By Patrick Rucker
http://www.reuters.com/article/idUSN1110173320100611MIAMI, June 11 (Reuters) - Investors who still see Latin America as restless and fraught with political risk underestimate how a growing middle class has helped stabilize many nations in the region, private equity investors say.
The era of nationalized industries, hyperinflation and even military dictatorships is a fading memory for many of the large economies in Latin America, yet skittish investors are still wary about making bets there.
As developed economies in Europe and the United States struggle with debt woes, and the future of Asia's runaway growth is uncertain, some are eyeing Latin America as a place to put their money. Yet private equity investors who concentrate on the region say many still undervalue the steady work in the region to build durable economies.
"There is no evidence that the worst of investors' fears are anywhere on the horizon," said Peter Tropper of the International Finance Corporation, which makes capital investments for the World Bank. "In the popular mind, though, those fears still exist."
Many investors identify Latin America with the recent seizures of industrial businesses by Venezuelan President Hugo Chavez or the 1980s era of bank nationalization in Mexico and triple-digit inflation in Brazil.
Investors who gathered in Florida this week for a private equity conference, however, roundly said that some peers unduly worry that the largest countries in the region could face an abrupt political setback and do not understand that stable economies are creating affluent stakeholders.
"As the middle class expands, the government loses some of its arbitrary authority," said Carlos Suner, who leads a private equity fund for the Andean region. He says investors need to appreciate how expanding wealth and shrinking poverty can create a tradition of stable growth.
Brazil, Mexico, Chile and Panama all boast an investment-grade rating on sovereign debt, while pension funds in many Latin American countries are making big bets on their own economies. But many investors remain unconvinced, said Erwin Roex of Coller Capital, which buys private equity assets in the secondary market.
In a Coller survey of would-be emerging market investors, 38 percent said they were deterred by the uncertainty of political risk in those growing economies. "Prior sentiment about these countries has not yet evaporated," Roex said.
HOMEOWNERSHIP INDEX
Expanding homeownership in Latin America shows that millions of families have a stake in continued economic certainty, several investors said.
"You gave someone financing to acquire a home? Well, you might have just given them stability and some net-worth for the first time in their life," said Diego Serebrisky of Advent International, a private equity investor based in Mexico.
Mortgage lending in Latin America is often a gateway to the formal economy, savings and household budgeting, investors said.
"When someone comes to you with a radical proposition and you have nothing to lose, you go to the street," said Josef Preschel of Peninsula Investments, which holds stakes in Latin America real estate.
"When you want to keep your home for your child and family, well, you will take a moment before you act."
While populist and left-leaning governments in Venezuela, Bolivia and Ecuador worry some investors, many other, more business-friendly Latin American countries are strengthening their economic infrastructure.
"When you can do investments and make such good money in stable countries in the region, why would you even go to some of the other countries were political risk is so great?" asked Peter Tropper. (Editing by Padraic Cassidy)
