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The Private Equity Review - Chile 

June, 2013 - Andrés C Mena, Salvador Valdés and Francisco Guzmán - Reproduced with permission from Law Business Research Ltd.

I OVERVIEW

Chile continues to offer an attractive business environment. Chile was the first Latin American economy to join the Organization for Economic Cooperation and Development, and is party to dozens of free trade agreements (including with the United States, the European Union, Mexico, South Korea and Brazil). In terms of competitiveness in Latin America, according to the ranking published by the Latin American Private Equity & Venture Capital Association (‘LAVCA’),2  Chile has remained the country with the best overall conditions for the private equity industry for seven years in a row. As a result, private equity in Chile has grown significantly: there are now approximately 37 investment funds (as compared to 31 last year) with an estimated amount of investments of $600 million, and 24 management firms. Seventeen of these funds are private equity funds with investments of about $342.6 million, and 20 funds correspond to venture capital funds with investments of about $256.8 million.3


i Deal Activity 

The private equity industry has grown aggressively as a result of changes in the statutory corporate, capital markets and tax framework implemented since 2000. According to the LAVCA Scorecard 2012, investors value the overall environment of institutional and legal certainty, the protection of intellectual property rights, the transparency of the judiciary and the protection of minority shareholders’ rights. In addition, Standard and Poor’s recently raised Chile’s credit rating from A+ to AA-. With this upgrade, Chile became the country with the best credit rating in Latin America and located twenty-third worldwide (comparable to Japan, Estonia and Taiwan). 


Still, the private equity industry is in an early stage, which makes it particularly attractive for new investors. Unlike other countries (such as Brazil) the number of sponsors in the market is still limited and new players are attracted by the opportunity for better value.


The bigger players (i.e., funds with assets over $100 million and with a regional and not purely national focus) are managed both by foreign entities (such as Advent or CVC) and by some regional players (such as Linzor Capital Partners or Southern Cross Group). Other key sponsors in the country are Blackstone, Quilvest, Brookfield, KKR and Partners Group. These funds use local feeder funds to raise capital, mainly from institutional investors. Other key local players include Aurus, Celfin (recently merged with BTG Pactual), Larraín Vial, Independencia, IM Trust and Moneda Asset Management.

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