Intel sets up shop in Brazil

Intel Capital, the captive VC arm of Intel Corp., has set its sights on Brazil, signalling the ongoing improvement seen in the country’s capital markets.

Intel Capital continues to expand the global reach of its venture capital arm, and most recently established a $50 million (€42 million) VC fund dedicated to investment in Brazil.

The firm, which is the captive venture arm of semiconductor maker Intel Corp., has made tremendous strides in the past ten months to expand its international footprint. The Santa Clara-based firm has dedicated $250 million toward investment in India, set up a $50 million fund concentrating on the Middle East and Turkey, and last June established a $200 million fund for Chinese investments.

Intel is also an investor in areas such as Japan, Russia, Israel, and other countries in Latin America, as well as in North America and Western Europe.

It’s always been a challenge in the Brazilian market to gain liquidity. The recent [IPO] activity certainly makes you take a look at the region.

David Thomas, managing director, Intel Capital

The VC group has been active in Brazil in the past. It already has an office in São Paulo and has plugged over $35 million into 13 Brazilian companies since 1999. Last year, the firm made four investments in Brazil, including deals in wireless broadband provider Neovia Telecomunicacoes SA, and digital certificate services company Certisign Holdings.

Intel’s David Thomas, a managing director in the firm’s São Paulo location, was appointed as the chairman of the Latin American Venture Capital Association this past September.

In speaking with PEO, Thomas cited a number of issues specific to Brazil that made the market appealing to Intel. Earlier in March, for instance, the government removed a 15 percent capital gains tax on profits from venture investments. Moreover, there have been changes in intellectual property law that also encourages investment.

The most important factor, at least according to Thomas, was the establishment of the Novo Mercado listing segment that is part of São Paulo’s Bovespa stock exchange. The new market represents the first time Brazilian companies are required to provide equal voting rights to shareholders in order to obtain a listing on the Novo Mercado segment. It signified a large step in improving governance standards, and because of that the Novo Mercado has been a favored destination for companies looking to go public.

“It’s always been a challenge in the Brazilian market to gain liquidity,” Thomas said, adding, “The recent activity certainly makes you take a look at the region.”

To wit, there have been 18 companies that have gone public in Brazil during the past two years, most of which sought out a Novo Mercada listing.

Intel’s new Brazilian fund will focus on areas such as hardware, local content development, IT service providers and services, such as broadband infrastructure and mobile wireless applications using WiMAX technology.