OPIC expands Americas exposure

The Overseas Private Investment Corporation is turning its attention to Central America and the Caribbean, where the US investment agency will provide up to $45 million to private equity funds targeting these regions.

The economies of Central America and the Caribbean are set to receive a boost from US investment agency Overseas Private Investment Corporation (OPIC), which announced last week its intention to issue a call for proposals in 2006 to select fund managers investing in the two regions. 

Mosbacher: encouraging growth in Central America

The amount of OPIC’s expected commitment to these funds – up to $45 million for a total fund capitalisation of up to $135 million when accounting for funds to be raised from other LPs by the selected managers – is relatively small compared to the agency’s allocation to funds targeting other emerging markets. For instance, OPIC has revealed plans to provide up to $100 million in financing to Eurasian private equity funds, $90 million to a Southeast Europe Fund, and $120 million to Mexico-focused private equity funds.

However, given company sizes and asset valuations in Central America and the Caribbean, $135 million is a significant amount of money, which far exceeds the size of any individual fund recently raised to invest specifically in the regions. According to data collected by Venture Equity Latin America, private equity backing in the region has tended to target small and medium-sized enterprises, with typical capital injections from funds ranging from $1 million to $5 million.

Although small, the economies of Central America and the Caribbean – seventeen of which qualify for investments by the OPIC-backed funds – are demonstrating “encouraging economic growth,” says OPIC president and CEO Robert Mosbacher. This dynamism has been fuelled in part by the US-Central American Free Trade Agreement, which has been approved by all countries covered by the agreement except for Costa Rica.

According to Alejandro Schwedhelm, managing director of the Darby Overseas-managed ProBanco fund, taken as a whole, Central America’s economy is similar in size to that of Chile or Colombia. Schwedhelm has said in the past that the region is a good target for investors seeking “regional roll-up” opportunities. ProBanco itself has pursued local consolidation strategies in the banking and finance industry.

Private equity funds targeting specifically Central America include the Central American Small Enterprise Investment Fund – managed by Nicaragua-based financial group Latin American Financial Services Corporation (LAFISE) – and the Aureos Central America Fund, managed by emerging markets SME investor Aureos Capital from its offices in Costa Rica and El Salvador. In addition to the Washington DC-headquartered ProBanco, Actis Capital – from its Costa Rica and Bolivia offices – and New York-based Conduit Capital, specialising in Central and South American energy investments, have also either acquired or divested assets in the region within the last two years.

In the Caribbean, the leading private equity provider is Trinidad and Tobago-based Prometheus Energy Partners, which was established earlier this year to invest in energy projects in the region.

Of this roster, it remains to be seen which firms will throw their hat into OPIC’s fund manager selection contest, or if any new players will emerge to give the incumbents a run for their money.