Conversation with Rodrigo Lowndes partner in Southern Cross Group, Latin America’s premier private equity specialists. Southern Cross has a 17 year history of investing in over 30 companies in Latin America, with offices in 5 countries in the region and a 25% IRR in USdollars.
Q: What is the current perception of institutional investors regarding Latin America?
A: Large institutional investors understand that Latin America as a region is heavily influenced by the behaviour of commodity prices, which are cyclical in nature. When commodity prices fall, the Latin American economies decelerate and GDP growth suffers across the region. These investors perceive that the cyclical nature of commodities brings with it opportunities for investment. The current low point in the cycle is considered a good moment to invest.
Q: Are political factors of concern to international investors?
A: There are countries where institutional investors will not invest at any one moment. The main concern is that the country should have a reliable and stable legal framework respected by the government.
Q: Does Spain retain the role of Latin American hub or has that shifted?
A: In the 90s and until the mid-2000s, Spanish and Portuguese companies led the expansion into Latin America. However, with the economic crisis, after 2008 that tendency has been reversed and companies sold off assets to create cash flow. Nowadays the trend has reversed and Latin American companies are investing in Europe.
Q: What are the main challenges you face as investors?
A: The main challenge is how quickly things change in the region and investor sentiment follows. Often investment decisions are made based on macroeconomic factors. However, Southern Cross adds value by improving the operations of the companies it invests in in the long term regardless of short-term macroeconomic factors. Another challenge is identifying and attracting the right talent particularly in periods when the economy is booming and there is a lot of competition. For this reason, Southern Cross relies on executive search firms that understand the company culture and objectives and can identify professional s with the appropriate skills for the portfolio companies