Venture Equity Latin America Developments

As reported in the most recent issue of Venture Equity Latin America published by WorldTrade Executive.

Brazil's Bracor Raises
New Funds with Global
Consortium

Brazilian real estate company Bracor Investimentos Imobiliarios, Ltda.
(Bracor) has raised BRL375 million (roughly US$213.5 million) in new
funds from equity pay-ins from a number of significant institutional real
estate investor groups, according to local investors. Bracor, which is 47%
owned by Sam Zell’s private equity-backed Equity International, has
invited Abu Dhabi-based Royal Group, Saudi Arabia’s Olayan Group,
Morgan Stanley Real Estate, and Berkley Corporation for the funds. Bracor
was founded in 2006 with a US$15 million commitment and invests in
commercial real estate. Carlos Betancourt, a Brazilian, is the other chief
partner in the investment


Bracor is a privately held company headquartered in
São Paulo, Brazil. The company was founded in 2006
by Carlos Betancourt, Equity International, a leading
Brazilian bank, and a leading U.S. real estate finance
company. In terms of its real estate, Bracor is focused
on the acquisition, development and management of
institutional-quality corporate properties throughout
Brazil. These are in turn often leased under long-term
contracts to companies with investment-grade credit.
A historical lack of permanent debt and equity
capital in Brazil has created a market characterized
by a significant supply of institutional-quality real
estate occupied and owned by an array of strong
multinational and Brazilian corporations. Bracor’s
standard approach has been to build a scalable business
and capitalize on still-immature emerging markets
that is trending in four specific areas: the emergence
of permanent debt and equity capital; increasing
monetization of corporate-owned real estate; growing
corporate demand for institutional-quality properties;
and strengthening of lease contracts and a broadening
securitization market.

To Bracor’s advantage, all of these factors are present
in the red-hot Brazilian real estate market. Indeed, in
its own words, there is throughout urban Brazil an
“unmatched pipeline of opportunities”.
Bracor acquires and develops corporate properties,
primarily single-tenant office and industrial assets, and
leases then to high-credit quality corporations like IBM,
Nestlé and Comsat,

Washington State Investment Board Invests
in Latin America Private Equity Funds
The Washington State Investment Board, which has roughly US$63.9
billion in assets under management, last month approved commitments
of up to US$1.5 billion to four private equity funds focusing on buyouts
in the U.S., Europe and Latin America. The system is committing up to
US$700 million to the KKR European Fund III, a large-cap, pan-European
buyout fund with a target size of US$8.8 billion to US$11.7 billion; another
US$750 million to the US$12 billion Warburg Pincus Private Equity X fund;
up to US$25 million to the US$1.3 billion Advent Latin American Private
Equity Fund IV, which invests primarily in Mexico, Brazil and Argentina;
and up to US$50 million to the Avenue Special Situations Fund V, a targeted
US$6 billion distressed debt fund.

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IRS Won't Challenge Credits against US Income Tax for Payments of Mexico's New Flat Tax

by Scott Studebaker (WorldTrade Executive, Inc.)


Mexico’s new flat tax, the IETU, became effective on January 1, 2008. The new tax has caused anxiety among U.S. investors over the tax implications. Investors and tax professionals have worried that the new tax might not qualify as an income tax under Article 24 of the U.S.-Mexico tax treaty. This, in turn, would mean that U.S. investors would not be able to receive a credit against their U.S. income taxes for the IETU paid in Mexico—a classic case of double taxation.

But the IRS has stepped in with a welcome, if provisional, clarification. On December 10, the IRS issued Notice 2008-3, in which it said that it, too, had not determined whether the IETU qualified as an income tax under Article 24(1) of the Treaty, and that the agency was going to study the new tax in order to make a determination.

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Fin 48 and Tax Risk in Latin America

In a recent discussion, PricewaterhouseCoopers' John Salerno joined the editors of WorldTrade Executive's Practical Latin American Tax Strategies to talk with ADM's Robert Frable and Sony's Marc Lewis about their tax operations in Latin America, their new procedures for dealing with FIN 48, and transfer pricing procedures. This excerpt from that interview takes a look at their strategies surrounding FIN 48:

Strategies: What has your overall experience been in managing the implementation of FIN 48 in the region?

Lewis: It is hard to say that the Latin American region presents something that is unique within FIN 48 implementation versus some of the other regions but I think one thing to consider is how much reliance a taxpayer can place on the availability of Competent Authority or APA relief. To a certain extent, it is dependent upon how active the Competent Authority is between different countries and how active the APA programs are between different countries. Latin America, Mexico and probably some others have pretty robust activities. However, in other countries, it is just building up, so I do not think you are at the same level as you see in some of the countries in Europe, Japan and other places where you can rely upon a Competent Authority or APAs in the assessment of uncertain tax positions.

Frable: FIN 48 was an interesting experience with this being the implementation year. I think everybody was surprised at how much time they ended up spending on the implementation. It took away from your day-today responsibilities. I think it is going to get better; tax departments, controllers and even outside auditors had to work through a learning curve.

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