What is investing in an economy with private capital?

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What is investing in an economy? Investing in an economy is an essential component that has a positive impact on the pillars of its development. Through this alternative, it stimulates the growth of the entrepreneurial ecosystem, creates jobs, promotes innovation, and technological development, and provides stability to investors. 

Among the investment alternatives, one that stands out for its growth in recent years is venture capital. It has become an important ally for companies that have a differentiating factor. 

Reveris a Mexican startup that owes its growth to private capital.Sequoia Capital, a U.S. venture capital firm, invested US $2.25 million in the company. With this investment, it was able to strengthen its technology, sales, and marketing team. It is currently in the seed stage, with a value equivalent to 4 million dollars. 

Just like the startup Rever, companies such as Reddit, Instagram, and PayPal are success stories that received early stages of private equity investment and are now driving economic growth, employment, and innovation in an economy. 

It may also interest you: 8 Startups que crecieron con capital privado en América Latina

Investing in an economy with private equity: a development enhancer

Private equity or venture capital is an investment strategy. It invests in emerging companies with high growth potential, providing support and advice. At the same time, it offers high returns to investors. 

The private equity industry is one of the alternatives that has most benefited the country’s economy in recent years. It has generated more than 1.4 million jobs with a growth rate of 12.7% in recent years, according to AMEXCAP

The growth is due to the different types of private equity investmentwhich are:

  • Seed capital 
  • Venture Capital
  • Growth capital 

With them, the country’s economy achieves a source of liquidity and capitalization for the entrepreneurial ecosystem, as it allows for their expansion. 

Additionally, private equity serves as a link for innovation and entrepreneurship It becomes a provider Additionally, private equity serves as a link for innovation and entrepreneurship. It becomes a provider of infrastructure for the county’s development. para el desarrollo del país.

calculadora-de-inversiones-gif-WORTEV CAPITAL

The impact of private equity on an economy

Private equity is gradually emerging as an ally to support the country's development by providing capital and mentoring to innovative companies that transform the economy. 

The economic impact The economic impact of investing in companies with private capital: 

  1. Provides capital to emerging companies with high growth potential that could not otherwise obtain capital. These companies strengthen the entrepreneurial ecosystem. 
  2. These companies create new jobs are created that stimulate economic growth.  
  3. By financing these types of projects, it helps create new industries.
  4. Increased consumption and innovation in society. 
  5. Also, promotes the competitiveness of the country's business ecosystem, as it forces companies to stay at the forefront of technology and new forms of consumption. 
  6. This type of investment positions a country as an investment point for foreign investors, since it supports companies that are considered innovative and promising.  

It may also interest you: Capital privado detona el crecimiento y desarrollo económico

Investment and its impact on the economy

An investment is when a person allocates money to multiply it. This capital is placed in a strategy that considers different financial instruments to obtain returns or profits for it, according to Banco de México  in Educa Banxico site. 

This type of plan has an advantage for the investor and responds to what it is to invest in an economy. Investment is a variable that interacts positively with the growth of a country. 

In particular, investment in small businesses is directly related to the creation of jobs and the stimulation of consumption, indicators that maintain the dynamism of the economy. 

The World Bank maintains that private investment has the potential to be an engine of economic growth, economic diversification, and structural transformation. It also sees it as a source of new jobs and technologies that foster innovation. 

Mexico reached a peak in investment of 20.9% as a percentage of GDP in 2021a record level since 2008This year was one of the most dynamic in terms of private equity investments. Marking the technological transformation and innovation that the country and the rest of Latin America are facing after the pandemic.  

"Private investment has the potential to be an important engine of economic growth, economic diversification, and structural transformation."

Laura Dachner, trade and competitiveness expert at the World Bank.

Main benefits of private equity investment to an economy: 

  1. Economic growth: it is stimulated by the increase it causes in production, employment, and income. It is reflected in the consumption and spending of citizens, which is positively related to the development and creation of companies. 
  2. Innovation: Investment in research and technological development promotes innovation. This increases the productivity and competitiveness of an economy. 
  3. Infrastructure improves the efficiency of the economy, reduces production costs, and increases trade. This transforms infrastructure.  
  4. Financial stability: provides financial stability by creating savings opportunities and offering a source of passive income. Investing in financial assets, such as stocks, bonds, and real estate, can increase the wealth of citizens. 

So what is investing in an economy? It is to promote its growth and develop its financial capacity. It is important to know the different alternatives that exist to invest and participate in this growth. 

Why is it important to invest in different alternatives?

Investing in different alternatives helps the investor to diversify risk, invest in the economy, and can increase the overall profitability of your investment portfolio. In addition to creating a hedge against inflation, the portfolio will be able to adapt to different market situations. 

With the information provided by CONDUSEFwe list some investment examples:

  1. private equity fundsthey can be international or domestic, and capture investors' capital to invest in disruptive companies in different sectors. 
  2. Stock exchangepurchase of shares representing a portion of ownership of a publicly traded company. 
  3. Currenciescurrencies are purchased and sold or bought according to the variable behavior of the market. 
  4. Commodities storable and durable products such as oil, grains, or metals that are traded on the market. 

Mexico has different investment alternatives for its citizens: 

  1. CETESssued by the Mexican government, these are a low-risk investment that offers regular interest payments. They are usually the option for Mexicans looking to invest their savings, however there are more profitable options. 
  2. private equity funds are a form that has gained popularity in recent years in Mexico. Investors' capital is allocated to a professionally managed fund that invests in a variety of assets. There are venture capital funds such as WORTEV CAPITAL that invest in Mexican companies that promote innovation and competitiveness in the country. 
  3. Stocks of Mexican companiescompanies that are listed on the Mexican Stock Exchange that are looking for capitalization to continue growing. This type of investment is made through brokerage firms and financial institutions. Some of the most important companies in the Mexican stock market are América Móvil, Cemex, and Grupo Bimbo. 

Each alternative promotes investment in an economy, and detonates development, with its characteristics and risks. Therefore, it is essential to evaluate each of them, in particular, to identify the one that best fits the investor's profile. 

There are private equity funds, such as WORTEV CAPITAL that support Mexican companies with the capacity to transform the entrepreneurial ecosystem, providers of innovation for the country.  

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La inversión en una economía impacta positivamente los pilares de desarrollo de un país.

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