Emerging Growth in Latin America’s Capital Markets

Exclusive Interview with

Antonia Stolper, Shearman & Sterling LLP

While the U.S. and Europe have been facing significant economic challenges, growth in Latin American countries continues to exceed expectations.  After emerging from an economic slump in 2008-2009, the region’s economies grew at a rate of 6% in 2010 and continue to rise — with the World Bank recently projecting 4-5% increases in 2011.

According to Antonia Stolper, a Partner in the New York office of Shearman & Sterling LLP and head of the firm’s Latin America practice, “The impact of the current expansionary economic times in Latin America is having a range of important effects on our business and on the business of our clients.  As countries come out of the recession we are seeing the needs to borrow, to issue equity, to raise money from the private equity markets, eagerness to do M&A transactions, to expand globally, and eagerness to invest throughout the chain.”

CONTINUE READING SUMMARY (Click to Expand/Collapse)

What we're seeing is that these governments came out of the recession very strongly, having kind of gotten their fiscal houses in order when the commodity boom was at its height in 2005, 2006, 2007. As the United States is suffering from high oil prices, it's of course a boom time in those countries in Latin America that are exporting minerals and mining, all the basic commodities, food in particular, soy, corn, etc.

So, all these countries had coffers full at the point that the crash came. They also had strong banking systems. The banking regulators having watched many crises in the past were very focused on high liquidity and high capital requirements. And as a result, when the recession hit, which absolutely affected Latin America, and resulted in low or no growth in many countries.

Nevertheless, the governments were in a position to go out and spend money, and that's a first, an absolute first time a Latin American country has been able to do counter cyclical expansionary spending. So all the countries went into the capital markets and borrowed, and borrowed to spend money on social programs, to hire people to build roads, to hire people to build schools, to run feeding programs.

Whatever was needed, they were in a position to be out there, to do it. And as a result, instead of having, you know, desperately economic times, which is something we've seen inthe past from North American and European recessions, Latin America acme out strongly. As countries come out of the recession, we are seeing the needs to borrow, to issue equity, to raise money from the private equity markets, eagerness to do M&A transactions, to expand globally.

An eagerness to invest throughout the chain. Latin America has an infrastructure deficit. And that infrastructure deficit creates enormous opportunities for international lending institutions, for international lawyers and for domestic companies and governments in the region. Ports, roads, airports, power plants, water systems.

The range of basic infrastructure that was left quite untended over many decades in the region create enormous opportunities. That's just one example. Another example is the enormous investment going on right now in the commodities sectors in the commodity sectors go across the spectrum: oil and gas, minerals and mining, but also agricultural commodities.

Latin America, and the former Brazil and Argentina, have some of the largest amount of arable land in the world that still can be cultivated.

In a world where food security has become an enormous issue, that's a focus that we're seeing our clients concerned about, as well as domestic governments. Oil and gas, we've talked about how important Brazil is as a driver of economic growth in the region. It is, by far, the largest country. It is a country that we have a tremendous investment in having had an office in Sao Paolo since 2004.

Brazil's got the most ambitious oil and gas development program, maybe in the world. I'm not exactly sure, but it's very possible.

Patrick Bross just went out and did an 80 billion dollar equity raise, of which about 30 billion went into the international capital markets. That's the biggest equity raise any company has ever done, but what are they doing with it? They are exploring the pre-salt mines that are deep-water offshore Brazil.

The enormous amounts of capital that this project alone is going to require in terms of drilling rigs and ships and piping and expertise globally is something that is driving economic development. Infrastructure is something that demands enormous amounts of capital. Some of that's generated locally in these countries, some of that needs to be imported.

Capital is completely global, and capital moves across the borders with freedom. That's a plus and a minus for all the countries of for Latin America, that's been a tremendous plus. And where are we seeing the money coming from? It comes from, I would say, three big pockets. One is domestic savings in Latin America.

For the first time in decades, we see high levels of savings in the home market. What does that mean? That means that there are pension fund savings going on in the home market. There are mandatory savings schemes in most of the countries in Latin America, and we're seeing that money deployed.  And, curiously, that money is both being deployed to invest in the home market, but also, because these markets are relatively small, there's some interest in moving that money across border.

