Client Alert

Private Equity and Venture Capital Trends in Latin America

MoFo PE Briefing Room

08 Apr 2020

In 2019, the number of large PE transactions in Latin America increased significantly. According to the Emerging Markets Private Equity Association, Latam had a record PE influx of $4.4 billion in the first half of 2019. By the end of 2019, Latam had received a total of 151 PE investments, of which 64 had an aggregate publicly reported ticket size of $10.8 billion.

The PE performance of 2019 was dominated by three regional funds headquartered in Latin America: CMB Prime’s regional infrastructure fund took in $400 million for investments in Chile; Vinci Partners’ third mid-market fund raised $214 million in Brazil; and IG4 Capital closed a $200 million regional fund. One of the most noteworthy events of 2019 was SoftBank’s establishment of a new VC fund devoted to investments in transformative technology companies in Latin America, which in 2019 completed investments in QuintoAndar, a Brazilian leasing platform; AlphaCredit, a Mexican consumer lending startup; Gympass, a Brazilian corporate fitness platform; and Uala, an Argentinian personal finance management app.  SoftBank funds also invested $1 billion in Colombian delivery service Rappi, its largest investment to date in the region.

PE investments have focused on larger markets in the region—that is, Brazil, Colombia, and Mexico—primarily as a result of legal reforms and governmental initiatives.

PE Trends in Latam

The sectors that have attracted the most attention from PE investors in Latam are infrastructure and technology. Between 2008 and 2018, the aggregate AUM of PE funds dedicated to infrastructure in the region increased from $2.7 billion to $40.3 billion. Experts believe that the reason that the infrastructure sector has emerged as a particularly popular asset in Latam is that the sector is non-correlated with traditional market movements.

The technology sector has also received noteworthy attention from international investors. During the first half of 2019, 28% of Brazilian PE deals were tech deals. In general, PE investors have been interested in technology-related companies regardless of the specific sector in which these companies operate. The Association for Private Capital Investments in Latin America (LAVCA) reported that VC investments in Latin American startups reached a record of $2 billion in 2018, up from $500 million in 2016, and nearly 25% of those investments were in FinTech companies. Since a large portion of the population in Latin America is still unbanked, PE and VC flow into FinTech startups in the region has greatly expanded and is anticipated to expand even more in the future.

Brazil introduces new investor-friendly reforms

Brazil was the target of 70% of all the new capital invested in the region in 2019, with 91 PE transactions representing an aggregate disclosed investment amount of $6.3 billion through the first three quarters of the year. At the end of 2019, the Financial Times reported that economists predict that the pro-business policies of President Jair Bolsonaro will boost Brazil’s growth from 1% in 2019 to 2.0–2.6% in 2020. Specifically, PE experts tie the increase of investments in the country with the investor-friendly reforms, lower interest rates, and the Pension Reform adopted by the government.

In September 2019, Brazil enacted the Brazilian Declaration of Economic Freedom Rights, which aims to free enterprise and prevent the public administration from adopting any measures that slow innovation, increase transaction costs without demonstrating benefits, or prevent the entry of new domestic or foreign competitors into the Brazilian market. The Pension Reform, which passed in October 2019, is targeted at reducing social security expenses and helping increase the country’s GDP.

In November 2019, President Bolsonaro announced the launch of the Mais Brasil Plan, an initiative centered on promoting a more attractive business climate, improving legal certainty, reducing interest rates, increasing credit, and expanding commercial opportunities for investors. New Tax and Administrative Reforms are expected to be sent to the Brazilian Congress for approval by the end of 2020.

Despite the recent economic recession and the political instability that characterized Brazil in previous years, these new reforms have allowed local general partners to access more profitable deals and PE funds to become a more reliable source of financing support. In 2019, Brazil received more than $75 billion in foreign investments, making the country the fourth-largest destination for foreign investments in the world.

Colombia promotes startup-friendly environment

Many Colombian startups have recently earned attention from international PE investors. In 2018, Colombia received $334 million in investments, which represented an increase in VC investment of almost 500% over the prior year. Colombia is also the home of one of the highest-funded Latin American startups, Rappi, which reached a publicly disclosed funding of over $1.4 billion.

Between 2010 and 2019, Bogotá raised the second-largest amount of VC among Latin American cities (raising an amount of $1.764 billion), only surpassed by São Paulo. Also, Medellín has increased its visibility in the VC arena. In the last decade, Medellín has been associated with the country’s technological development, while the city has undergone an extraordinary urban transformation. As early as 2012, the city was selected among 200 as the “Innovative city of the year” by the Wall Street Journal, Citi, and the Urban Land Institute. Between 2011 and 2018, more than 148 technology-based startups from over 24 countries chose Medellín as their gateway for growing in Latin America and the world, according to Ruta N.

The increase of VC investments in Colombia is the result of an increasingly connected consumer base and of a startup-friendly environment supported by the Colombian government. Specifically, in 2012, the national government created the programs iNNpulsa and in order to promote innovation, business, and technological developments in Colombia. These programs help local startups obtain funds and provide coaching programs for entrepreneurs. At the beginning of this year, the Colombian government further demonstrated its commitment to promoting and funding innovative developments with the creation of the Ministry of Science, Technology, and Innovation.

Mexico facilitates cross-border investments

Much of the capital raised in Mexico has been intended to be invested outside of Mexico, due to the fact that local investors are skeptical of the government’s ability to return the country to a path of strong growth. In particular, during the past two years, fund managers in Mexico have raised $900 million for vehicles listed on the Mexican Stock Exchange and $4.4 billion for vehicles that invest primarily outside the country.

Despite the low confidence in the government, the PE market in Mexico is growing at a steady pace. In the past few years, PE funds have increased, particularly in the technology sector, and experts forecast that PE and VC transactions in this market will continue to represent a significant percentage of investment in the country. Mexico had the second-largest number of PE transactions in Latam, second to Brazil, with a total of 24 PE transactions for a disclosed amount of $2.7 billion.

This steady growth is likely attributable to the adoption of several new regulations. In 2018, the Mexican authorities changed the rules governing the Certificados de Proyectos de Inversión (CerPIs) to facilitate cross-border investments. CerPIs are long-term investment vehicles created by the Mexican Pension Fund managers (AFOREs), targeting infrastructure and energy projects in Mexico that are listed on the stock exchange. The AFOREs have responded to this change in rules by diversifying PE allocations on a regional basis. Finally, the Mexican Congress has recently passed a bill allowing AFOREs to make PE investments (both direct investments in companies and investments in PE funds), subject to certain rules.


  • Despite the political uncertainty that is typical of the region, PE and VC flow in Latam has continued to grow.
  • The attractiveness of Brazil’s new reforms, the startup friendly programs implemented by Colombia, and the new regulations adopted in Mexico will likely cause an increase of PE and VC funds into the region and continue to attract attention from international investors.
  • However, the recent widespread effects of the COVID-19 pandemic may negatively affect Latam markets if the governments in the region do not implement sufficient measures and regulations to protect their economies. Those countries where the effects of the virus last for a longer period of time or where there is a higher number of cases may experience greater difficulty in recovering from this human and economic crisis. Only time will tell what the impact of the COVID-19 outbreak will be on Latam and PE and VC investment in the region.


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