LatinFinance - Special Edition - August 2013 - 16

1
THE
EVOLUTION
OF THE
MARKETS
1988-2013

latin america’s equity capital
markets are unrecognizable
from the late-1980s. What
started as a few chilean banks
raising less than $100 million
via Sec listings has in recent
years unleashed some of the
world’s biggest deals.
multi-billion dollar issues are
now common, with domestic
and international investors
participating in ever more
sophisticated offerings.
companies in the region
have issued more than $20
billion in each of the last eight
years, up from annual volumes
of less than $10 billion in the
1990s. the rise has hardly been
a smooth one, however.
in the 1990s, a US registration was needed to raise any
funds. a few chileans, Brazilians and others headed abroad
– even Venezuelans and argentines had access. in 2013 USregistered deals still happen,
but are the exception.
Privatizations including
telebrás, telmex and YPf led
to a few larger deals in the early
years, but macroeconomic uncertainties, and a small buyer
base meant iPos and followons were not much of an option
for latin fundraisers.
“Before the early 2000s,
banks didn’t have anybody focused on latam equity capital
markets,” says Javier Vargas,
co-head of latam banking at
credit Suisse. “that wasn’t part
of the offering for clients.”

Latin American companies have proved they can deliver
deals as big as anywhere in the world in ever more sophisticated markets.
But smaller issuers are still left out. By Ben Miller

Equity markets
A matter of size
Boom from bust
a few telecoms and banks
brought big deals in the 1990s,
but the party didn’t start until
well into the 2000s.
the dotcom bust in the US
provided a spur for investors
to look harder for alternatives.
Some latam countries with
stabilizing macroeconomics
and politics began to look attractive.
nowhere was this truer
than in Brazil, where incoming
president luiz inácio lula da
Silva’s administration proved
more market-friendly than
expected and global demand
for commodities accelerated
the economy. transactions
done under the 144a format
allowed easier access than Secregistered deals.
Brazil became home to a
new wave of public companies.
the $167 million iPo from
companhia de concessões
Rodoviárias (ccR) in 2002 was
an early 144a example. natura
reopened the market after a
two-year hiatus in 2004, raising $241 million and setting off
an intense period of issuance
that would last more than three
years.
With locals and international
issuers participating, deals of
various sizes were sold, almost
daily. this coincided with a
shift in Brazil’s entrepreneurial
culture. With examples of
visible and successful private
businesses increasing, more of

16 l atinfina nce.com - 25 Years - August 2013

crisis of 2008-2009, it had
started to become clear that
the rush to the Bovespa was
too much of a good thing. many
Brazilians came to market – and
many performed poorly. the
market has restarted since the
crisis, but many new issuers
– particularly small ones – still
have trouble hitting the midpoint of their pricing target.

THE RIGHT DIRECTION: Opportunities to raise cash in the stock
markets are on the rise for Latin
companies

an effort was made to formalize
business practices and adhere
them to the novo mercado, the
listing segment of the Bm&f
Bovespa exchange.
Unrepresented or underrepresented industries emerged:
consumer products, technology, real estate, financials.
the market peaked with a $51
billion year in 2007 – 76% of it
issued by Brazilians, including
66 iPos from the country, according to Dealogic.
But even before the financial

Local following
to the delight of investors and
issuers alike, equity markets
have become more regionally focused over the past two
to three years, with growing
opportunities for companies
outside Brazil to list.
chile has always been able
to support issuers, including small ones, thanks to its
pension funds holding more
assets as a portion of GDP than
in other countries. Hortifrut,
moller y Pérez-cotapos and
echeverría izquierdo are
examples of recent sub-$100
million debutants, done largely
without international support.
Beyond chile, local buyers
in most countries step up when
international investors are
skittish.
Brazilian equity deals
traditionally attract 70% international buyers, and 30%
national. When conditions
tighten, sizes go down and the
frequency of deals decreases,
however, transactions still get
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