Brazil – battling for emerging Asia dollars?

In 2008, fundraising in emerging Asia hit $40 billion, while Latin America raised just $5.6 billion, according to EMPEA data. For the first three quarters of 2010, the gap has been definitively narrowed, with $9.7 billion raised in emerging Asia, and $5 billion raised in Latin America. Many believe Brazil in particular will become a contender for the ‘non-China' dollar, giving Indonesia, India and Vietnam a run for their money.

To this point, The Carlyle Group and Apax Partners made their debut investments in Brazilian companies in 2010. Advent International closed its fifth Latin America-focused fund at $1.65 billion, topped several months later by Buenos Aires-based Southern Cross, closing its fourth buyout fund at $1.68 billion. Currently both MVision and Credit Suisse are in the market with separate Brazil funds, no doubt helped by the government's move to incentivize would-be investors by announcing reduced tax rates for foreign investment into PE funds (slashing the rate from 6% to a barely-there 2%).

While nobody believes that emerging Asia is going to be supplanted by growing LatAm interest, there is an appeal for investors that have become disenchanted with India due to valuations and the bite-sized-at-best deal sizes, or Southeast Asia because of ever-changing regulations.

In discussing PCGI's allocation strategy, MD Steven Cowen told AVCJ, "Latin America, which has historically been fairly important to us, will probably be in the range of 25-30% [of capital commitments in 2011]," noting that Brazile was one of the more interesting markets there.
Some have argued that after hopes for India have been muted, that perhaps a changing tide might make Brazil more attractive. Shankar Narayanan, MD of Carlyle India's growth team strongly disagrees, saying, "It would take remarkable shortsightedness… to change your approach based on the fact that India may not have performed as well in a year than other markets. I don't think India's attractiveness has been diminished at all."

Dennis Montecillo, CEO of Diamond Dragon Advisors, believes Brazil will attract the "marginal dollar," in particular developed economies' dollars. This could, however, include Asian countries like Japan and South Korea, which have fallen out of favor due to difficult economic conditions.
How the Brazil play will factor into Asia's fundraising environment will take longer to play out, but there is no doubt that as one industry source explains, "the opportunities there are very attractive, and there is no shortage of interest."

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• Fundraising
• LPs