Foreign venture capital and private equity cannot be let off their leash in public parks, according to municipal ordinance here in Brazil.
This is the impression I often get, at least, from contemplating the institutional framework in which the federal government serves as arbitrator of all deal-making and listening to the rhetoric of the powers that be. The current financial crisis is pointed to with a certain smugness of the disastrous results of letting “speculative” capital off its leash.
The Brazilian Association of Venture Capital and Private Equity: inner circle
“Productive” capital is warmly welcomed. Arbitrageurs will be shot on sight. And yet domestic investors are constantly straining at their leashes, hungry to adopt more sophisticated methods and investment instruments in a capital market in which men in smocks still yell at one another all day long.
The U.S. fund Darby — 23.5% owner of the AleSat fueling station network — gets used as a punching bag today by all and sundry in the Rio tip sheet Relatório Reseervado. The fund is said to be standing in the way of making a match with one of three attractive suitors, citing its contractual exit date of 2012. The RR believes the fund is actually counting on a higher ROI if it sells its shares together with the other partners.
AleSat, meanwhile, is said to be considering a purely tactical IPO that would dilute Darby’s bargaining power. On the down side, AleSat owners would not realize 100% of the proceeds of the sale under this scenario. And here I was just recently rereading an old college textbook on the “tragedy of the commons.”
The point is that outsiders are often resented, and speculative ventures viewed, not as the other man’s honest attempt to get the most out of the hand he has than as something shady, requiring institutional barriers to control.
These institutional arrangements are reflected in a certain genteel — or sometimes not so genteel — xenophobia. The press revels in scandals involving domestic subsidiaries of the big multinationals, often whether there are any scandalous facts to scandalize or not. (more…)