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Foreign investor appetite grows in mergers and purchases in Latin America

International investors see greater opportunities in the area of ​​mergers and acquisitions in Latin America, with Chile, Brazil, Mexico and Colombia leading the list of attractive countries for investment, according to a survey published today.

A survey by the global legal services firm Baker McKenzie to 125 investors from North America, Europe and Asia shows a “growing optimism in investment opportunities in the area of ​​mergers and acquisitions” (M & A, in English) in Latin America, detailed the company in a statement.

The study, titled “A guide for the M & A investor in Latin America 2018,” found that international investors expect growth in mergers and acquisitions activity in the region during 2018. ”

Particularly in Chile, Brazil, Mexico and Colombia, “with the impulse given by the rapid growth of the middle class, the urbanization of the region and the technological evolution of its industries, which make their assets more attractive,” he said.

According to the report, which assesses the situation in Argentina, Brazil, Chile, Colombia, Mexico and Peru, four out of five investors expect mergers and acquisitions activity to grow in the region during 2018. And 40% of them said they felt “very confident” in investing in Latin America.

According to the survey, about 75% of investors indicated that they plan investments this year in Chile, mainly due to the perception of being a country with a strict legal and regulatory framework.

On the other hand, 66% and 61% plan to do so in Brazil and Mexico, respectively.

“Chile and Mexico were considered the countries that offer a better climate for business among the countries analyzed in Latin America,” the firm said.

The study found that the Pacific Alliance – made up of Mexico, Colombia, Peru and Chile – is quickly catching the attention of foreign investors by eliminating 92% of tariffs among their countries and integrating their stock markets into a single platform. .

“They favor investor confidence in this block reflected in 55% of respondents who said that the creation of the Pacific Alliance has impacted its M & A strategy in Latin America,” said the consultant.

The study also reflects changes in the reasons for investing in this area in Latin America.

If before they did it because of a lack of good assets in their territory, today they invest with the desire to increase their market share (37%) and acquire leading companies in their respective industries (36%), within the framework of activity plans transnational

“As the economies and the political climate of the region stabilize and evolve, investors look to Latin America and business decisions respond to an increasingly sophisticated market, which will lead us to see a growing appetite,” he said. Baker McKenzie’s M & A leader for the region, Liliana Espinosa.

The survey also inquired about the challenges faced by investors in Latin America.

The study found that regulatory obstacles (33%) and obtaining sufficient information on assets (25%) are the main challenges in general.
With regard to contract negotiation, market volatility (35%) and the closing of asset valuation gaps (33%) are worrying.

Baker McKenzie’s M & A partner for Mexico, Jorge Ruiz, highlighted that in recent years this country has become a powerful manufacturing center and as the second largest economy in the region, it has attracted interest in its cross-border trade.

Since 2012, the United States, Belgium and Israel have been the main foreign investors in Mexico, with a focus on consumer goods, energy and telecommunications.

However, there is a “dark cloud”, and that is the renegotiation of the North American Free Trade Agreement (NAFTA).

“The possibility that Mexico may lose its duty-free access to US consumers threatens foreign investment,” the report said.

Despite this, Ruiz valued positively the development in the matter of the country, especially for the structural reforms promoted since 2013.

According to the report, Mexico received between 2013 and 2017 about 60,000 million dollars of foreign investment in the mergers and acquisitions sector.

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