Latin America Commodity Boom Offering Opportunities from PE to Infrastructure
Firms are bolstering their ranks, betting on growth in Latin America. The commodity boom in the region is driving investment opportunities from private equity to infrastructure. Brazil’s currency, the real, recently hit a nine-year high, climbing 0.3% to 1.6577 per dollar, according to Bloomberg. The Colombian peso has jumped more than 17% over the last 12 months as foreign investment has rushed into the Andean country, reports Bloomberg. The report also states that Colombia’s economy expanded 7.5% last year, the fastest pace since 1978. Foreign direct investment (FDI) also rose 40% last year, reaching $9.03 billion.
As investors seek to capitalize on continued growth in Latin America, executive search firm, A.E. Feldman, says attorney jobs exist at full-service leading global law firms for candidates specializing in Securities, Structured Finance & Securitization, Banking, Derivative and M&A. Infrastructure finance jobs also exist at global investment banking firms for experienced professionals with expertise in analyzing and executing structured financings.
Latin America Infrastructure
Governments seeking to compete in a global market apparently are bolstering investment opportunities with plans for improving infrastructure, water treatment, energy and natural resources in Latin America, according to a recent KPMG survey.
KPMG’s findings show that Brazil remains the overall investment favorite, named by 42% of respondents as their focus for spending over the next two years. Trailing closely behind, Mexico was cited by 34% percent of respondents as their primary target for deals during the same period. KPMG’s research also indicated that Colombia, where fund managers traditionally showed little interest in recent years, surged in popularity and was cited by 30% of respondents as their primary target for spending in 2008 to 2009.
“After an extremely busy period of raising capital not seen in the region since the record-setting 1990, fund managers now must look to putting their capital to work,” said T Jean-Pierre Trouillot, a Miami-based partner in KPMG’s Transaction Services practice. “Investment activity should experience an uptick in 2008 as a result.”
In the next 2-3 years, KPMG says a whopping 69% of those polled say infrastructure deals in communications and distribution channels such as ports, airports, pipelines, water treatment plants and roads comprise the most attractive investment opportunity for private equity. Not far behind, 66% of the fund managers queried believe energy and natural resources hold the most opportunity. Half of KPMG’s respondents also see promise in financial services.
KPMG also found that more than 41% of respondents say U.S. institutional investors comprised their primary source of funds.
Private Equity in Latin America
The Overseas Private Investment Corp. (OPIC) recently announced that it will provide financing to new private equity investment funds that will support the growth of capital markets in Latin America, potentially leveraging as much as $1 billion of investment in the region.
OPIC has issued a call for proposals to manage the fund(s). The Funds, which will be privately owned and managed, will be expected to build a diversified portfolio in terms of exposure to the various investments in the specific strategies outlined based on the proposals submitted.
Proposals are invited to address both public or private capital markets, and debt or equity strategies. The call emphasizes investment in products such as medium- and long-term debt, local currency debt, mezzanine financing, private equity for small and medium-sized enterprises, and new, publicly-listed debt and equity securities.
Law Firms Look to Latin America
The rise in overseas M&A has also encouraged Wall Street law firms to accelerate foreign expansion programs, according to Bloomberg. Law firms are expanding their M&A practices in Latin America to deal with a wave of corporate takeovers.
Chadbourne & Parke LLP recently announced it has opened an office in Mexico City as part of the expansion of its Latin American practice. Attorneys in the office will advise clients in Latin America and also in major U.S. markets involved in cross-border trade with the region.
“A Mexico City presence fits well with Chadbourne’s international and domestic network of offices and provides strong support for our Latin America practice,” said Allen Miller, co-head of Chadbourne’s Latin America practice. “We expect Mexico City to be a key office in our international network.”
Chadbourne says attorneys in the new office will focus on M&A, private equity, capital markets, bank and project finance, energy and infrastructure, litigation and arbitration.
Following significant increases in 2007 in revenue and profits, the Firm is evaluating other locations in Latin America for expansion. Talbert Navia, Co-Head of the Latin America practice, said that Brazil is a possibility. He reasons, “Chadbourne already serves major clients in that country, in the energy, natural resources, infrastructure and financial sectors. An in-country presence in Brazil would further expand our practice.”
Bloomberg also quotes Paulo Cezar Aragao, Managing Partner at the Sao Paulo-based law firm, Barbosa, Mussnich & Aragao Advogados, as saying that as deals in the real estate and energy industries thrive, private equity firms have poached transactional lawyers from law firms in order to set up their own legal teams to advise on buyouts.
Merrill Also Eyes Latin America
Merrill Lynch recently announced the expansion of its Brazil investment banking team, which has been on a hiring spree as capital markets in Latin America’s largest economy boom. Merrill reports that its Brazil business generated double-digit revenue growth in the last two years. The firm also ranked fifth in equity underwriting and sixth in mergers and acquisition advisory in Brazil in 2007, according to Reuters, citing Thomson Financial. “We are making a very long-term bet in the region and in Brazil,” says Sonia Dula, Merrill Lynch’s Head of Latin America investment banking.
