PER LatAm’s new venture in Bogotá, Colombia, by Carla Casares

27 January 2020 | Carla Casares, Consultant

 PER LatAm continues to deepen its presence in Latin America with the opening of an
office in Colombia, the region’s third largest private equity market. I’m thrilled to be leading the charge here in Bogotá and look forward to the challenge of growing the business in this thriving market.

Bogota Skyline

Spurred by recent regulatory changes, Colombia’s private equity market continues to attract important investments; recent statistics indicate more than 135 funds operate in the country, targeting investments in key sectors such as infrastructure, energy, financial services and retail.

Historically, the most relevant investments made by private equity funds have been in infrastructure, and this trend is set to continue. For instance, in 2016, Brookfield and other institutional partners completed the acquisition of Isagen, an energy firm of the Colombian government that operated a renewable energy portfolio consisting mainly of hydroelectric generating capacity. This was the largest privatization in the country in nearly a decade.

In this same sector, in 2018, the Canadian fund, Caisse de dépôt et placement du Quebec, CDPQ, created a $1 billion private equity fund to invest in domestic infrastructure with a focus on energy. The investments will be made in the energy and renewable energy sectors, transportation, social infrastructure, telecommunications, water and basic sanitation.

Real estate is another sector that has drawn investment for some years. Patria Investimentos, a Brazilian Private Equity Firm backed by Blackstone, opened an office in Colombia in 2014, with capital commitments of up to USD$ 500 million.

The country’s appeal to investors goes beyond infrastructure and real estate. A significant increase in GDP per capita, which has resulted in a growing middle class with increased purchasing power, has also attracted private equity funds that invest mainly in the services and retail sectors.

Examples of these are the investment from L. Catterton in the Colombian gym chain Bodytech, or the investment in the landmark restaurant - now restaurant chain - Andres Carne de Res from Portland Private Equity Funds. The local fund Altra Investments invested in Prosalon in 2014, a Colombian leading cosmetics and beauty products specialty retailer, and in Reve Group, a leading player in the hard discount retail segment in Colombia. The group’s two main companies are Justo & Bueno, the second largest hard discount grocery retailer in Colombia, and Tostao’, a hard discount coffee store chain in Colombia.

Southern Cross Group, tapping the opportunities generated by this growing middle class, invested in 2017 in Crezcamos, the second largest non-bank microfinance player in Colombia, focused on providing microfinance services to small businesses and entrepreneurial households in small cities, towns and rural areas.

The economic growth, coupled with an improvement in the country´s security since 2002, has also spurred an increase in international tourism, and private equity funds have noticed this change in demand. For instance, in 2013 the fund Teka Capital invested in the fifth largest hotel chain in Colombia, Movich hotels, in anticipation of this growth. The Argentinian fund Pegasus invested in $35 million in El Viajero Hostels in 2018, a boutique hostel chain in Colombia.

Among the main drivers of investment from private equity funds in the country, professional fund managers have cited the following:

  1. Colombia was invited as a member of the OECD in 2018, subject to policy reviews and the implementation of further significant reforms that include labor law, judicial reform, and anti-bribery laws, which will likely improve the business environment,
  2. Political stability - after years of war, a peace deal between the government and the FARC (Revolutionary Armed Forces of Colombia) was signed in 2016
  3. Good macroeconomic indicators - controlled inflation, GDP growth (highest GDP growth in 2019 among LatAm peers), decreasing unemployment rate =
  4. Many family owned companies reaching second and third generation who have a better understanding of the advantages of partnering with an institutional investor
  5. Lower perceived labour and tax contingencies vis-á-vis LatAm peers such as Mexico or Brazil

It’s an exciting time to invest in Colombia, so there are plenty of deals to be done and that means growing opportunities in private markets. I can’t wait to work with our clients on growing their Colombian teams and with our network of talented investors to find them the perfect role in this growing sector.

About the author

Carla Casares is Lead Consultant in the Bogotá, Colombia office and part of the PER Latin American team. Carla handles searches for positions from Analyst to Managing Director for local, regional and global funds in Colombia and throughout the Andean region,including Peru, Ecuador, and Chile.

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