Brazilian private equity: Cash is God but creativity is vital
In Brazil, private equity is in vogue. Local billionaires Eike Batista and Andre Esteves are not the only people tapping the low valuation opportunities. Fund managers can be more selective within wider risk parameters as the true power of their key asset – cash – becomes obvious. Chloe Hayward reports.
"CASH IS NO longer king," says Eike Batista, the Brazilian billionaire and chairman of the EBX group of companies. "No, cash is no longer king. Cash is God. In these market conditions, those with cash are going to be the winners."
Batista wants more. He plans to tap into the new big trend in Brazil and raise a $5 billion to $10 billion private equity fund. He will start the roadshow in April (see Batista tries to maintain his X factor).
But the question of who will invest in this risk-averse climate remains. "Risk is the probability of getting paid – therefore an investment in a resort in Nicaragua with good management and offshore collateral is probably less risky than giving a US company a rolling facility," says Hans Humes, president of Greylock Capital Management, an asset management group in New York. "Risk has been redefined."
Despite a deep global recession, Brazil is still forecast to show GDP growth of 0.8% to 2% in 2009. And although the capital markets are only open to state-supported entities, there is still some hope.