RIO DE JANEIRO — Private equity fund managers in Brazil, after a rocky start, once again are attracting U.S. and European pension fund investors.
Brazilian private equity funds — and Latin American funds private equity funds with a focus on Brazil — raised $5.2 billion in 2007, compared with $2.8 billion in 2006 and $1 billion in 2005, according to private equity manager Advent International. Some 90% of the money raised last year was from foreign investors, 60% of which was from U.S. and European pension funds.
Foreign private equity managers in Brazil did not fare well with their first-generation funds. Many that started in the mid-1990s stumbled because of the January 1999 currency crisis, which triggered a major devaluation of the Brazilian real, along with the lack of corporate governance and investor protection and a stagnant economy from 2001 to 2003.
But since 2004, Brazil's economy has grown an average of 4.5% a year, with the gross national product reaching 5.4% in 2007 and expected to hit 4.8% this year, according to the International Monetary Fund, Washington.
Estimates for U.S and European Union growth this year, in comparison, are 0.5% and 1.3%, respectively. And on April 30, Standard & Poor's upgraded Brazil to an “investment grade” rating, a long-awaited sign of foreign investors' increased confidence in the country's economic soundness that should lead to increased foreign investment flow.
Brazil's brighter economic picture, a strong currency and private equity managers' better knowledge of the market have led to new funds being created.