Global institutional investors are circling a swathe of energy-related infrastructure assets in Latin America to increase their exposure in a region rife with more uncertainties but offering greater returns than those in more developed markets such as the US.

Private investors or pension funds with cash burning holes in their pockets are increasingly participating in leveraged acquisitions of assets from Chile to Mexico. Mainly in the energy and infrastructure fields, such assets come with assigned long-term operating concessions and line up with the buyside’s taste for longer-term investments, banking sources said.

“Private equity or infrastructure funds, there is a lot of money chasing fewer deals,” said a mergers and acquisitions (M&A)investment banker involved in the region. “They are chasing these assets to justify the need for returns and Latin America offers a long-term play for these buyers.”

In developed markets, heightened competition from a broader investor base is increasing asset valuations for projects in the energy and infrastructure fields, making it harder for local investors to strike a deal. In the US specifically, borrowers’ access to cheaper public sources of funding has driven opportunistic investors to Latin America where private projects or acquisitions have more limited borrowing options and are more likely to tap banks and institutional investors for funding.

“The competitiveness for North American infrastructure assets has left a shortage of real deals,” said Alex Bertram, a managing director and head of infrastructure financing for the Americas at ING. “If investors are willing to take the cultural leap [into Latin America] and take a punt on the currency, then there are better returns available.”

Medium-term bank financing, with tenors ranging from three to seven years, is increasingly backing potential acquisitions in Latin America, while bridge loans provide a short-term cash injection before being taken out in the capital markets, sources said.

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