2014 was clearly a challenging year for many of the economies of Latin America. Decreasing foreign demand, falling commodities prices and a reversal of asset flows back to the developed markets precipitated an overall slowdown in activity across much of the region.
PE investment activity lost some momentum during the year as uncertainty took hold and fundamentals deteriorated. While the value of deals increased modestly, the number of PE transactions fell 22% to 73.
However, despite the macro downturn, there remains little indication that investors are withdrawing from the region. Indeed, many seem to be doubling down. Fundraising continues to trend higher, increasing 46% from US$5.2b to US$7.6b between 2013 and 2014. Moreover, there are another 59 funds based in the region at various stages of the fundraising process, which are targeting a combined US$13.5b for investment.
Investors clearly continue to believe in the long-term investment thesis for Latin America, and for entrepreneurs and family owners, it’s in just such challenging environments where PE’s value-add becomes its most compelling. Above and beyond simple injections of capital, the operational expertise and financial discipline that PE brings can enable savvy entrepreneurs to weather difficult macro headwinds.