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Capital Markets

Alternative investments: Brazil’s VC industry wakes up

Venture capital in Latin America, led by Brazil, Chile and Mexico, has come a long way since 2003, when the industry raised just $417 million in funds. Last year, the figure reached $2 billion, according to the Latin American Venture Capital Association and, if Brazil can realize its potential, the figure could double by 2008. Brazilian pension funds, with about $120 billion in their portfolios, are making venture capital-linked investments for the first time ever this year, led by state oil workers pension fund Petros.

The awakening of Brazil’s venture capital business owes something to the São Paolo stock exchange, which is cultivating an over-the-counter market – the Bovespa Mais project – that gives financiers an exit option as it allows venture capital-backed companies to raise up to $50 million. At a time of historically low interest rates in Latin America, investors are seeking alternatives to traditional investment vehicles for secure returns, benefiting venture capital, while Brazil is benefiting from a prolonged period of economic stability.

The financial arm of Brazil’s science and technology ministry, Finep, which has played a leading role in promoting Brazilian venture capital, has pledged more than $130 million for about 24 funds this year and is diversifying into start-up businesses and throwing the focus wider than just small and medium-size companies.

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