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Investors flock to Mexico as overall LatAm investment declines

  • Deal volume drops in 2015
  • Mexico helps sustain deal volume with record year
  • Fundraising also drops across the region

Disheartened by economic troubles in Brazil, many Latin America deal-makers headed to Mexico last year.

Mexico pulled in a record $2.3 billion through 88 private equity and venture capital investments in 2015, said the Latin America Private Equity and Venture Capital Association. Mexico’s deal volume shot up 80 percent from the prior year, while the total dollars invested in the country increased by 72 percent, LAVCA said.

“International private equity investors are responding to the opportunities generated by Mexico’s ambitious energy reform,” LAVCA President Cate Ambrose said in a statement.

Overall deal-making and fundraising in Latin America took big hits in 2015 as a major recession roiled Brazil, the region’s largest economy, driving away potential new investors and forcing GPs to be very selective.

Latin America-focused private equity funds raised $7.2 billion last year, down more than 30 percent from the $10.4 billion raised in 2014, LAVCA said.

The amount of capital invested in Brazil last year fell 31 percent year-over-year as the country entered recession last August. The decrease was driven by a dearth of large-cap deals in the country, LAVCA said. The decrease also reflected a 32 percent decline in the value of the Brazilian real against the U.S. dollar during the period, LAVCA said.

Even with the decline, Brazil remained the region’s hot spot for deals, with about $3.2 billion invested in 149 deals in 2015, LAVCA said.

“It’s pretty well understood Brazil is not going to be recovering in the next 12 or even 24 months,” Ambrose said in an interview.

Despite the downturn, some firms are ramping up activity in Brazil. CVC Capital Partners, for example, in January was scheduled to open a São Paulo office to be led by Jean-Marc Etlin, former CEO of Itaú BBA Investment Bank. Also, Canadian pension plan CPPIB has ramped up its activities in the region since opening a São Paulo office in 2014, according to a statement from the system.

Firms expanding their presence in Brazil today need to be “savvy enough and counter-cyclical enough and have long-term vision,” Ambrose said.

Action Item: For more information about LatAm investing, visit LAVCA’s website: http://lavca.org

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