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LAVCA in the News

News from LAVCA Chile Forum – Chile Becoming Platform For Regional Private Equity Investments

26 May 2010

By Anthony Esposito

Wall Street Journal (via Dow Jones Newswires)

May 26, 2010 –  Due to its strong economic standing and transparency, among other factors, Chile is increasingly becoming a platform for regional private equity investments, said Cate Ambrose, president of the Latin American Venture Capital Association.

Chile has been at the top of the list in the region over the last five years in terms of judicial transparency, protection of intellectual property rights, perceived corruption, tax treatment and restrictions on institutional investors, according to the association, also known as LAVCA.

“Chile is a market that makes a lot of investors feel comfortable. Some private equity firms or investors are coming to Chile as a market from which they can expand into Latin America, as a sort of platform, especially into Peru and Colombia,” Ambrose said at a venture capital forum in Chile’s capital city Santiago.

Investors especially like the Colombia, Peru, Chile triangle because of their strong investment laws and their expectations for robust growth, she said.

Despite a massive earthquake that hit Chile in late February, the country’s gross domestic product is expected to grow between 4.25% and 5.25% on the year in 2010, the nation’s central bank said. Colombia’s GDP will likely expand 3% in 2010 and 4.4% in 2011, according to Juana Tellez, bank BBVA’s chief economist for Colombia. Meanwhile, Peru’s second largest bank, BBVA Banco Continental, recently increased its forecast for growth in Peru’s GDP for this year to 5.7%.

In 2009, Chile received 7% of all private equity and venture capital investments in the Latin American region, third in line behind powerhouses Brazil and Mexico, with 62% and 13% of investments, respectively, according to LAVCA.

Also, Corfo, the Chilean government’s investment promotion agency, has played a key role in getting Chile’s nascent venture capital market off the ground.

“You would not see venture capital in Chile were it not for the efforts of Corfo. It has been investing millions of dollars to get fund managers started,” Ambrose said.

Corfo is now helping to bring San Francisco-based venture capital firm Burrill & Company to Chile to create a life sciences venture capital fund in conjunction with local Austral Capital Partners.

Corfo will be a “major investor” in the fund, which looks to raise an initial $40 million to $50 million, said Steven Burrill, the chief executive of Burrill and Company.

The fund, called the Burrill Chile Fund, aims to invest in the life sciences fields, mainly industrial biotechnology, bio-energy, bio-fuels, bio-processes, health care, and agricultural and food technologies.

Over the last several years Corfo has helped create some 30 funds that are now worth over $600 million, said Corfo’s Patricio Reyes.

“For every peso an investor puts in we put in three. That’s likely the formula we’re going to follow with the life sciences fund,” Reyes said.