Fundraising

OPIC launches $1bn LatAm initiative

The US government agency will make commitments between $25m and $100m to new Latin American funds, ‘creating a carrot for Latin American private equity investments’.

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The US Overseas Private Investment Corporation has launched an initiative to generate up to $1 billion (€627 million) in alternative investment in Latin America, part of an effort to stave off effects of a US slowdown on the region.

“We’re in the business of creating a carrot for Latin American private equity investments,” Robert Mosbacher, OPIC chief executive, told PEO. “Other investors may be retreating, so that means you need OPIC to provide encouragement.”

OPIC is currently soliciting proposals from US private equity firms to create new funds exclusively devoted to Latin American industries struggling to access capital, including infrastructure and exports.

“This fund is really aimed at businesses throughout Latin America with a track record and potential for growth,” said Mosbacher. He added that the capital would be deployed in Latin American countries with free trade arrangements with the US, including Mexico, Peru, Brazil and several countries in Central America.

OPIC will commit between $25 million and $150 million in senior secured debt across three to five new funds. OPIC commitments will comprising between one-third and one-half of the total capital in each fund.

Once the funds attract commitments from other limited partners, up to $1 billion in private equity investment could be making its way south of the border. Only firms with significant US operations are eligible for OPIC’s initiative.

OPIC will consider proposals that focus on medium- and long-term debt, local currency debt, mezzanine financing and private equity for small to middle market companies.

Although private equity fundraising in emerging markets has increased by $26 billion between 2006 and 2007, and Latin American activity in particular has been on the rise, concerns persist over how an American recession would affect Latin economies, many of which are still highly export-dependent.

OPIC, a US government agency which also provides political risk insurance and loan guarantees to US companies with overseas operations, has modeled this Latin American venture after $250 million African initiative launched last year.