While the original book and story Barbarians at the Gate is about the fall of RJR Nabisco and a mammoth LBO that opened flood gates for leveraged buyouts and the heyday of private equity, the story is slightly different here.
In Central and South America, the barbarians are everywhere – politics, authority, the discrepancy between super rich and super poor – and then there is a movement to impact the region through capital. Call it impact investing or call it logical, sound business. When you crush the bottom line, a second and triple bottom line can have massive impact – crush the bottom line first.
According to the President of the Inter-American Development Bank, the region stands on the threshold of historic opportunity. He predicts that Latin America’s regional GDP and average income will double by 2025 and poverty levels will be slashed by two-thirds.
The winners of this will be the entrepreneurial minded – both sides of the table – investor and entrepreneur. But what needs to happen to get passed the gate? And in my time in Nicaragua, I saw some bad, half built gates which leads to my point.
Infrastructure (All types):
Tangible, Financial, Social and Human. An ecosystem has to exist to support new ventures. Angel networks must get in the trenches and communities must emerge (technology, security, energy, retail, health, and transport). The physical infrastructure must advance. I have seen Colombia make great strides in roads and infrastructure. There are huge plays in infrastructure buy outs but the countries have to do their part. In Ometepe for example, it took me an hour and half to travel a few miles. The roads are garbage. That has to improve.
Improved infrastructure paves the way for a beautiful thing – a middle class (which does not exist in much of Latin America). It creates jobs and skills for workers, allows for the efficient transport of goods and services, adds reliability for health care, supports energy innovation and strengthens retail. With an emerging middle class, the region can sustain the growth experts predict - a win-win for all.
My one concern is – do governments in the region actually want this to happen?