Private Equity Funds Still Going Strong in Brazil Despite Economic Malaise
RIO DE JANEIRO – This may seem to be an inopportune time to invest in Brazil.
Inflation is an increasing concern. Interest rates have risen. Fiscal accounts have deteriorated, and the country’s stock market returns are down for the year.
Yet, the private equity sector has been not pulling back on the country. The Carlyle Group is said to have just raised a new private equity fund for Brazil. Advent International last week acquired its third Brazilian company this year, up from just one last year. And the private equity firm General Atlantic backed the country’s lone initial public offering this year.
Though the backdrop of Brazil’s economy remains weak, private equity firms say this is a good time to get in, betting that things cannot get much worse.
“If you have money, you should find some good deals,” said Christopher Meyn, a partner with Gávea Investments, who expects much consolidation to take place among Brazilian companies in the near term.
A weak I.P.O. market can benefit private equity firms at least when entering investments. When Brazil was a darling among emerging markets — it had 64 I.P.O.s in 2007 — until 2012, numerous young companies went public. Many subsequently struggled, most famously those founded by the onetime billionaire Eike Batista.
“Our biggest competitor is a pre-mature I.P.O.,” said General Atlantic’s head of Latin America and managing director, Martin Escobari.
Although Brazil’s growth was negligible last year and contracted in the first two quarters of this year and was merely 0.1 percent in the third quarter, an upside emerged.
“It is not all about the macro. It is also about the micro,” he said.
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