Investing in Recovery in Latin America

The Covid-19 pandemic has been devastating South and Latin America over the past year. The region accounts for 8.4% of the world population, but 18.6% of Covid-19 deaths. The outbreak took place in the context of weak economic performance, high levels of poverty. In addition, informal labour, significant social and economic inequalities, and fragile social protection systems have plagues the region as well. Multiple companies and private entities have invested in South America its rich natural resources.

There are multiple funds that are investing in South America with the aim of not just to achieve high returns but also to achieve societal and environmental goals by investing in businesses that focus on such initiatives. One example is the award-winning investment fund Lightrock that has invested in General Water. A company that uses innovative technologies to extract, treat and recycle wastewater while adhering to the highest environmental standards. 

Another example is the efforts of a group of Peruvian businessmen that decided to take it to the next level by setting up a multimillion-dollar investment fund to fight the impact of the worldwide Covid pandemic in the region. 

With years of experience, Baste Consulting an international multifamily Office created and managed an official fund to help struggling businesses in South and Latin America. A total of US$328 million dollars was invested. 

Close to 70 companies received investments from as low as US$1.5 million to US$20 million depending on each case.

This was no simple task. South and Latin America in general over past years have faced many economic and political challenges. While the governments in the region were extremely swift in facing the challenge of Covid-19 their actions were poorly executed. This left the region in financial ruins. Prior to the pandemic, it was expected that the region’s GDP would grow slightly by 1.8% which was much welcomed news. So far, the GDP has shrunk by 8.1%, with no end in sight. The pandemic and its mutations are inflicting considerable pain and damage in the region.

Baste Consulting was able to leverage the investments to acquire company shares or even offer low interested yield loans. These funds have not only strengthened economies that were in dire straits but saved many small and medium sized businesses.

The continuing economic crisis that began in the first quarter of this year was an unprecedented global shock to both aggregate demand and aggregate supply. Countries have imposed stricter social distancing measures to flatten the contagion curve of the pandemic and its mutations. Global production, consumption, and investments which many hoped were coming, have been slowing down again. Southeast Asia was hit first and the hardest until the rest of the world faced the same constraints.

Southeast Asia was the hub to the largest trading partners to the South and Latin America. The trade from Southeast Asia has an estimated increase from US$12 billion in 2000 to US$306 billion in 2018. Approximately three years ago, Asian investment represented about nine percent of Latin American total exports and 18.4% of total imports. All countries are not suffering the same, for example 28.1% of total Brazilian exports, as well as 10.5% of Argentina’s and 32.4% of Chile’s are concentrated in Southeast Asia.

There are six main trading partners of the region were Brazil, Argentina, Chile, Peru, Colombia and Venezuela, whose exports are concentrated in four products: copper, soy, crude oil, and iron ore. These represent about 75% of Latin American total exports.

Foreign direct investment and loans have increased significantly in the past decade, between 2005 and 2017, more than US$90 billion dollars were in tranche payments to region. Those have virtually stopped or have slowed down significantly. However, Baste Consulting’s new fund is helping to pick up some of the slack. 

Leonardo Duran Ferrer, Managing Partner at Baste Consulting, has stated that “despite the devastating effects of the Covid-19 pandemic on the global economy, we believe that now is the time to invest in businesses that have managed to withstand the unprecedented obstacles of the past year.”

Ferrer also stated that he believes that with careful management Baste Consulting will be the “to go group” in South and Latin America. Ferrer predicts that the pandemic will end, and the region will look to those that stepped up in the business world