Latin America: getting warmer?

These are not easy times for emerging markets: many investors have been taking their money and heading for safer havens amid worries about the likely impact of developed world central banks turning off the liquidity tap. 

For private equity investors in Latin America, this only makes a difficult situation worse. The region had a bumper year in 2011, with several huge funds raised and over $10 billion worth of exits. But last year’s totals plummeted – and according to the latest deal figures from Latin American Private Equity & Venture Capital Association (LAVCA), 2013 totals look set to be more in line with 2012.

On the plus side, the number of mid-market deals – which in this case means deals between $25 million and $100 million – has risen substantially. For instance, there were nearly twice as many such deals in Brazil in the first half of 2013 compared to the same period 2012, LAVCA said. It claimed there had been “an uptick in private equity and venture capital across the board” in the first half – although these charts don’t really bear that out.

Almost 70 percent of the deal activity in Latin America was in Brazil, making it the largest market in the region by some distance. Mexico was the next biggest contributor, accounting  for 11 percent, while Colombia and Chile accounted for 5 percent each.

In sector terms, the consumer growth story is still the big attraction in Latin America: investments in the consumer retail space were up by 44 percent. But there was also a huge rise in energy sector deals, with total volumes up from $126 million to $336 million year on year.

As for exits, although that headline number above doesn’t look particularly positive, it’s worth noting that the $1.5 billion H1 total was 67 percent up on H1 2012. So if there’s a similar rush of second-half exits in the second half, investors may well start warming to Latin America once again.