High-Growth SMEs and the Availability of Private Equity and Venture Capital in Brazil

SMALL BUSINESS ACCESS TO FINANCE IN LATIN AMERICA AND THE CARIBBEAN, Carolin A. Crabbe, ed., Inter-American Development Bank, 2008

37 Pages Posted: 10 Jan 2008

See all articles by Leonardo L. Ribeiro

Leonardo L. Ribeiro

Center For Private Equity and Venture Capital Research at Fundacao Getulio Vargas (GVcepe)

Date Written: May 1, 2007

Abstract

This chapter discusses private equity and venture capital (PE/VC) in Brazil. Firstly, it is shown that PE/VC has a strong impact in the Brazilian capital markets, with PE/VC-backed companies representing close to half the amount raised by initial public offerings (IPOs) in the stock exchanges. By examining two of these deals, which involved small and medium-sized enterprises (SMEs), it is argued that PE/VC managers have acted as catalysts of the impressive growth rates experienced before these companies entered the stock markets. Indeed, PE/VC firms represent an important segment of the capital market, with specialization to invest in high-growth innovative SMEs. PE/VC managers exercise superior selection, monitoring and governance that mitigate the uncertainty and risks of investing in such companies. Despite its successes in Brazil, PE/VC is still very much restrained by the challenging local economic and institutional environment. Thus, changes in the legal and fiscal system, simplification in bureaucratic procedures, and other such improvements will most likely result in a sensible growth in the Brazilian PE/VC industry, with positive impact in the SME access to finance in Brazil. Since most countries in Latin America share similar economic and institutional traits with Brazil, the path followed by the local PE/VC industry can serve as an example for other countries to learn with its successes and failures.

Keywords: private equity, venture capital, institutions, IPO, public policy

JEL Classification: G24, G28, O16, O31, P12

Suggested Citation

Ribeiro, Leonardo de Lima, High-Growth SMEs and the Availability of Private Equity and Venture Capital in Brazil (May 1, 2007). SMALL BUSINESS ACCESS TO FINANCE IN LATIN AMERICA AND THE CARIBBEAN, Carolin A. Crabbe, ed., Inter-American Development Bank, 2008, Available at SSRN: https://ssrn.com/abstract=1082438

Leonardo de Lima Ribeiro (Contact Author)

Center For Private Equity and Venture Capital Research at Fundacao Getulio Vargas (GVcepe) ( email )

Rua Itapeva, 432
8th floor
Sao Paulo, Sao Paulo 01313-902
Brazil
+55 (11) 3281-3459 (Phone)

HOME PAGE: http://www.cepe.fgvsp.br

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