How private credit investment is filling a funding gap in Latin America
Key takeaways
• Private credit is expanding rapidly in Latin America as investors fill a USD650 billion financing gap across infrastructure, energy transition, logistics, and mid-market corporates underserved by banks and public markets.
• Unlike the US leveraged-buyout model, Latin America’s private markets focus on structured lending, family-owned businesses, fintech growth companies, and infrastructure backed by contracted cash flows.
• Investors are drawn by high yields, stronger collateral protections, and attractive risk-adjusted returns, even as FX risk and perceptions of emerging-market volatility remain key challenges.
Private credit in Latin America is gaining ground as an alternative to traditional bank finance. But the market is growing in a very different way to its more established US cousin.
Latin America faces an estimated USD650bn annual development financing gap across infrastructure, energy transition, logistics and corporate investment. With the capacity of bank lending and public markets constrained, private credit investors see an opportunity to fill the gap.
In this environment, private credit is a nascent area with room to grow. It represents less than 1% of corporate lending in the region. Private credit funds tracked by Private Debt Investor magazine raised USD800 million for Latin America strategies in 2025, a fraction of the USD356 billion raised globally and well below the region’s 7% share of global GDP.
Private credit activity has increased in recent years and is spread across the region (see Figures 1 and 2.) It is firmly on the radar for global alternative capital providers such as Gramercy, which regularly closes private credit transactions with corporates in the region, or Darby International Capital, which closed a USD363 million Latin America fund in 2025.
There are also local champions such as Patria in Brazil, which raised its first dedicated private credit fund in 2025 and is now preparing another vintage of its strategy.
Regional characteristics
Unlike in the US, where private credit is dominated by direct lending to private equity-backed companies – typically used for leveraged buyouts, refinancings or dividend recapitalizations –the market in Latin America is more about filling structural gaps in credit provision in three main segments:
- Infrastructure: Renewable energy, transport concessions, telecom towers and water systems require long-duration capital that banks are often unable or unwilling to provide. Private credit has become a key source of funding against contracted or regulated cash flows.
- Mid-market corporates: These companies are often too large or complex for traditional SME lending but too small or illiquid for capital markets access. Private credit is increasingly used for capex, acquisitions and refinancing across Mexico, Brazil and Chile.
- Family-owned and fintech growth companies: The region features many small and family-run businesses, as well as many fast-growing tech and fintech firms that can struggle to access funding.
This leaves a gap for structured credit providers, according to Eduardo Uranga, CFA, a private credit investment manager at Mexico-based Deep Ocean Polymath Ventures (DOPV), a joint venture between Colombian investment firm Polymath Ventures and New York-based Deep Ocean Partners.
“There are many SME family-run businesses here in Mexico, some of which are transitioning from one generation to another, alongside a growing number of venture-backed companies and fintech companies that are still in a growth phase, not profitable but cash-flow positive,” he said.
Idiosyncratic strategies are also gaining traction throughout the region, particularly in Brazil.
Antonio Piccirillo, Partner at law firm Proskauer and head of its São Paulo office, notes that Brazilian banks are very conservative in how they lend, with lending decisions typically based on longstanding relationships with top-tier companies. “That leaves a gap for companies that can’t borrow from banks and also can’t access the capital markets,” added Piccirillo.
“In Brazil, most of the time we are not talking about deals where a private credit fund comes in and makes a loan. I’m referring to any type of non-bank lending.”
The result is a host of local financing instruments, such as the Fundos de Investimento em Direitos Creditórios (FIDCs), which are effectively bankruptcy-remote securitizations of receivables such as invoices or automobile loans. In a market with high real rates like Brazil, these vehicles are particularly attractive to investors.
Within the fintech segment, Cate Ambrose, CEO, Global Private Capital Association, highlighted an additional dynamic: many firms that have already raised equity are now turning to debt financing to avoid further dilution and preserve cap table flexibility, making private credit a complementary source of growth capital.
Ambrose also pointed to Brazil’s court-ordered government payment claims, or “precatórios”, which are debts of national or local government bodies.
“When a judge rules against the government and in favor of a private party, there is often a long delay before the money is paid out,” she said, a situation that creates a demand for private investors to finance those claims and then seek payment from the government.
Private markets investment firm Siguler Guff, for example, closed a USD439 million fund in October 2025 dedicated to structured credit investments in precatórios.
Challenges, but also value
Despite growth through these different strands, there are important challenges – headed by currency risk.
“The Achilles’ heel of investing is FX risk,” said Ambrose. “A big part of the strategy is therefore ensuring that loans are USD-denominated or USD-linked, which concentrates activity in dollar-generating or export-linked borrowers, especially in manufacturing and trade.”
In addition, while global institutions and local private credit specialists are well versed in the asset class, educating the region’s wealthy individuals about the potential of private credit remains a challenge.
“In Mexico, family offices and their families are used to traditional lending, a loan that might be backed by a real estate property, and that is the risk they are willing to take,” said Uranga. “Penetrating that barrier has been our biggest challenge.”
Nevertheless, he argues that the region offers clear value if investors can get comfortable with the asset class.
“In the US and parts of Asia, private credit penetration has compressed spreads and in some cases risk may not be fully priced,” added Uranga. “In Mexico and other parts of Latin America, we still see transactions with cash yields north of 20%, while companies maintain EBITDA margins of 40%–60%.”
The advantage is not only yield but also structure. Lower competition in this underpenetrated market enables senior positions, tighter covenants and stronger collateral than in crowded developed markets.
Meanwhile, the region also stands to benefit from the current travails of private credit markets elsewhere.
“Capital is increasingly flowing from developed markets into emerging markets, and Latin America is in a great position to absorb that,” said Pedro Barraza, CFA, Senior Corporate Finance Analyst at Adcap Grupo Financiero. “I think the turmoil in private credit in the US is a potential opportunity for our region.”
Different trajectory to the US
As Latin America’s private credit market grows, it is unlikely to converge toward the US model. It is evolving along a separate trajectory shaped by banking conservatism, macro volatility, FX constraints and an economy anchored in infrastructure and industrial production rather than technology.
Still, for inflows to accelerate, attitudes will need to change, said Ambrose.
“There is a perception that markets like Brazil, Colombia and Uruguay are inherently riskier than the US, driven by sovereign debt risk and macro thinking,” she said. “But in private credit, the opposite is often true — lenders achieve better terms, and underlying asset quality is often extremely high. This perception of risk is really exaggerated.”
To learn more about Latin America investment trends, explore these stories:
Why Latin America’s equities are capturing global attention
Liquid assets: Why Latin America is embracing investments in water
Family offices in Latin America: From wealth preservation to wealth strategy
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