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The business environment has been gradually improving for private equity investors in Latin America, according to a ranking of regional countries soon to be issued by the Latin American Venture Capital Association (LAVCA). The going may well get tougher this year, due to recent turmoil in capital markets, but this is no time to panic, Eduardo Elejalde, the LAVCA chairman, told Emerging Markets.

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The business environment has been gradually improving for private equity investors in Latin America, according to a ranking of regional countries to be issued by the Latin American Venture Capital Association (LAVCA).

The going may well get tougher this year, due to recent turmoil in capital markets, but this is no time to panic, Eduardo Elejalde, the LAVCA chairman, told Emerging Markets.

Ramona DeNies, LAVCA research director, said: “Six out of the 11 Latin American countries in the survey have made improvements. They are still baby steps.”

The ranking, to be issued in April 2007, shows that Chile is still the region’s star. Preliminary results seen by Emerging Markets show that the Andean country is quickly catching with Spain and Mexico, and has a better business environment for private equity investors than Taiwan.

Elejalde, who also heads Latin America Enterprise Fund Managers, said: “There is a lot of investor interest in Brazil and Mexico, but Central America is in a good position. Peru and Colombia are starting. The funds raised for investment are now reaching the level they hit in 1998” – which was a record year, he said.

“If there is a downturn in the global economy, Latin America would be affected as most of the countries are commodity exporters.” Investors have to become more selective. “You have to invest in solid companies that can handle a downturn … It’s a risk but it does not affect the industry,” Elejalde said.

Chile has again topped the ranking, which was first issued last year, while the Dominican Republic offers the worst conditions. “The Chilean market is very well developed. It gets the top scores in terms of the regulatory environment, tax treatment, and protection of minority shareholders,” Ramona said.

The ranking is based on a methodology that includes a qualitative criteria.

The Brazilian business environment has also improved, but it is Trinidad and Tobago that has achieved the best progress. There have been major improvements there, especially in protection of minority shareholders as well as registration and reserve requirements on inward investment.

Perceived corruption and lack of enforcement of judicial decision are the main issues that drag countries such as El Salvador, Ecuador and the Dominican Republic to the bottom of the ranking, according to Lavca. “There is still room for improvement,” DeNies said.