Mid-East Funds Fixate on Brazil

Middle-East-based investors with cash to allocate to LatAm are focused on Brazil, according to market participants. “We have seen in the last couple of years a pick up in the flow, specifically to Brazil,” says Michael Diaz, managing partner at law firm Diaz Reus, speaking of Arab-LatAm investment. The case for Brazil is boosted by size and stability of the economy, demographics, ample fresh water and arable land, abundance of commodities coveted by Mid-East investors, and a direct Emirates flight to Sao Paulo. “Brazil is a country that we were particularly fond of in 2008, and we continue to remain very positive for 2009 and in the long term,” says Jawad Mian, portfolio manager at Rasmala Investments, which manages about $1.2bn. “It’s blessed with resources,” he continues. Rasmala is overweight LatAm versus other EM, though negative on Mexico and worried generally about regional FX risk. ADIA, ADIC, Bin Zayed Group, Emirates Capital and Dubai Ventures Group are also among potential Arab investors in Brazil. Other large Gulf players are only just starting to assess LatAm. “We’re gradually working our way down to Latin America,” says Felix Herlihy, CIO at Istithmar World, which invests in industrial, consumer and financial services sectors. He adds that Istithmar – the investment arm of Dubai World – has historically had very little exposure to LatAm, but recently opened a New York office to overcome distance and time difference barriers. Herlihy also notes that LatAm valuations are “reasonably attractive,” and that his firm is putting more resources into assessing the opportunity. “LatAm from an investor perspective has become a lot more stable,” says Alejandro Berney, director of securities and fund services at Citi. “You will probably find very good values just because there is capital lacking in the region,” he adds. They were speaking at the Latin America Mid-East Investors Forum, a LatinFinance event held in Dubai this week.