By Jonathan Shieber
The Wall Street Journal
September 12, 2012 – Limited partners are going to be spending a lot more time south of the Rio Grande in the coming year, according to a new survey from Coller Capital and the Latin American Venture Capital Association.
Investments in Latin America are expected to climb steadily for the next few years, according to data released by the organization, thanks to a favorable political climate, continuing domestic growth and a young population and growing middle class.
Long the darlings of emerging market investors, China and India have lost some of their luster with their slowing economies, according to the survey and industry experts, and investors are looking to Brazil and other Latin American countries to pick up the slack.
Of the limited partners with some exposure to Latin America, 73% see the region’s deal flow and economic growth potential as attractive compared with other emerging private equity markets.
Among Latin American markets, Brazil still reigns supreme, as the concerns earlier this year about the inflated value of the Brazilian real have diminished thanks to recent decline in the currency.
“One of the biggest issues has been building in the currency risk,” said Peter von Lehe, a managing director at Neuberger Berman. “We are more bullish today because the currency is less overvalued.”
For the Neuberger Berman alternative investment team, the concern in Latin America is more about funds raising too much capital than the overall opportunity in the market. According to von Lehe, multi-billion dollar funds in the region just don’t have many options to put their capital to work.
While Brazil has held the attention of the investment class for some time, limited partners are looking closely at other Latin American countries, including Colombia, Peru and Chile.
Mexico, in particular, has emerged as one of the top benefactors from the new found attention on Latin American markets because of its correlation to the growth of the U.S. Hispanic market, according to the LAVCA head.
From Coller’s perspective, the amount of capital flowing into the market means an opportunity for interesting secondary deal flow in another two to three years, said Erwin Roex, a partner with Coller Capital.
Roex said he believes the only obstacle to the further development of private equity in the region will be a shortage of experienced managers. Beyond that, the conditions are ripe for continued growth across the region, he said.