The Latin America Venture Capital Association Conference provided fresh evidence of the momentum for PE/VC in Brazil. My next post will cover the interesting take-aways but for now, see the article below on David Rubenstein’s keynote address. He explains why Carlyle is getting into Brazil and why, in his words, “Brazil is the best place in the world for private equity right now.”
It was heartening to see him reiterate what many of us ‘Brazil Bulls’ have been saying for some time.
Carlyle in Brazil – 10 reasons to invest
efinancialnews
Cardiff de Alejo Garcia
23 Sep 2009
The co-founder of US private equity giant Carlyle Group has said his firm is planning a “major push” into Brazil, outlining a 10-point list of why the country’s burgeoning economy presents a more attractive opportunity than the other large emerging markets.
David Rubenstein told a conference of Latin America private
equity professionals in New York yesterday that Brazil’s
increased openness to the asset class, its macroeconomic
stability and less competition from other large foreign buyout
firms, were strong reasons to invest in the country.
Speaking at the annual Latin America Venture Capital
Association Summit, Rubenstein first gave reasons to be
pessimistic about investing in the US, even as it exits
recession, including the possibility of large long-term deficits, a
weaker dollar and rising taxes.
He expressed his belief that China is now the most attractive
place in the world to invest, largely because of its size, but that
its market for private equity had become crowded. He said:
“When I travel to China, I see as many private equity managers
walking through Beijing hotels as I do in New York.”
Rubenstein said that foreign private equity managers have been slower to embrace Brazil, though he expects that will soon change as the country has “turned out to be an extremely attractive place to invest, and has a number of attributes that even India and China don’t have”.
He then listed 10 points that make the country a compelling opportunity for private equity firms.
1- A sizable and growing domestic market
2- Room for credit expansion for both households and companies
3- Lower dependence on foreign trade, with the domestic market accounting for 60% of gross domestic product
4- Diversified export markets
5- A recent history of political and economic stability
6- Fiscal discipline
7- High foreign exchange reserves
8- Proactive and effective government intervention
9- A well-capitalised financial system
10- Massive amounts of natural resources
Rubenstein declined to give specifics about Carlyle’s activities in Brazil, citing regulatory issues but said that the firm’s team of seven employees in Sao Paolo, headed by Fernando Borges, was now performing due diligence on potential deals and would make “a major push in the next few years”.
He said: “I am hoping that our competitors in the global private equity markets won’t notice and start rushing to invest there. But I suspect that in next year you’ll start seeing all kinds of stories about other private equity managers engaging Brazil.”
Aside from local investors, Rubenstein said that much of the money for funds that invest in Brazil will come from the Middle East, Europe and Asia rather than from North America. Pension schemes in other Latin American countries such as Peru and Colombia – where restrictions on the maximum amount pension administrators can invest in private equity have eased in recent years – are also expected to contribute.
Private equity firms have been in investing in Brazil since the mid-1990s, though the asset class only began to really take off there in recent years.
There is now $27bn (€18bn) in capital committed to private equity funds in Brazil, with $11.5bn already invested, according to statistics provided by Luiz Figueiredo, chairman of the Brazilian Private Equity and Venture Capital Association.
There have been 300 new private equity investments since 2004, and more than 40 initial public offerings for Brazilian private equity-backed companies.
