The global economy seems to be springing back to life from the lull that the Covid-19 pandemic has created and this seems to spell great news for Latin America. Private equity firms from Continental Europe, UK, and North America are not shying away from cross-border deals and are zeroing in on Latin America as the next big investment destination, leaving the Asia Pacific and the Middle East far behind.
There seems to be a widespread belief that cross-border deal flow will not abate but will only accelerate in the coming years. This optimism is a compelling reason for the mounting interest in Latin America coupled with alluring valuations. Private equity firms firmly believe that the volume of international transactions will get a jump-start and get back into shape by the end of 2021 and even more so after 2022.
Private equity firms are well aware of the varied obstacles that could hamper their progress in Latin America such as the vast differences in culture, in law and regulatory frameworks, and also in compliance regimes. These firms are prepared to outsource the running of their fund to a third party in order to overcome some of these obstacles.
Latin America is slowly but surely becoming a hub for huge investments especially because of the civil unrest which reared its head in 2019 due to inequality and a lack of social mobility, its growing middle class, and also early pension reforms which have consequently created not only a greater need for improved infrastructure but also a significant pool of assets in which to invest in. More and more, political and macroeconomic challenges in Latin America are gaining momentum creating a perfect base for the deployment of capital by private equity firms. These firms are, therefore, keen to capitalize on the great potential that their investments could fetch for new untapped business across borders.
In spite of the risks which come hand in glove with cross-border deals, private equity funds are being upbeat and enthusiastic about attractive opportunities which could help them get a firm foothold in the emerging market in Latin America.