Mexican GPs Eye Increased Foreign Interest

Seeing signs of increased interest from foreign investors this year, GPs at Mexico’s private equity (PE) funds are hopeful that can translate into greater investment flows. While opening up PE investment to the country’s pension in recent years has boosted domestic participation, international capital has been slower to follow. “We have seen an increase in calls from foreign LPs who want to know Mexico. This is a change from last year when we made the calls, looking to draw attention to an underserved environment,” Jose Antonio Contreras, partner at Wamex, tells LatinFinance. Wamex closed its second fund earlier this year, raising $160m. Realizing this interest takes time, he cautions, meaning that the additional foreign LP interest may not materialize immediately. “International LPs are more curious about Mexico, and I have never seen the amount of interest as there is today. It’s not enormous but it had been very limited,” Alfredo Castellanos, managing director at Protego Asesores, tells LatinFinance. It is not going to turn Mexico into Brazil, he notes, but the increase is significant. Mexican PE funds raised $363m in 2011, according to the Latin American Venture Capital Association, while Brazilians took in $8.1bn. A cloudier economic outlook for Brazil coupled with a more positive fundamental picture for Mexico boosted by a change in government could divert more attention to the latter. Challenges remain, however, GPs explain, including a shortage of big ticket opportunities, and an environment where many family-owned businesses are still reluctant to let in outside capital. More flows into PEs may follow the strong FDI and record Bolsa levels seen this year, but the visible results should be gradual. “I see an increase first in the size of the current [domestic] funds. You will continue to see a few new players appear in the landscape. The industry will continue to grow but it will be a moderate growth,” Castellanos says, noting he does not expect an immediate