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Economic growth, stability, market reform and liberalization have led to a Latin American investors into Chile, Colombia and Peru. Leticia Lozano reports.
THE ANDES HAVE rarely been at the forefront of international investors' minds, instead conjuring up images of poverty, guerrilla groups and presidents who survive in office for just a few years. In Latin American business and politics, the might of Brazil and Mexico dominate, and the region's private equity growth has been no exception. But just as tourists have begun to flock to Peru's famed Inca citadel of Machu Picchu, so teams of private equity specialists are beginning to scour the Andean region's capitals of Lima, Bogota and Santiago, as well as nearby Buenos Aires, for buyout opportunities and the chance to develop funds.
Political stability, more open trade, a surge in commodity prices, low inflation and interest rates, fiscal discipline, pension fund reform and strong consumer demand are all leading to unprecedented growth rates in Peru and Colombia. Chile is knocking on the door of developed-country status and Argentina is recovering from its 2001 crisis with red-hot 8% annual economic growth rates. As a result, private equity has huge potential in a largely untapped region, especially in the fast-growing oil, gas and mining sectors of Peru and Colombia.
The depth of capital markets, banking regulation, the rule of law, protection of minority shareholder rights and government corruption are still issues in the Andes but the feeling among investors is that things are rapidly changing for the better. "Colombia and Peru are two of the countries that have a recent track record of very strong economic growth and very stable macroeconomics. That is clearly something that differentiates them from the rest of the region," says Julio Lastres, senior managing director for the Americas at Darby Overseas Investments, which has invested in the Peruvian and Colombian banking sectors, in fuel distribution and in telecoms, and owns a power station in the two countries. "There is a renewed interest for private equity in Latin America and it will start spilling over from Brazil and Mexico into other areas like Colombia and Peru," adds Lastres. According to the Latin American Venture Capital Association (Lavca), Chile offers the best conditions for private equity in Latin America --...