This article is part of the special report: Challenging perceptions: Brazil makes a comeback

Brazil’s private equity (PE) and venture capital (VC) markets have seen a surge in activity in recent years, with the technology sector being one of the biggest winners. However, there are already signs of caution in the market.


The market has flourished over the past two years, according to the Association for Private Capital Investment in Latin America (Lavca), with private capital investment in Brazil in 2020 resulting in 391 deals valued at $6.41bn, leaping to 534 deals worth $13.95bn in 2021. 

“Recent years in Brazil have been very favourable for PE and VC funds, as since late 2016 we have had a constant fall in the Sistema Especial de Liquidação e Custodia [the Brazilian central bank’s system for performing open-market operations] base interest rate, dipping to 2.0% in 2020 — something unimaginable for Brazil,” says Felipe Argemi, CEO of mergers and acquisitions boutique Santis. “As a result, there has been a massive migration of fixed income investments to the capital market and to private investments, whether direct investments or through PE and VC funds.”

TMF Brazil managing director Rodrigo Zambon agrees: “PE and VC investments have increased by 128% between 2020 and 2021 — a clear sign that there is still appetite for investing in business growth and value creation in Brazil,” he says. “Traditionally, these types of investments are counter-cyclical and benefit from the low price of assets, which increases their chances of achieving higher returns in the mid-to-long term.”

Regional leader

Lavca’s 2022 industry data and analysis report reveal that Brazil continued to attract the most capital in the region last year, minting eight new ‘unicorns’ (tech companies valued at more than $1bn). Several notable VC rounds took place in the country which saw investments in fintech Nubank, proptech firm Loft and logistics firm CargoX.

Beyond the tech industry, investors have been eyeing opportunities in traditional sectors, such as energy and infrastructure. For example, the divestment of mature assets by state-owned multinational Petrobras is providing opportunities for PE funds, financial institutions and other firms to enter the market and expand their portfolio. 

Looking ahead

The first quarter of 2022 has seen no slackening of market activity. However, as global economic storm clouds gather and certain investors become more risk-averse, Brazil’s PE and VC markets are expected to come under increased pressure. “This year will be slower than 2021, due in part to the country’s general election, but mainly because of the increase in the interest rate, which has reached 12.75%, a level we have not seen since the beginning of 2017,” Mr Argemi says. “This takes the euphoria out of the market and the more conservative investors, who recently started investing in riskier assets, are moving their investments back to fixed income again.”

He adds that higher interest rates will also impact the valuation of companies. “Today we are seeing a mismatch between the expectation of value between sellers and buyers. Sellers are still considering more generous 2020–2021 valuation metrics, while buyers have already adjusted to the more cautious 2022 scenario,” he says.

“The impact of this can also be seen on the Brazilian Stock Exchange, because in 2022 we still haven’t seen any company debut here. As a result, we expect a decrease in PE and VC activity in the coming months, as they are now even more cautious with their investments.”

In association with Apex-Brasil. Writing and editing were carried out independently by fDi Intelligence.