MEXICO

36 | SPECIAL REPORT: PRIVATE EQUITY IN MEXICO
Conclusion
As one industry veteran points out, “The amount of private equity
capital in Mexico is incredibly low for a country with so many
needs.” We would tend to agree. The total value of private equity
investment in 2015 accounted for only 0.03% of Mexico’s GDP,
in comparison to nearly 2% in the United Kingdom and 1.4% in
the United States (see Exhibit 25). Mexico also lags a number of
its emerging market peers; for instance, measuring only one-third
the rate of Brazil and one-tenth the rate of India.
The challenging investment climate, one dominated by local families,
is certainly a contributing factor. There is an old Mexican
business saying: padre noble, hijo rico, nieto pobre (father noble,
son rich, grandson poor). Whether by helping a company improve
its internal operations, raise additional financing, or take advantage
of Mexico’s numerous trade agreements to expand operations,
private equity firms are willing and able to help domestic companies
ensure they do not go broke by the third generation. A tighter
embrace between private equity firms and family-controlled businesses
could result in greater openness and transparency regarding
the local business environment, as well as promote stronger job
creation and more inclusive economic growth.
Northgate Capital’s Mizrahi observes, “We will continue to have
some ups and downs but, in general, Mexico is committed to
growing this industry because the benefits of private equity have
been proven in nearly every other place in the world. As a developing
country, we still have many challenges in terms of poverty,
corruption, education, health systems, etc. But this also gives us
in the business community a lot of opportunities. It’s a two-fold
situation where we are trying to take advantage of those opportunities
as well as hopefully contribute to the longer term growth
of the economy and expansion of the middle class.”
Exhibit 25: Sampling of Global Private Equity Penetration, 2015
2.5
2.0
1.95
PE Investment / GDP (%)
1.5
1.0
1.41
0.77
0.5
0.0
United
Kingdom
0.31
0.18
0.09 0.09
0.10
0.03
0.01
0.04 0.03
0.01
United States Israel India South Africa China Brazil Poland Indonesia Nigeria Mexico Turkey Russia
Source: EMPEA EM PE investment data as of Q4 2015. IMF GDP data as of December 2015. PE data for the U.S., U.K. and Israel from Pitchbook as of Q4 2015.
Note: Includes private equity, private credit, private infrastructure and real assets.