Earlier this month LAVCA Chairman Patrice Etlin presented initial findings from the 2013 LAVCA Industry Data & Analysis at the SuperReturn conference in Rio de Janeiro, and today member firms are receiving the full report with fundraising, investment and exit activity from 2012. The numbers tell a clear story on the evolution of the region’s major economies as markets for private investment.

Global investors have poured money into the region since 2007, and there has been concern over growing competition, larger fund sizes and less attractive valuations. But in 2012 the seven private equity firms that raised over $11bn for the region in 2010 and 2011 successfully deployed capital across a wide range of markets, strategies and sectors, sending investment totals to a five-year high.

Private equity and venture capital firms committed $7.9bn to investments in Latin America in 2012, a 21% increase over 2011. The $7.9bn total reflects 237 investments, a 37% increase in the number of deals from the previous year.

At the same time, the number of managers that were able to realize closings on new funds increased significantly, with those managers overwhelmingly targeted smaller fund sizes. PE and VC managers raised $5.6bn in 2012, an important shift from 2010 and 2011, which saw record totals of $8.1bn and $10.3bn respectively.

The largest fund raised in 2012 closed at $850m, and final closings were typically realized at under $500m. A total of 40 managers reported 42 partial or final closings in 2012, versus 35 partial or final closings from 28 firms in 2011.

A growing universe of private equity investors are targeting middle market deals with ticket sizes under $100m as an accurate reflection of the investment opportunity in Latin American countries outside of Brazil.

Investments in consumer-related sectors dominated in 2012, capturing 40% of the $7.9bn total. Consumer retail represented $2.2bn of investments, with the rest coming from deals in financial services, restaurants, education, fitness, healthcare and consumer goods. IT deals also posted strong growth in 2012, with both the number of IT deals and dollars invested in the sector more than doubling from 2011.

As in previous years, Brazil was the largest market for PE/VC investments in Latin America, accounting for 72% of the total invested and 62% of the total deals. In Mexico, the total number of deals was on par with 2011, but dollars committed increased by 50% over 2011. Activity in the Andean region was driven by an increasing number of cross border deals, with managers in Colombia, Peru and Chile investing across all three markets.

After a banner year for exits in Latin America in 2011, 2012 saw $3.8bn raised through 34 divestments that disclosed financials and another ten exits that were reported without financial information. While there were limited opportunities to realize IPOs given volatile equity markets in Latin America and around the world, strategic investors were active acquirers of Latin American assets, creating attractive options for private equity sellers.

Latin American private equity and venture capital investors faced many of the same key challenges in 2012 that they faced in 2011. Despite increasing demand from global investors for exposure to the region, fundraising requires an arduous effort by all accounts. Competition for deals in Brazil, Colombia and Peru is intense, but competition for human capital to staff investment teams and portfolio companies presents an even greater challenge. And business owners are still skeptical of private equity and often unwilling to give up even a minority stake to a financial investor.

But investors active in the region will recognize clear indicators of the maturation of the PE/VC industry in Latin America’s major economies. The mid- to long-term opportunity is clear.