After meager activity over the past three years, the primary equity market in Latin America and the Caribbean could finally get going in the second half of this year, albeit sluggishly, analysts say.
“The market has been pretty slow,” says Victor Rosa, head of investment banking in Brazil for Scotiabank.
Brazil, the largest equity market in Latin America, hasn’t had an initial public offering since 2021, when there was a flurry of 45, according to the B3 stock exchange.
The latest holdback for IPOs is that the country’s benchmark interest rate surged to 15% in June from a most recent low of 2% in early 2021. This discourages investment in the equity market when good returns can be made on bank deposits and in the fixed income market.
“With interest rates the way they are, it is very tough for the IPO market to reopen,” Rosa says. “I don’t see a lot of change in the second half of the year.”
Regionally, there was only one IPO this year through June 15 for $457 million, down 47% from $861 million in the year-earlier period, according to data from LSEG. Yet the IPO was by a Bermuda-based unit of a US insurance company.
Latin American firms are still waiting on the sidelines.
The last big deals were a $677 million IPO by Mexican retailer Tiendas 3B on the New York Stock Exchange in February 2024 and a $360 million IPO by Peruvian healthcare services provider Auna a month later on that same exchange.
Rosa said the follow-on market has been healthier in Brazil, but investors are being selective in what companies they put money into.
That can be said of regional activity, too. Follow-on deals came in at $2.9 billion on 15 deals this year through June 15, in line with the year-earlier period’s $3.1 billion on 14 deals but down from the $5.8 billion on 20 deals in the same period of 2023, according to LSEG.
Languishing
Volume and number of IPOs and follow-ons, by year, January 1 to June 15
| IPOs | Follow-Ons | |||
| Issue Date | Proceeds (US$m) | Number of Issues | Proceeds (US$m) | Number of Issues |
| 2023-01-01 – 2023-06-15 | 1,026.65 | 4 | 5,785.91 | 20 |
| 2024-01-01 – 2024-06-15 | 861.42 | 4 | 3,061.85 | 14 |
| 2025-01-01 – 2025-06-15 | 457.12 | 1 | 2,901.77 | 15 |
WILL IT GET BETTER?
After such a long dry spell, are companies getting ready to dust off plans to sell equity?
Maybe not just yet, but there are a few positive indicators in Brazil at least.
“We talk to investors a lot,” Rosa says. “The mood has improved over the past few months. The market has become a little bit more positive. I see a positive momentum, but it is still a long way to go.”
The key for new deals will be a decline in interest rates, which Rosa expects to start toward the end of this year or in early 2026.
A prod for new deals could also come from a potential change in the country’s political leadership. Brazil’s left-wing president, Luiz Inácio Lula da Silva, has been declining in popularity, and analysts say this could fuel equity deals on the bet that a more market friendly politician could win the October 2026 general election.
LOOKING ABROAD
In the meantime, there is potential for a Brazilian company to sell equity in the US market or the private market, says Marcelo Millen, head of Latin American equity capital markets at Citi.
“I see this trend happening from the second half of the year,” he says.
A driver of this expectation is that the secondary market is doing well, Millen says. The country’s benchmark Ibovespa stock index was up 14% year to date through June 20, fueled by a surge in flows from international investment funds to Brazil.
“Local institutional investors are making positive returns this year,” Millen says.
The higher stock prices boost valuations, a key for companies to consider going public.
Local institutional investors are making positive returns this year
Marcelo Millen, Citi
Millen says the sectors that have shown the most growth in valuations have been consumer retail, education, financial services and utilities.
POCKETS OF GROWTH
Elsewhere in the region, Fibra Educa, a Mexican real estate investment trust focused on the education sector, plans to raise funds in a follow-on offering in the local and international markets despite the uncertainty about the impact of US tariffs on Mexico.
“The education sector is not a sector that depends on tariffs; it’s a sector that is fundamentally driven by sociodemographic numbers,” CEO Raúl Martínez says. “We are an asset that could be interesting in terms of investment due to the potential for future growth.”
The timing of the deal will depend on when it finds an appetite for the equity, he adds.
In June 2018, Fibra Educa raised around $468 million in Mexico’s first IPO in the education sector.
Kaab Capital Management, a real estate investment manager in Mexico, is also hoping to skirt the tariffs conundrum to raise $150 million in equity to fund acquisitions in the Yucatán Peninsula, co-founder and CEO Juanmari Molina says.
Kaab Capital expects to grow the business around Mexico by capitalizing on growing demand in senior living developments on the bet that demand from US retirees will continue to rise for affordable, high-quality care, he says.
Assisted living in Mexico can start at around $1,500 per month for good quality facilities, compared with an average of $5,350 per month for a private room in the United States, according to data from industry sources.
Even so, the volatility in the global markets has complicated fundraising in the equity market, Molina admits.
“There are investors who don’t want to participate right now,” he says. “But at the same time, there are very good investment opportunities. Anyone who can raise equity now to deploy that capital in the next 12 or 18 months will be very successful.” LF