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As overseas investment interest in Latin America continues to grow, a refreshing new breed of publications and research mechanisms has appeared which serve to provide relevant insider information to what can be complex marketplaces to enter.  A great example of one of them is the Alternative Latin Investor – a free digital magazine which focuses on a range of topics included commodities, forex, private equity, wine, art, regulation, philanthropy, hedge funds, agribusiness, renewable energy, emerging markets and real estate. Please see a guest post kindly written by Nate Suppiah, CEO of the magazine, where he explore barriers faced by foreign investors in Latin America; which countries are the most secure; the boom-bust nature of several LatAm economies; political risks; the growth of Chinese interests in the region; particular areas of interests and some general tips amongst others.  We also encourage you to subscribe to the magazine, details of which are at the end:

First off a bit about myself: having a fairly colorful background, living in various countries and occupying quite a few different occupations, I see the past 10 years as preparation for my current role running the Alternative Latin Investor.  The skills, international experiences and knowledge I acquired gave me the ‘jack of all trades’ ability which I believe is crucial in the running of a successful publication.

I found a great deal of interest in Latin America which, at the time, was not matched with a sufficient amount of information.  In addition there has been an ongoing trend towards alternative asset acquisition, with investors looking to diversify away from just capital market holdings.  It was the combination of these two trends that gave birth to the Alternative Latin Investor.

A common question I am asked, particularly by European and US investors, is what are the most common barriers to developing a successful investment strategy in Latin America.  In most markets I don’t see many ‘barriers’ though I do see a trend of many overseas investors not performing adequate due diligence in an effort to get a ‘deal’.  If an investor takes a position without adequate research, this creates a proliferation of illegitimate deals which – by their very nature – are designed to prey on those that are unprepared.  As these types of deals grow in number, so does the bad press surrounding ‘LatAm Scams’ – which, in turn, has the unfortunate effect of scaring off further foreign investment and unjustifiably salting the water.  However, at the same time, investors need to remember that – despite the availability of Blackberries, Wi-Fi and Dom Pérignon – LatAm is still populated with emerging market economies, which are designated as such by their market volatility and turbulence.   This uncertainty is reflected with the high returns innate to investments with higher risk.  In no market – emerging or developed – can investors protect their investment, as was made very clear by the events of late 2008.

Nevertheless, the crisis was excellent publicity for Latin America over the past two years.  The region has been plagued with economic tragedies over the past three decades – from which some very important lessons have been learnt.  With a very small mortgage markets and availability of credit, the main effects from the crisis were secondary resulting from the decreased spending of the US and Europe.  With the ‘First World’ markets in trouble, investors were forced to take a less myopic view.  It is my firm believe that this change in perspective will continue to drive investment into the region.

So, on to potential investment strategies.  By leaps and bounds Chile is by far the easiest and most secure region to invest within Latin America, although its returns are reflected in that.  Mexico, Colombia, Panama and Brazil continue the list.  It should be noted that ‘ease’ really depends on what type of investment is in question.    I would say investors should start, as a minimum, by asking themselves the following questions:

1)     What do you want from this investment – ie. a high return hedge fund or hobby?

2)     What is your risk profile?

3)     Do you want to be able to manage your investment remotely?

4)     What is your timeline?  Some investments, such as renewable energy, are very long term for example.

With these four basic pieces of information, an investor can determine sector and region, giving them a manageable amount of opportunities to pursue more diligently.  However, in general, the political stability of Latin America (save Venezuela and Cuba) has been significantly improved along with fiscal policies and investment infrastructure.  I am interested in most alternative sectors in Latin America, but the most interesting regions right now are Colombia and Peru.  We will be seeing some amazing things coming out of these two countries in the near future.  In addition, the joining of the Colombian, Chilean and Peruvian stock exchanges will create a derivatives market which will be closely watched by the fund industry.  Indeed, I am very excited by the possibilities of 2011 and beyond throughout Latin America.

The reason Alternative Latin Investor exists is that it is not easy to find detailed and objectively written information on much of what is discussed here.  We feel that we provide both a general overview of a wide range of alternative asset classes as well as a decent amount of specificity.  Once a potential investor has an idea of the particular asset class they are interested in – preferably both region and sector –finding competent due diligence services is not a difficult task, although it should be remembered that it does not come cheap.

Alternative Latin Investor is a free publication.  There is a short (under a minute) registration process to be able access all our content:

To see some of our previous issues and special reports:

http://www.alternativelatininvestor.com/issues.html

http://www.alternativelatininvestor.com/reports.html

For further information about Alternative Latin Investor or with regards to investment in Latin America please feel free to email me at nate@caprg.com (Nate Suppiah).