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Petros, the pension fund of state-controlled oil company Petrobras, has become the first institutional investor of its kind in Brazil to get a taste of the private equity and venture capital market, through partnerships with five venture capital firms including FIR Capital, CRP and Rio Bravo. The move underscores the country’s rapidly growing financial sophistication while also paving the way for other pension funds to follow suit.

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April 2, 2006 — Petros, the pension fund of state-controlled oil company Petrobras, has become the first institutional investor of its kind in Brazil to get a taste of the private equity and venture capital market, through partnerships with five venture capital firms including FIR Capital, CRP and Rio Bravo. The move underscores the country’s rapidly growing financial sophistication while also paving the way for other pension funds to follow suit.

“High interest rates have long prevented this type of investment,” Ricardo Malavazi, CFO at Petros, told Emerging Markets. “But rates tend to decline quite rapidly now, and we want to find partners that can leverage [these] resources.” Petros is limited to a 25% stake in such ventures.

“Funds have started to attract (local) pension funds that until now had been staying away from such business,” said Guilherme Emrich, a partner at FIR Capital, a venture capital fund active in biotechnology. Emrich is currently in talks with three other pension funds.
The development is an indication of how much risk appetite and the business climate has improved in Brazil in recent years. The country ranks second in the region, according to the inaugural scorecard issued yesterday by the Latin American Venture Capital Association (Lavca).

Lavca’s ranking focuses on the business environment in 11 various countries in the region. While Chile is predictably well ahead of the pack, Brazil achieved a better position than Mexico and Costa Rica.

“There is an investment pay off for countries that manage to improve the business environment. Progress in Brazil is linked to the recent reforms,” said Ramona DeNies, Lavca’s research director.

All other countries ranked had a score below the average of 50%, as a measure of business friendliness, and ranged from Peru; Trinidad and Tobago; Colombia, Argentina; El Salvador; Uruguay and, at the lower end of the scale, Jamaica.

Yet the obstacles facing the private equity business in Latin America are still profound. “Other regions are faring better than Latin America,” said Everett Santos, CEO for Latin America at EMP Global, a private equity firm. “Raising money is still difficult. The region is not an easy set [of countries].”