Private Equity Still Has Faith In Chile, But Outlook Cloudier In Colombia, LAVCA Says

Despite the region’s political challenges, the outlook for investment is still vibrant, the Association for Private Capital Investment in Latin America’s director Ángela María Tafur says

According to the Association for Private Capital Investment in Latin America (LAVCA), private investment in the region totaled $29.4 billion in 2021, up from $16.8 billion in 2020.
May 10, 2022 | 04:20 PM

Bogotá — Political transitions in Latin America are not exempt from generating certain disruptions in the business climate, but in the case of Chile, private equity funds remain optimistic, while in Colombia some uncertainty persists prior to the presidential elections in late May.

“I see that private equity still has a lot of faith in Chile. They see only opportunity, and they also see that Congress is promoting the whole entrepreneurship and investment agenda. From Colombia’s point of view, it is a little more difficult,” Ángela María Tafur, executive director of the Association for Private Capital Investment in Latin America (LAVCA), said in an interview with Bloomberg Línea.

LAVCA has more than 190 private equity and venture capital firms as members from across the region.

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LAVCA’s executive director said private equity funds see “a lot of opportunities”, although they are aware that “many people in Chile are a bit scared” by the change of government in that country.

President Gabriel Boric took office in March, but his approval rating has since taken a dive, while the constitutional assembly is currently drafting a new constitution for the country, which will be put to an obligatory vote by citizens in September.

Tafur said that, in Colombia however, the panorama is more difficult as the country gears up for presidential elections.

However, she added that, in Colombia, “there is a very solid base” because it is “the oldest democracy in Latin America”, in which a pro-entrepreneurship and pro-capital legislation has already been established.

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“Even if a president comes in who is not exactly of that line, there is already a framework, there is rule of law. The country’s institutional framework would have to break down for the country to destabilize,” she said.

“Another thing I think, and this is personal, is that Colombia is a country in which our DNA is entrepreneurship, we are entrepreneurs (...) so, although there may be some government lines that determine and constrain the ecosystem, Colombians are entrepreneurs, and will seek to take care of their businesses, they will seek to take care of their ventures,” she said.

And as for Brazil, which will also elect a new president this year, she said the country “has had impressive growth”, as of the 16 unicorns that emerged in the region in 2021, half of them are Brazilian.

“Brazil still has a great deal of interest from international investors, especially in the areas of technology, infrastructure and also energy transition,” she added.

A ‘Vibrant’ Outlook

Despite the political challenges that lie ahead on the continent, Tafur said the private equity landscape in Latin America remains vibrant after investment last year totaled “unprecedented” figures.

“The strongest enabler of investor interest across the entire asset class was technology,” she said.

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According to LAVCA statistics, private equity investment in Latin America totaled $29.4 billion last year, up from $16.8 billion in 2020.

The Pacific Alliance bloc, comprising Colombia, Chile, Peru and Mexico, stands out in particular, as it attracted some $12.7 billion in investment, or the equivalent of 43% of the capital invested in the region.

In terms of venture capital, investments totaled almost $16 billion in Latin America in 2021, “which is more than the region has attracted in 10 years”, she said.

“After venture capital, the area that most attracted investors to Latin America was infrastructure. International investors came to participate, for example, in Colombia in 4G networks, in digital infrastructure, data centers, telecommunications towers and fiber optic networks,” she said.

And although LAVCA does not release forecasts, she said there is optimism among investors because these are long-term investments and there are many opportunities.