There’s ample reason why investors are skittish about Mexico. The country seemed less business-friendly after the election of leftist President Andrés Manuel López Obrador. His cancellation of the Mexico City Airport only heightened concerns. And then the sudden departure of Finance Minister Carlos Urzúa appeared to confirm investors’ fears.

But where many see obstacles, Colony Capital sees opportunity. The Los Angeles-based private equity firm recently announced it would invest $5 billion in Latin America, much of it in Mexico, as it targets the Pacific Alliance countries that also include Colombia, Chile and Peru.

Over the past decade or more, those countries in particular have become appealing because of stable governments, attentive central banks and stable currencies, according to Justin Chang, Managing Director and Global Head of Private Equity at Colony. “The business and political worlds have become divided in a healthy way,” says Chang. “Traditionally, in a lot of these economies, the business cycle was based on political swings. In the last 10, 15 years, that has ceased to be the case.”

Recent developments in Mexico doesn’t change Colony’s perception. Two reasons explain this view. Miguel Olea, who heads Colony’s investment team in the region, says the current administration in Mexico understands the importance of investment capital in helping the economy grow. Colony had discussions with people in and around the government to understand their thinking and policies, according to Olea.

And then there’s the contrarian impulse. “If the headlines cause others to pause, it’s probably a more interesting time for us. We’re long-term investors. We’re not trying to time the market,” says Chang. “Obviously if there’s a short-term perception gap, and we’re taking a longer-term view, historically that’s a pretty attractive entry point.”

Founded in 1991, Colony began investing in real estate as the savings and loan crisis spread in the US. Today, with some $50 billion in assets under management, the firm has a diversified global portfolio, though it still focuses much of its investment in real estate.

The firm has long been interested in Latin America, as part of a global strategy to diversify into emerging markets. Olea points out the US and Europe offer solid, steady growth, but there’s only a handful of places where’s there’s growth 5 to 10 years in the future. Latin America is one of these places, according to Olea.

And Latin America may offer more incentives than other emerging regions like Asia, he adds. “You can find more growth in Asia, but geopolitical risks and challenges are higher as compared to Latam.” “There are tensions in the South China Sea, North Korea, Iran, India, everywhere you look there are nuclear or quasi-nuclear states with political rivalries.”

Then there’s the competition. “One of the big differences with Asia is that the amount of capital chasing opportunities in Latin America is a fraction versus other markets,” says Olea. In terms of competitors, there are very few institutional players in the market, and we see proprietary deals.”

Colony has made some investments in the region over the years, but only on an opportunistic basis, according to Olea, because it didn’t have a team in Latin America that could bring local expertise to investment decisions.

The opportunity to build a local team came earlier this year when it acquired the Latin American private equity group from the troubled Dubai-based Abraaj Group, renaming it Colony Latam Partners and retaining Olea and his investment team.

Colony’s focus on the Pacific Alliance countries reflects not only the economic and political stability in member counties, but also other fundamentals, such as the rise of the middle class, increased consumer spending, and outhful demographics.

Colony is focusing on private equity opportunities but hopes to expand into related investment classes over time, ranging from renewable energy to credit. Olea points out that energy is a critical component driving these economies and demand is growing steadily, with the next generation of energy opportunities weighted heavily toward renewables and gas. “There is strong demand for renewable energy and this is an attractive market,” he says.

When it comes to identifying potential investment opportunities, Olea says he looks for companies whose businesses are scalable in the Pacific Alliance and elsewhere and often spots targets in the mid-cap market, where banks are reluctant to lend.

Developing relationships with family businesses or entrepreneurs is another growth area. “Sometimes they need an equity partner. Sometimes they need a credit partner,” he says. “We partner with management at the growth stage and work with the company to set strategy.”

Peruvian restaurant group Acurio is a good example according to Olea, first invested in the company for Abraaj in 2012. Headed by celebrity chef Gastón Acurio, the chain has 20 restaurants throughout Peru and 27 in other countries like the US and Madrid.

QBCo is another investment spotted by Olea. The Colombian company is a private label food manufacturer, focusing on edible oils, margarines, canned food and pet food, with clients in the Colombia, Panama, Ecuador and the US. Abraaj acquired a majority stake in 2017.

While Colony shops for similar opportunities in the Pacific Alliance, Olea emphasizes that the firm isn’t about to let the headlines deter it, emphasizing they’re not day-to-day investors.