November 30, 2015
Interviewed by: Privcap
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Expert Q&A: With Michael Rogers of EY

Although political and economic headwinds in Brazil have created extra risk for investors looking to deploy capital in Latin America, Michael Rogers, global deputy private equity leader at EY, says valuations will make a comeback and capital will begin to flow back into the region.

Although political and economic headwinds in Brazil have created extra risk for investors looking to deploy capital in Latin America, Michael Rogers, global deputy private equity leader at EY, says valuations will make a comeback and capital will begin to flow back into the region.

Expert Q&A: With Michael Rogers of EY

What is the case for investments in Latin America, particularly in Brazil, today?

Michael Rogers, EY: It’s hard to make a bullish case for Brazil today given that almost every economic indicator is going the wrong direction for Brazil. But with a currency that’s 30 or 40 percent down relative to the Dollar, at some point valuations will be attractive and capital will continue to flow back in there. In fact we’ve actually seen pretty strong flows into Brazil despite the currency drop off recently.

But if you look through the cycles that we’ve experienced, oftentimes some of the best deals of course as you might imagine for private equity have been done in periods of downdraft. So I think that if you have a long term view and they want to have an investment platform there it’s probably, it may not hit, you may not be able to catch the exact bottom but you’re probably getting you know, close to it.

Should investors avoid countries that rely heavily on exporting commodities for economic growth and stability?

Rogers: The commodities cycle is one that you know, you can kind of go down the list and look and see who has more exposure. That’s always a challenge as well, but I would put a vote in for Latin America for a couple of other reasons though. One is more political stability than some of these other countries right now. There is you know, some places are having you know, war issues or strife or other challenges, and Latin America does not you know, have some of those challenges. They’ve also developed some of these pro-growth you know, sort of policies, and reduced some of the barriers for trade. And so I think if you look at the MPEA study for attractiveness around the world Latin ex Brazil was rated the number one most attractive.

What can Latin American countries do to combat falling currency valuations?

Rogers: I think that what will happen is because of the currency challenges in some ways too some of the maybe luxury goods that they were importing into some of these markets people might say well let’s focus back in our own region. And so there might be more capital and investment made in country, which might provide opportunity for private equity in those locally owned businesses as opposed to you know, the model had been for a while get a position in one of these businesses and think about international expansion, things of that nature. I think there is probably going to be some nice opportunities to find some assets in country where they’re focused on consumers locally, things like food and retail and restaurants.

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