After a sharp drop in Latin American deals in 2022, bankers expect a slow recovery next year, led by M&A. IPOs may take longer to resume, due to high global interest rates.
The volume of M&A deals in Latin America fell 35% this year, to $86 billion, according to Refinitiv data.
Roderick Greenlees, global investment banking head at Itau Unibanco Holding SA (ITUB4.SA), said the total value of M&A, although lower than the record year of 2021, was within historical range in the years before.
Bankers predict M&A volumes will grow up to 20% in the region next year as Latin America becomes more relevant among emerging markets. Many emerging market investors have already backed out of Russia due to the war in Ukraine, and are now reducing exposure to China, worried over the impact of erratic COVID policies, tension with Washington and opaque finances of Chinese firms.
Latin America has a great opportunity to increase its share among emerging markets, said Latam M&A co-head at Citigroup Nicolas Roca.
"The volatility related to elections in the region tends to be short lived and won't affect this trend," he said, citing the example of market improvement in Chile a year after the election of leftist Gabriel Boric.
Investors are also awaiting economic policy proposals from Brazil's President-elect Luiz Inacio Lula da Silva, the latest leftist elected in the region after Colombia's Gustavo Petro, Roca said. Lula takes office on Jan. 1 and has announced that party loyalist Fernando Haddad will be his finance minister.
