Brazil Growth Attracts Private Equity
RIO DE JANEIRO, BRAZIL - Although many well-known foreign companies, from cosmetics giants L'oreal to car maker Fiat, Spanish telecommunications giant Telefonica and global energy groups such as Shell have been increasing investments in Brazil, there is a less recognized, but growing, foreign investor presence emerging - private equity groups.
Private equity has a long history of buying and selling companies in developed markets but its impact in emerging economies, particularly Latin America, has been negligible.
Private equity firms raise pools of money - known as funds - from investors such as pension funds, banks and insurance companies.
With these funds - the biggest of which can be many billions of dollars in size - private equity groups buy companies and after a few years sell them at a profit. In the U.S. many global household name companies such as Chrysler, Toys R Us and Hilton Hotels are owned by private equity.
In 2010 private equity groups investing in Latin America raised a record US$8.1 billion, more than twice the previous year. Of this capital, 76 percent was invested in Brazil, according to data provider Preqin.
Consistent growth, which the IMF estimates will range between 4.5 to 5 percent through 2011-2014, alongside the increased purchasing power of a burgeoning middle class have done much to tempt foreign private equity investors to Brazilian shores.
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