Brazil faces 70 percent fall in fundraising from investors over two year period
Brazil is losing its attraction as an investment hub as private equity and venture capital firms lower their fundraising for the Latin American country by over 70% in the past couple of years, the Financial Times reported.
Bigger firms like London-based 3i have been driven away by the country's dimming prospects. Citing newly-released data from the Latin American Private Equity and Venture Capital Association or Lavca, the report said Brazil only raised $2.3 billion in 2013, representing a drop from the $3.6 billion raised in 2012 and the $8.1 billion raised the year before.
With investors setting their sights in Mexico, Colombia and Peru to search for higher returns, the share of Brazil in the region's fundraising has also decreased. In 2011, Brazil accounted for 79% of the amount raised for investments in Latin America. This went down to 65% in 2012. Last year, however, Brazil only comprised 42% of the 5.5 billion raised for investments in the region, the report said.
Lavca President Cate Ambrose told FT, "In the last 18 to 24 months we have seen a significant increase in the amount of investor interest in opportunities in Latin America ex-Brazil."
Investors were drawn to Brazil in 2010 when it posted a 7.5% growth. However, it was not long before the country's consumption-fueled economy experienced a slowdown. In the final quarter of last year, the country may have gone into technical recession based on central bank data released last week, the report said.
Brazil is also one of the hardest hit among the emerging markets with the tapering undertaken by the US Federal Reserve, the report said.
Because of the worsening investment climate and uncertainty before October's presidential polls, 3i said last month that it would not be pushing forward with an investment fund it had planned for Brazil, FT reported.