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Private equity: The stakes rise in Colombia

Rich in resources, light on infrastructure and newly politically stable, Colombia is a prime target for private equity investment – and it’s not just international firms that are getting in on the act. Jason Mitchell reports.

COLOMBIA’S PRIVATE EQUITY industry has taken off in the past five years – local managers have already committed $1 billion to deals and are in the process of raising up to a further $2 billion.

A decade ago, the country had a limited private equity industry with only some well-known international players, such as the Carlyle Group, AIG Private Equity, Darby Private Equity and Newbridge Capital, investing in businesses in Colombia. However, in 2007, the government introduced an important new regulation, Decree 2175, which allowed domestic pension funds to allocate up to 5% of their assets to local private equity managers, giving a huge boost to the fledgling industry.

Some five or six local private equity managers have now secured capital and closed their funds – averaging around $200 million – and a further 20 groups are fundraising, according to the Latin American Venture Capital Association (Lavca). The average size of investment in local companies is $20 million but deals of up to $60 million have taken place.

"The international interest in Colombia among private equity players has been growing significantly during the past couple of years," says Cate Ambrose, executive director of Lavca. "The government’s commitment to the local funds industry has been very strong, too.

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