While interest in the private equity (PE) markets of the BRIC nations has been strong in recent years, these countries are starting to see splits in how opportunities there are viewed. Russia and India continues to attract investment owing to the opportunities that still exist there.
While China’s economy is viewed as strong, many investors are turning away from the country owing to red tape – an issue that, incidentally, is affecting much of the Far East. Some investors, as reported by ourselves recently, are still embracing Brazil, but the consensus across the industry seems to be that the opportunities in Latin America lie elsewhere.
A recent Financial Times report highlighted the extent of Brazil’s decline. Although $2.3billion was raised to be invested in the country last year, this pales in comparison to the $3.2billion raised in 2012, and even more so against the $8.1billion raised in 2011. The FT cites these figures from the Latin American Private Equity and Venture Capital Association.
The percentage of PE investments Brazil is responsible for in Latin America has plunged, too. 2011’s figure accounted for 79% of all funds raised for South America. In comparison, this stood at 42% in 2013. Many large firms are now wary of Brazil and are looking for PE opportunities elsewhere in Latin America, with Mexico, Peru, and Colombia all countries now attracting more attention than at any time in the past. Lavca president Cate Ambrose told the FT, “In the last 18 to 24 months we have seen a significant increase in the amount of investor interest in opportunities in Latin America ex-Brazil.”
However, she also went on to praise Brazil and said the country is likely to remain attractive in the longer term, adding, “Brazil is simply 5-10 years ahead of the rest of Latin America in terms of the development of the private equity market. It is easier to take a controlling stake in Brazil than in Mexico, Peru, or Colombia where much of the business landscape is populated by family businesses where the attitude is: I would rather see my company go bankrupt than sell out to private equity.”
Last week’s reports that Brazil had slumped into technical recession are unlikely to help in the short to mid-term, but there should still be enough interest in Brazil to keep the PE market strong as the economy continues to develop.