- All Countries Hold Position, with Some Notable Improvements
The investment climate for private equity (PE) and venture capital (VC) in Latin America continued its upward trajectory, with all countries posting positive gains in the 2013 LAVCA Scorecard, released by the Latin American Private Equity & Venture Capital Association (LAVCA). The 2013 Scorecard is the eighth edition of the annual ranking and reflects ongoing stability in the regulatory environment across key markets in Latin America.
Both Mexico and Colombia improved their scores as a result of gains on the indicator for entrepreneurship. Latin America has experienced a new generation of start up investing in recent years, and governments in Mexico and Colombia, among other markets, are promoting new programs to support entrepreneurs and venture capital investors.
Peru also saw an important gain in the 2013 Scorecard, with a reform approved last year that lifts restrictions on local pension funds investing in private equity in Peru and internationally. The new regulation reflects a return to a more proactive stance among Peruvian regulators on this issue, and increases the country’s overall score by two points.
There was little change at the top of the rankings, as Chile led the region for the eighth consecutive year, followed by Brazil, Mexico and Colombia. Chile continues to lead on indicators that are generally weak across the rest of Latin America, specifically intellectual property protection, judicial transparency and the perception of corruption, and posted an increased score on accounting standards that put the country’s overall score on par with benchmark nations Taiwan and Spain.
In Brazil, where a new reporting code aimed at fund transparency went into effect, scores remained stable.
“Governments in major Latin American markets recognize the importance of private equity and venture capital for economic development and are responsive to investor demands for streamlined regulation. With record dollars invested in PE and VC in 2012, we are in a virtuous cycle of new investments, while the overall ecosystem continues to evolve”, said Cate Ambrose, President of LAVCA.
In Central America and the Caribbean scores were generally unchanged, though investor interest in the smaller opportunities presented by these markets continues to grow, prompting local governments to consider improvements in their regulatory environment. The Dominican Republic, where a new administration is tackling corruption, increased its score by three points.
Argentina presents the sole obstacle to progress, as the economy continues to deteriorate, and public policy presents a hostile environment for foreign investors. The country hosts a vibrant start up community, but Argentine entrepreneurs are beginning to look elsewhere for funding and partnerships.
Overall Latin America continues its steady path of growth and positive reform, a positive signal for PE/VC firms eager to invest in the region. As reported in 2013 LAVCA Industry Data, last year a record $7.9 billion was deployed in new investments across Latin America.
The annual Scorecard ranks 12 Latin American countries based on 13 indicators including taxation, minority shareholder rights, restrictions on institutional investors and capital markets development. The regional countries are benchmarked against four markets outside the region – UK, Israel, Spain and Taiwan.
The eighth edition of the LAVCA Scorecard was produced in collaboration with the Economic Intelligence Unit, the Multilateral Investment Fund and the Andean Development Corporation. It is available for download on the LAVCA website.