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.