The Latin American Venture Capital Association (LAVCA) presents positive indicators for
industry growth at the 2005 IDB/IIC Annual Meetings in Okinawa
April 10, 2005 Naha-City, Okinawa, Japan — With the economies of Latin America and the Caribbean projected to grow this year at their fastest rate in over 20 years, many investors are justifiably bullish on their prospects in the region. An update on the latest trends and resurgence of private equity for Latin America was presented in a briefing organized by the Latin American Venture Capital Association (LAVCA) for participants at the 46th Annual Meetings of the Inter-American Development Bank (IDB) and Inter-American Investment Corporation (IIC) in Okinawa, Japan.
The location of this year’s meeting in Japan highlights the growing trade links between Latin America and Asia. LAVCA Chairman Richard Frank, CEO of Darby Overseas Investments, Ltd., said that resurging confidence in Latin America’s potential for growth and profitability owes something to the region’s strengthening ties to Asia over the past year. Latin American exports to Asia have boosted the economies of Brazil, Argentina, and Chile.
“Global players are just starting to hear more about the good returns that are possible in Latin America,“ said Mr. Frank. “The experience of Darby and some of our colleagues in the industry has been quite positive. We just need to better document our results to reach out to investors.”
Discussion at LAVCA’s Executive Briefing on Private Equity in Latin America sponsored by the IDB’s Multilateral Investment Fund (MIF), revolved around the apparent resurgence of investor confidence in the region and the increasing moves on the part of the public sector to improve the environment for venture investing.
Mr. Frank’s overview of recent trends in the industry noted that:
- An estimated US $1 billion was raised for Latin America in 2004, an increase of 145% from 2003 to 2004, as compared with 50% growth in Asia and Central and Eastern Europe.
- Mexico has emerged as a challenger to Brazilian dominance in fundraising, with US $340 million raised in 2004 to Brazil’s $480 million.
- The number of active fund managers has declined to 39 from 46 in 2003. This decline is offset by the recent entry of new players such as CalPERS and the Carlyle Group.
- The region is beginning to demonstrate exit potential in the capital markets. Companies raised US $4.3 billion through equity capital markets in 2004. 22 equity issues – 10 IPOs, 5 of which provided private equity exits generating US $341 million.
Another highlight of the briefing was the announcement by Federico Patiño, Deputy Manager for Investments of Nacional Financiera SNC (NAFIN) of plans by the Government of Mexico to merge all its equity support programs into a a new fund of funds, with estimated new commitments of at least $200 million. This will be in addition to the existing commitments of $250 million by the public sector. The total capitalization, which could reach US $3 billion, is unprecedented in Mexico. According to Mr. Patiño, this development may level the playing field for Mexico with respect to the private equity industries in Brazil and Argentina.
LAVCA’s mission is to promote the growth of the venture capital and private equity industry in Latin America through research, education, networking, best practices, and the advocacy of sound public policy. LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers. For more information about LAVCA, please visit www.lavca.org.
Latin American Venture Capital Association
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