The circuit of industry conferences geared up in April – LAVCA partnered in the annual meetings of the PE/VC associations in Brazil (ABVCAP) and Mexico (AMEXCAP), as well as at events in Costa Rica and Abu Dhabi and the IFC/EMPEA conference in Washington DC. Each venue presented an opportunity to highlight LAVCA’s 2009 industry data and the results of the 2010 Scorecard on the PE/VC Environment to a different audience of fund managers, investors and public officials, and to take the pulse of the industry.

There is no confusing the signals – EM investors are anxious to pile into Latin America with an eagerness not seen since 1997. And while Brazil dominates, the demand extends to Mexico, Colombia, Peru, Chile and even Argentina.  Fundraising data from LAVCA’s 2009 survey indicates that in a very difficult year the region fared comparatively well: total funds raised were down 43% from 2008 as compared to 61% in other emerging markets and 66% in developed markets.

Advent International’s record close on $1.65b in April served as a starting gun for managers waiting on the sidelines, now set to fill the pipeline with new funds in 2010. The oversubscribed Advent fund included LPs making their first commitments to Latin America, and those seeking broad exposure to the region. In addition to Brazil and Colombia, Advent is particularly bullish on opportunities in Mexico, a country that saw its economy contract 7% in 2009, but now projects 3% growth for 2010.

Mexico was also the star performer in the 2010 Scorecard, with a five-point jump in its overall score largely attributed to an improvement in the indicator measuring restrictions on institutional investors. In late 2009 the country’s pension funds (Afores) made their first commitments to Mexican PE through a new vehicle known as Development Capital Certificates (CKDs).

The opportunity to tap the vast resources of the Afores has spurred a pipeline of new funds in Mexico, with a first wave from local players such as Nexxus, EMX, Wamex and Alta Growth Capital, and a coming second wave from veteran LatAm firms setting up their first Mexican vehicles.

“The new role of Afores will highlight the attractiveness of the underserved PE market in Mexico, particularly as compared to the competitive landscape and relative market prices in say, Brazil”, comments Arturo Saval of Nexxus Capital.  “And this new tier of investors will also spark new confidence among global LPs as they see local ‘skin in the game’.”

The momentum was clearly evident at the annual AMEXCAP conference on April 29, with a sold-out event packing 200+ local and international participants into Mexico City’s new St. Regis hotel. But global investors with a less nuanced understanding of the Mexican market will opt for what they perceive as more secure markets – on the sidelines of a LatAm conference in Abu Dhabi days before the AMEXCAP event, a SWF targeting LatAm infrastructure admitted that  the headlines on Mexico’s drug wars represent a major deterrent.

Brazil maintained its position in the 2010 Scorecard, but made an incremental improvement in an already good regulatory framework for PE/VC with the September 2009 ruling allowing the county’s pension funds to increase their allocations to PE/VC, and to allocate to managers outside the country (related story here).

In April the country hosted two major industry conferences that attracted a range of international deal makers, many looking to set up offices or partnerships and to recruit local talent. “Local firms that don’t offer the right incentives will lose talent to global competitors or to new Brazilian players such as banks and asset managers,” comments Sidney Chameh, founder of DGF Investimentos and a veteran manager with 10 exits in three funds over the last decade. “Brazil is not experiencing a bubble today, but it is approaching – we are at a key inflection point.”

Recent entrants in Brazil include Warburg Pincus, which recently staffed a Sao Paulo office and Apax which took a 51% stake in outsourcing company Tivit. TPG is widely reported to be seeking a deal in Brazil.

Chile led the LAVCA Scorecard for the fifth consecutive year, holding a one-point advantage over Brazil thanks to strong scores on its judicial system, the protection of intellectual property rights and low perceived corruption.

Enrique Bascur of Citigroup Venture Capital International, which has racked up deals worth several hundred million dollars in the country over the last decade, confirms that Chile is one of the countries in global EM where CVCI can more comfortably rely on local law contracts. He points out that low sovereign risk also attracts global strategic investors seeking assets that can provide a platform for expansion into neighboring Peru and Colombia, which in turn creates exit opportunities for local PE firms.

Exits can also be realized on the Chilean stock exchange – the Scorecard gives the country a top score for the depth of its capital markets. Chilean pension funds have accumulated reserves exceeding $120b since their privatization in the 1980s and have been active investors in public equities and alternatives domestically and internationally.

Pension funds in Peru and Colombia are 10 or 15 years behind Chile, but are becoming more active investors in capital markets, lending liquidity to local exchanges. And pension funds in both countries are making new allocations to local and international PE firms in 2010.

“From a funding perspective, not only are there renewed efforts from local operators across different asset classes – buyouts, infrastructure, real estate – but there is also a very significant interest from international managers in accessing local institutional investors,” comments Mauricio Camargo of Altra Investments, which has offices in Lima and Bogota. “After a slowdown in private equity related activity in both Colombia and Peru during 2009, 2010 is shaping up to be very active.” In April Altra acquired 51% of Peruvian underground mining contractor Semiglo.