Then, we're seeing the international capital markets. And where is that money coming from? I would say everywhere. Huge chunks of it are in the United States in institutional investors, some retail. Huge chunks of that are in institutional investors in Europe and some retail. And huge chunks of that are in China, fundamentally.

Where the Chinese government has made a decision that lending to Chinese exporters, lending to Chinese entities, who are becoming construction contractors, and otherwise getting involved in Latin America is something that there's now a national interest in doing. We're also seeing the Koreans involved.

The Japanese have been involved in London to Latin America over many many decades. Their big particular power companies have been investing in building power plants and using Japanese source capital investment for many, many years. So, and now we're starting to see the Middle East, which is for us in Latin America a brand new player!

We're seeing the equity markets. Brazil had an amazing equity boom for three years. We were absolutely part of that equity boom. Through our process in San Paulo, it sort of stopped because the Petro Brastile, which we were also pleased to be involved in, kind of ate up the Brazil market for most of the year because it was so enormous. Everybody was waiting for that to happen. The rest of Latin America has historically been a debt market and not a equity market.

We're seeing that there 's been some interest and I'm starting to see the pipeline fill of, other countries getting back into the equity markets. Some of that's money being raised in the United States and in Europe and being brought to Latin America. We've seen several major funds raised over the last year.

But some of it is also internally generated. We're seeing Peruvians raise funds. We're seeing Mexicans raise funds. We're seeing Brazilians raise funds and they're attracting in those funds international money, they are attracting local pension fund money and we're seeing them attract cross border money.

The Chileans are going into Columbia to raise private equity funds. The Columbian's looking elsewhere. And, so we're seeing a dramatic integration of the capital flows within the region as well. MNA is another important element to the story in Latin America right now. There's a tremendous amount of what I would call "inbound MNA," where countries, companies in the United States and in Europe and in Asia are buying assets and buying companies in Latin America.

We're seeing lots of that, a lot of movement in the commodity space, a lot of investment in the oil and gas industry, minerals and mining, and in commodities -- soy, wheat, et cetera -- but also a lot of investment in infrastructure. Again, bringing the expertise, and some of that -- I would say, most of that -- on the infrastructure side is through public/private partnerships, through concessions, through partnerships with local companies, et cetera.

Infrastructure is one of those things that having a local angle is very, very important because your relationship with the government in any kind of infrastructure project is very important.

So that's one source of
tremendous amount of basic MNA joint venture, pure investment activity. Another place where we're seeing just tremendous activity is what we'll call the outbound, which is Latin American companies, who are looking for acquisition opportunities outside their own countries.

That's generated by two things. One is highly concentrated local markets, so its very hard to grow locally because you already have a rather large chunk of the market. So, antitrust considerations in these countries, which have active antitrust regulators, make the consolidation in your home market problematic.

You're looking for opportunities elsewhere. We've been very pleased to be part of JBS' expansion, the largest beef producer in the world, who's been catively acquiring in the United States, for example. We've also been involved with Ecopetrol, which is the state-owned oil company of Colombia who's making acquisitions within Colombia from other operators.

Where they've been able to involve us is international council. So we're seeing that kind of cross-border activity, where companies looking for high-growth opportunities, looking for places to invest, and looking for places to enhance shareholder value are trading among themselves and moving out of their home countries.

Each of these countries is unique. That goes without saying, but Brazil's got 200 million people. Mexico's got 100 million people. Those are very big countries. The rest of the countries are really pretty small. They have small economies. There's a lot of other challenges, infrastructure, development, poverty, educational needs, such that you can't have a Latin America strategy, whether you're an investment bank, whether you're a law firm, whether you're a manufacturer, without thinking about the country that you want to invest in.

One of the key challenges as lawyers is that we're engaging with the law. That's what we do, so our clients may be running economic models about growth, et cetera, but we're thinking about how it is that we can get this project done in this country. So, one of the key focuses always is how to engage the regulatory environment such that you can do the project.

And that ranges from tax issues, which are these are highly complex tax systems and have also been subject to a lot of change. I'm a capital markets lawyer, personally. The securities regulatory system of many of these countries remain quite undeveloped. Brazil's gotten quite advanced, Argentina's quite advanced, Mexico's quite advanced, Chile's quite advanced.

