Despite previous Venture Capital (VC) and Private Equity
(PE) activity in Latin America since the mid 80s, the asset class can still be
considered a “new species” in the region.
Taking however into account the growth levels the asset
class experienced in developed markets during that same time period, the growth
potential for VC and PE in Latin America seems enormous.
It is a fact that although the value of investments in
emerging markets has been hit hard by the financial crisis, we should keep in
mind, that the sources of the crisis were definitely not the emerging
countries. These markets did not suffer any severe credit crises. Mortgages –
which triggered the crisis – were not and will not be a cause of concern in the
region.
The Latin American
economies were spared, in large part, because their mortgage systems are
completely different from the U.S. system.
Most Latin
American mortgages are subsidized by the government. As a result, there was
none of the speculation of housing prices and method of finance that we
experienced here in the U.S. So as the U.S. economy struggles to recover, Latin
American banks are enjoying a very stable deposit base and low-risk assets—and
very little to do in terms of recovery from the economic downturn.
Thank you
Ziad Abdelnour
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