Skip to content

LAVCA in the News

Record Buyout Firm Backing of Latin American Infrastructure

16 December 2013

(Financial Times) Private equity firms invested a record amount in infrastructure in Latin America this year, tapping into a drive by countries in the region to boost economic growth by solving logistics and other bottlenecks.

In 2013, buyout firms invested more than $3.5bn in deals in the transport, logistics, oil, energy and telecoms sectors, more than double last year’s total of $1.7bn.

The amount spent on Latin American infrastructure this year is equally to nearly half the total funds private equity invested in the region last year, according to the Latin American Private Equity & Venture Capital Association.

The growth is likely to continue as governments continue to reform critical sectors, the group said.

“There are enormous expectations in Mexico about what will happen around the reforms, particularly energy but telecoms as well,” said Cate Ambrose, president of Lavca, referring to an overhaul of these sectors launched by Mexico’s president, Enrique Peña Nieto.

International and domestic private equity groups have raised billions of dollars for investment in Brazil over the past few years, with major groups including KKR and JPMorgan’s asset management arm establishing a presence in the local market.

Private equity groups raised a record $10.27bn for investment in Latin America in 2011, with most of it destined for Brazil, according to Lavca.

Fundraising fell to just over half that amount last year but the amount invested overall rose 21 per cent to $7.88bn. Figures for total private equity investment in Latin America in 2013 have not yet been released.

Lavca said that firms put $2.85bn to work in the first half of this year, 5 per cent more than the same period last year. Companies raised $3.81bn for the region, up 101 per cent on a year earlier.

Much of these funds are flowing into infrastructure. Advent International in December closed the largest regional deal in the sector this year – the acquisition of a minority stake in Colombia’s Ocensa oil pipeline for US$1.1bn.

“Many major Latin American countries face a deficit in the infrastructure necessary to support the region’s growth,” said Patrice Etlin, the São Paulo-based managing partner of Advent International and chairman of Lavca. “Advent has identified some attractive opportunities in this space in recent years.”

Among other deals, Capital International invested in Brazil-based QGOG Constellation, a provider of offshore and onshore oil and gas contract drilling, while local firm BTG Pactual purchased 50 per cent of Deep Sea Supply Navegação Marítima to build a platform supply vessel for Brazilian oil exploration.

First Reserve and Renovalia Energy expanded their Mexican joint venture with the addition of two windpower plants in Southern Mexico.

Meanwhile Actis, another international firm, spent $290m on a 60 per cent stake in Chile’s Aela Energía, a renewable energy developer, and also bought 60 per cent of Atlantic Energias Renovaveis, a Brazilian company specialising in hydro and wind projects.

Telecom deals included BTG Pactual’s acquisition of the underwater fibre-optic cable units of Brazilian mobile carrier Oi for about $772m.

Mexican reform is expected to yield more deals, especially the telecoms reform bill aimed at helping smaller companies expand in a market dominated by billionaire Carlos Slim’s America Movil.

Lavca said that one telecoms deal that closed following that reform was Ventura Capital Privado’s acquisition of Maxcom Telecomunicaciones, a local wireline service provider.