After reviewing the year-on-year changes in policy regulation affecting PE/VC investors in Latin America, LAVCA is publishing an interim edition of the LAVCA Scorecard. The 2014 Update retains the scores published in 2013 and integrates new commentary (in bold throughout) on notable changes in major Latin American markets. Following this interim edition, the 2015 LAVCA Scorecard will reflect new scores and content.
The LAVCA Scorecard on the Private Equity and Venture Capital Environment in Latin America reﬂects ongoing efforts by regional regulators to foster a stable climate for investment. Large and small economies alike continue to improve their capacity to monitor the development of the PE/VC industry, improve transparency and disclosure laws, and create better conditions for local entrepreneurs.
For the 2014 Update edition, while we have maintained 2013 scores, certain countries and indicators are on watch for 2015. Updates are specified in bold throughout, including changes to Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico, and Peru. As a reflection of the 2013 Scorecard, Chile ranks first with a score of 76, followed by Brazil (72), Mexico (67) and Colombia (61).
Chile had improved its score in 2013 due to the adoption of international financial reporting standards by non-listed firms. In January 2014, a new funds law drafted under the previous administration was enacted, consolidating the regulation of PE/VC funds. However, the new government which took office in March 2014 is pursuing a range of legislative initiatives, including tax reform, that appear unfavorable to the PE/VC industry.
Brazil remains a pioneer and innovator in PE/VC speciﬁc regulation in Latin America. With unique fund structure laws and streamlined restrictions on foreign investment, the country remains in second place in the regional ranking.
The current administration in Mexico has embarked on an unprecedented structural reform agenda that includes constitutional changes in the energy, financial, telecommunications, and education sectors, as well as reforms to the tax and political systems.
Colombia continues to enhance existing regulation and is on track to improve its ranking in coming editions of the Scorecard.
Private equity investors continue to target Peru as a favored market, and the country realized an increased overall score in 2013 with the implementation of a long-awaited change by the banking superintendent to reform pension fund investment laws.
The Scorecard benchmarks Latin American and Caribbean countries by comparing them with four markets outside the region – UK, Israel, Spain, and Taiwan.
The 2014 Update was produced with support from the Multilateral Investment Fund. It ranks 12 countries based on the following indicators:
- Laws on PE/VC fund formation and operation
- Tax treatment of PE/VC funds and investments
- Protection of minority shareholder rights
- Restrictions on local institutional investors investing in PE/VC
- Protection of intellectual property rights
- Bankruptcy regulation
- Capital market development and feasibility of local exits (ie, initial public offerings)
- Registration/reserve requirements on inward investments
- Corporate governance requirements
- Strength of the judicial system
- Perceived corruption
- Use of international accounting standards and quality of the local accounting industry
LAVCA collaborated with law firms, GPs, associations, and individuals in the production of the 2013/2014 Scorecard Update, including:
- Argentina: Marval O’Farrell & Mairal (Diego Krischcautzky); Brown Rudnick (Alejandro Fiuza)
- Brazil: Mattos Filho (Daniel Miranda, Guilherme Bouzan); ABVCAP; Stratus Group (Álvaro Gonçalves); EY (Carlos Ascutti)
- Chile: Philippi, Yrarrazaval, Pulido, & Brunner Abogados (Constanza Rodríguez)
- Colombia: Brigard & Urrutia (Luis Gabriel Morcillo, Carlos Fradique Méndez); ColCapital; LAEFM Colombia (María Ángela Córdoba)
- Costa Rica: Batalla Abogados (Rodrigo Zelaya, Alejandro Batalla)
- Mexico: KPMG (Victor Esquivel); AMEXCAP; Darby Overseas Investments (Jaime Salinas)
- Peru: Alterra (Ricardo Postigo); Rubio, Leguia, Normand (Sergio Amiel)
- Regionally: Baker & McKenzie