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The Crisis and the Obvious - Article Piero Minardi, President Added in 5/19/2020

There comes a point when those who do business in Brazil think they have seen everything: inflation, the most diverse currency crises, recessions typical of wartime but in periods of peace. This is all with an historical backdrop of a gigantic state, an octopus with tentacles that pretends to want to help but only gets in the way. We are now in 2020 and facing a crisis that no one imagined they would find. A crisis that combines global aspects and is exacerbated by our political mishaps and lack of leadership. The result is an economic plunge that certainly frightens everyone - and makes the mission of our industry, today and in the future, even more important than it already was.


I have no doubt that having Private Equity and Venture Capital investors as partners helps Brazilian companies to better weather and get through this storm. Our industry is formed by experienced people, with masters and doctor degrees in the Real Brazil. Even though we have gone through so many crises, we have helped to boost companies and given our investors a return and whilst leaving our mark on the Brazilian economy. For the entrepreneur, this experience is worth a lot. We know that every crisis passes, and that it is essential to avoid panic and focus on what is under their own control - the personnel, the cashflow, the customers. At this time, this combination of governance, experience and long-term capital that shares risks and gives access to best practices is worth even more than in normal times.


We have talked about the actions taken by each of us to help our partners and the teams of the invested companies, and this only proves the strength, resilience and importance of the Private Equity and Venture Capital managers. But I would like to take this opportunity to talk about the future.


The reaction to the crisis will accelerate some phenomena that were already happening. One of them is the exhaustion of the fiscal capacity of our state. In a move necessary to alleviate the suffering of families, our debt will increase even more. At that time, ideas that we thought were discarded, such as the miraculous printing of money and other false solutions, are beginning to reappear. Not much is said about the only certainty we actually have: that the Brazilian economy depends on private capital to recover.


The global Private Equity and Venture Capital industry has over two trillion dollars to invest. You would expect our government to be doing its best to attract this long-term capital - to revitalize our infrastructure, buy state-owned companies, make our startups take off and attract quality partners to established companies. We don't need much. Clear rules, legal certainty: that's the basics. But unfortunately, we have been treated as agents of evil by the government, which has not yet understood how important we can be.


No doubt you have been following this rather inglorious journey for the past year. ABVCAP goes out of its way to convince the government to untie the knots that hold back long-term investments in Brazil. It is frustrating at times, but I do not lose hope. It's a fair fight, and we'll keep fighting. We have been trying to bring to Brazilian society the message of the importance of our companies in the daily lives of citizens and in the capital markets. An importance that is not clear to many in the country.


Maybe we really need a crisis of this magnitude to realize the obvious. Our industry is mature, we have more than two decades of history and foreign and Brazilian funds with topnotch teams, ready to multiply their investments at a time when long-term capital is more important than it ever was. We can attract many more investments than we have done so far. The ecosystem exists and is consolidated and proven. Incomprehensible how it can be ignored or even antagonized by those who should understand it the most.


The Private Equity and Venture Capital industry is helping Brazilian companies survive this difficult time - and as with other crises in the past - will also help the country grow again.



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