Mexico

CAF promotes Mexican SMEs through venture capital funds

CAF – development bank of Latin America – has signed agreements with three Mexican investment funds to promote SMEs, as part of a strategic alliance with NAFIN and other Mexican development banks.

Funding recipients are Mexico Fund of Funds II, Adobe Social Mezzanine Fund I and Evercore Mexico Capital Partners Fund III, in which CAF will make equity investments.

For 18 years, Mexico has been pursuing a policy of promoting entrepreneurship, venture capital and SMEs, all areas in which CAF has vast experience in Latin American countries.

The three agreements were signed during CAF president Enrique Garcia's official visit to Mexico City, where he attended the inauguration of Mexican President Enrique Pena Nieto.

Garcia says CAF's participation in investment funds is part of the institution's policy of supporting SMEs in Mexico and Latin America.

"This activity has a positive impact on economic growth, as this type of capital investment promotes the creation of new businesses, new products and services, jobs and the emergence of entrepreneurs," he says.

The first agreement to be signed was on CAF's equity investment in Mexico Funds Fund II, which will be managed by Corporacion Mexicana de Inversiones de Capital (CMIC), formed by Nacional Financiera, Banobras, Bancomext and FOCIR, and whose mission is to promote investments in venture capital in Mexico.

CAF will invest USD40m and will have a seat on the fund's investment committee. This is intended to encourage the growth of venture capital funds in Mexico, often overlooked by independent investment managers.

The fund of funds' structure will allow the issuance of certificates of deposit, in which Mexican pension funds, AFORES, can purchase.

Once it reaches its maximum size, the fund will become a catalyst for direct investments of more than USD550m in companies, as well as Mexican and Latin American projects with high development potential. Mexico Fund of Funds II will become a benchmark investor in the national market and will help maintain the high growth rate of the Mexican economy, as well as promote the implementation of international best practices in sustainability and corporate responsibility.

In addition to the equity investment, CAF also will contribute with its know-how in the management of venture capital funds in Latin America. It will also support the implementation of best practices in social and environmental protection.

The second agreement was the USD10m equity investment in the Evercore Mexico Capital Partners Fund III. The fund will focus on investing in companies with high growth potential and provide goods and / or services to the Mexican domestic market. This is the third Mexican fund to be managed by the Evercore firm, expecting to repeat its previous funds' success, which, among other investments, supported the development of flagship companies such as Volaris, Morepharma, Ike Assistance, Lipu Transporte. The fund will be a catalyst for direct equity investments of up to USD150m.

The third agreement was CAF's USD2m equity investment in Adobe Social Mezzanine Fund I.

Adobe Social Mezzanine Fund I is a venture capital and technical assistance fund that will make equity investments or buy subordinated debt in small companies or those in their early stages of growth, with a social and environmental focus. This fund seeks to support the early growth of companies offering products and services that have significant impact and improve the quality of life of a large number of people, with particular emphasis on underserved communities.

CAF's participation in Adobe Social Mezzanine Fund I will enable the Latin American financial institution to indirectly reach small and medium enterprises in Mexico, to help these companies grow with capital, advice, networking, management experience, best practices and other added value products offered by the fund.

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