LatinFinance - March/April 2013 - Costa Rica Supplement - 15

Capital markets | Costa Rica

capitalization of the entire exchange.
The opening of the Costa Rican economy from the late 1980s
But there is scope for Costa Rica’s numerous smaller companies provided a competitive shock to local companies which shook up
to use equity markets, Brenes says. He has been studying
industry, says Harry Strachan, managing director at advisor and
international examples such as London’s
private equity firm Mesoamerica. That
Alternative Investment Market to see how
stimulated domestic and international
Costa Rica’s own alternative index, the
take-over activity. Over the years, an
MAPA, could be developed. So far just two
increasing number of companies based
companies have raised capital on MAPA,
in Central America have been looking to
with technology firm ICC Voz y Datos listing
create a regional footprint, he adds.
most recently, in June.
Recently, Colombia has become a
The idea would be to bring high growth,
particularly important investor, with a
innovative companies seeking to raise
strong currency and a corporate sector
$1 million to $5 million to market.
that has much to learn from abroad,
Companies that service multinationals are
says Najmias. Inflows from the country
likely candidates with a couple of agrohave replaced the European and North
chemical firms and a bio-degradable
American companies that have been
product manufacturer for Walmart possible
absent from acquisitions since the crisis,
candidates, he says. Another option is listing
he says.
through convertible instruments, although
But high levels of bureaucracy and
Michael Harrington, Actis
this is presently a cumbersome process, he
government restrictions have wilted
says. Liquidity, though, would be desperately
investments in what could be very
thin and it is not clear how Costa Rica could improve that.
promising areas such as energy production, he says. StateOutsiders believe the solution will lie in finally inking a deal with
owned ICE still dominates energy production, although that is
regional exchanges. They point to the trading platform created
slowly changing. ICE is buying energy from private providers and
by Colombia, Peru and Chile, MILA, which allows brokers to buy
Mesoamerica is working on more projects in the area.
securities on other exchanges. The exchanges of Panama, El
Actis, the UK private equity firm, runs a Central America energy
Salvador and Costa Rica signed a memorandum of understanding
fund out of Costa Rica. “The global environment in general has
in 2008. But foot-dragging by supervisors has protracted the
been difficult, but we are finding quite a bit of appetite thanks
process so much that it is unlikely to be concluded any time soon,
to energy growth in Latin America,” says Michael Harrington,
says Brenes.
investment principal of the
If corporate debt and
Energy Fund. Through the
The local crowd
equity still seem to be some
region, energy consumption
Central government debt (% GDP)
way off, the exchange is acting
is increasing 5% to 10% a
40
as a conduit for real estate
year and wind and solar
and works funding. Some US
are becoming increasingly
35
hedge funds and small- to
competitive, he says.
Foreign
Domestic
30
medium-sized family offices are
Investors are drawn to
looking to buy projects, explains
Costa Rica for its low cost of
25
Brenes. The exchange can
equity, agreeing to lower internal
certify the projects, for example
rates of return more than in
20
for corporate governance
troubled and poorer neighboring
standards, making them eligible
countries, Najmias says. Other
15
for this kind of investor. Deals
advantages to buying Costa
10
might involve the purchase of
Rican companies include
a commercial building which is
quality management teams
5
sold to investors partly on the
which can be “far superior to
exchange and partly privately.
Central and even Latin American
0
Six projects were raising capital
[management] and can get to
2006
2007
2008
2009
2010
2011
2012
this way in February, he says.
be as good as the US,” says
Source: Central Bank of Costa Rica
Najmias. In general, investors
M&A, PE boom
are most interested in retail and
In the absence of public markets, M&A and private equity
consumer goods, banks and insurance companies, he says.
are thriving through both domestic, and inward and outward
Meanwhile, a good quality of life, the US-friendly location and the
investments. There was around $800 million in M&A activity last
high number of English speakers have all helped drive investments.
year, estimates Leonardo Najmias, managing director at advisory
“It is much easier to bring in professionals from other parts of the
and private equity shop, Mesoamerica.
world to Costa Rica than most of its neighbors,” he says. LF

“The global environment
in general has been
difficult, but we are finding
quite a bit of appetite
thanks to energy growth
in Latin America”

A Supplement

to

LatinFinance | March/April 2013

15



Table of Contents for the Digital Edition of LatinFinance - March/April 2013 - Costa Rica Supplement

Latin Finance - March/April 2013 - Costa Rica Supplement
Contents
Getting it right
Securing the future
Making the leap
Finding space
A hard currency
Trading up
Green credentials
LatinFinance - March/April 2013 - Costa Rica Supplement - Latin Finance - March/April 2013 - Costa Rica Supplement
LatinFinance - March/April 2013 - Costa Rica Supplement - Cover2
LatinFinance - March/April 2013 - Costa Rica Supplement - Contents
LatinFinance - March/April 2013 - Costa Rica Supplement - Getting it right
LatinFinance - March/April 2013 - Costa Rica Supplement - 3
LatinFinance - March/April 2013 - Costa Rica Supplement - 4
LatinFinance - March/April 2013 - Costa Rica Supplement - 5
LatinFinance - March/April 2013 - Costa Rica Supplement - Securing the future
LatinFinance - March/April 2013 - Costa Rica Supplement - 7
LatinFinance - March/April 2013 - Costa Rica Supplement - Making the leap
LatinFinance - March/April 2013 - Costa Rica Supplement - 9
LatinFinance - March/April 2013 - Costa Rica Supplement - 10
LatinFinance - March/April 2013 - Costa Rica Supplement - 11
LatinFinance - March/April 2013 - Costa Rica Supplement - 12
LatinFinance - March/April 2013 - Costa Rica Supplement - 13
LatinFinance - March/April 2013 - Costa Rica Supplement - Finding space
LatinFinance - March/April 2013 - Costa Rica Supplement - 15
LatinFinance - March/April 2013 - Costa Rica Supplement - A hard currency
LatinFinance - March/April 2013 - Costa Rica Supplement - 17
LatinFinance - March/April 2013 - Costa Rica Supplement - Trading up
LatinFinance - March/April 2013 - Costa Rica Supplement - 19
LatinFinance - March/April 2013 - Costa Rica Supplement - 20
LatinFinance - March/April 2013 - Costa Rica Supplement - 21
LatinFinance - March/April 2013 - Costa Rica Supplement - 22
LatinFinance - March/April 2013 - Costa Rica Supplement - 23
LatinFinance - March/April 2013 - Costa Rica Supplement - Green credentials
LatinFinance - March/April 2013 - Costa Rica Supplement - Cover3
LatinFinance - March/April 2013 - Costa Rica Supplement - Cover4
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