New countries that are newer on the scene of the international capital market are less advanced. What does that mean? How do you get a deal done if the stock exchange doesn't know how to trade the security that you're trying to put forward? As a capital markets lawyer, where we're looking to import capital into the country, you're very concerned about ways in which you get repaid.

What are the exchange control rules? What are the capital control rules? Do you have to remain and invest it for a certain period of time. What kinds of dividends repatriation rules are there, what the tax regimes are going to be? All of those things are key to determining any project, whether it's a fund-raising project, whether it's a building project, whether it's a joint venture, and what the rights of the joint venture party are going to be.

All of those things are immediate challenges for lawyers, but they're also what make what we do really interesting. Where's Latin America going and where do we go with it. One of the great advantages of now being a magnet of investment, is that most of this investment is for the long term. And I'm not just talking about inbound.

Private inbound investment, but I'm talking about companies on the ground raising money to invest. And because the horizon is now relatively good, then people are making investment decisions for the long term.

The great thing about infrastructure is that its fallout is, has so many positive impact. So what's very exciting about the current investment boom is that it is focused on basic economic generating assets that both require a commitment to an investment horizon that's many many years long. As well as having economic benefits to the home country that's many many years long.

That's a positive spiral.

You can scroll through the transcript and click on any text in the CaptionBox above to go directly to that part of the video. [To start, click on Expand Transcript.] Or click on the links below to view by topic.

VIDEO SECTIONS (Click link to advance video to specific topic.)

View and download a PDF transcript of the full interview at *
Transcripts provided by

*Full Downloadable Transcript Coming Soon.


Antonia E. Stolper

Partner, Shearman & Sterling LLP

Antonia Stolper is a partner in Shearman & Sterling’s New York office and head of the Firm’s Latin America practice group. Ms. Stolper’s practice focuses primarily on corporate finance transactions in emerging markets. She has extensive registered public offering experience for foreign private issuers.

Recently her practice has focused on debt and equity securities offerings for Latin American corporate and sovereign issuers, representing both underwriters and issuers, and on restructuring transactions, primarily in Latin America, representing issuers, dealer managers and creditors. In addition, she advises a number of foreign and domestic issuers on their ongoing SEC reporting requirements, Sarbanes-Oxley compliance and corporate governance matters.


Related Practices, Industries & Focus Areas:

Capital Markets
Latin America & Caribbean
Corporate Governance
Pro Bono
State Controlled Companies/Sovereign Wealth Funds
Oil & Gas


New York


New York University School of Law, J.D., 1988
Yale University, B.A., 1979


599 Lexington Avenue
New York, NY 10022
(212) 848-5009 

To see a full bio, visit: http://www.shearman.com/astolper

Recent Publications:

Using a Credit Rating in a Public Offering – What to Expect Now That the Dodd-Frank Wall Street Reform and Consumer Protection Act is the Law (22 July 2010)

U.S. Supreme Court Rules Against Extraterritorial Application of Antifraud Provisions in “Foreign Cubed” Case (8 July 2010)

SEC Proposes Rule Change to Allow Underwriters to Offer Securities of WKSIs Before a Registration Statement is on File With the SEC (6 January 2010)

The Cuban Missive Crisis – Texas District Court Dismisses Mark Cuban Insider Trading Case (28 July 2009)

SEC Proposed Amendments – Proxy Disclosure, Solicitation Enhancements and NYSE Rule 452 (9 July 2009)

ADR Programs: Impact of Unsponsored Programs on Non-US Issuers (3 March 2009)

SEC Final Rule — Modernization of Oil and Gas Reporting (16 January 2009)


Shearman & Sterling LLP

Shearman & Sterling has been advising many of the world’s leading corporations and financial institutions, governments and governmental organizations for more than 135 years. We are committed to providing legal advice that is insightful and valuable to our clients. This has resulted in groundbreaking transactions in all major regions of the world.

For additional information, visit: http://www.shearman.com

Other Shearman & Sterling Featured Video Interviews:

Structuring Public and Private Transactions
in the Current M&A Environment

Clare O’Brien, Partner, Mergers & Acquisitions Group
Shearman & Sterling LLP

Click image to view the video.




  • http://www.quicktranscriptionservice.com Quick Transcription Service

    Excellent Article.

  • http://www.essaywriter.co.uk/uk-dissertations.aspx UK Dissertations

    I think latin america will put up their economy because they are one of the biggest continent in the world.