Capital Allocators – Inside the Institutional Investment Industry
Episode: Rodrigo Bitar – Overlooked Opportunities in Latin America (EP.442)
Host: Ted Seides
Release Date: April 28, 2025

Introduction

In Episode 442 of Capital Allocators, host Ted Seides welcomes Rodrigo Bitar, co-founder of 3B1 Partners, to discuss overlooked investment opportunities in Latin America, with a particular focus on Venezuela and Central America. This in-depth conversation delves into the economic landscape, investment strategies, challenges, and future prospects within the region.

1. The Investment Case for Latin America

Rodrigo Bitar outlines the attractiveness of Latin America as an investment destination, emphasizing its economic progress and geopolitical significance.

• Economic Progression:
  "The economy in Latin America has been progressing nicely the past few years."
  (05:58)

• Geopolitical Relevance:
  "The closeness that historically has existed between Latin America and the US I think is going to become more relevant for the future."
  (06:40)

• Valuations and Demographics:
  Latin America offers attractive valuations compared to the US, supported by a young and growing population. Currency concerns have been subdued, and the region has seen increased stability over the past decade.

2. Opportunities in Venezuela

Despite political misalignments with the US, Venezuela presents unique investment opportunities due to its natural resources and evolving economic conditions.

• Asymmetric Risk-Reward:
  "We believe Venezuela is a very interesting investment case... a country that was overlooked by investors for understandable reasons. And that created an opportunity where you could find very high quality assets at very attractive prices."
  (08:22)

• Oil Production Growth:
  Venezuela's oil production, having declined by 80%, has seen a resurgence, contributing to economic growth and portfolio expansion by approximately 40% per annum over the last four years.

3. Strategies and Successes in the Venezuelan Pharmaceutical Sector

Rodrigo details 3B1 Partners' strategic approach in Venezuela's pharmaceutical industry, highlighting acquisitions and growth strategies.

• Sector Focus:
  "We're looking at food assets, so everything that you need when the population is beginning to become wealthier and they're seeking a higher quality of life... We're targeting and we've been successful at choosing the right companies."
  (11:06)

• Acquisition Example:
  3B1 Partners acquired a pharmaceutical company, initially the sixth in the market, and through strategic roll-ups and growth initiatives, elevated it to the second-largest manufacturer in less than three years.

• Operational Advantages:
  "If you have the capability to transact, you have the management team to integrate and grow these companies and you have the capital... then you have a winning formula."
  (12:00)

4. Expansion into Central America

Building on successes in Venezuela, 3B1 Partners is exploring opportunities in Central America, leveraging similar market dynamics and growth potential.

• Fragmented Markets:
  "Central America is a little bit like that... it's a lower priority. It's a little bit overlooked, similar to Venezuela. And for us that's a big opportunity."
  (27:35)

• Growth Potential:
  The region boasts a fast-growing healthcare sector with annual growth rates of 10-15%, supported by stable currencies and increasing wealth among populations.

5. Risk Considerations

Rodrigo addresses the inherent risks associated with investing in volatile and illiquid markets like Venezuela and broader Central America.

• Illiquidity and Patience:
  "The biggest risk that I see is illiquidity. You need to be patient... we can do the same in Central America."
  (32:14)

• Geopolitical Shifts:
  Unexpected changes, such as shifting US policies towards Venezuelan oil sales, pose potential risks that 3B1 Partners actively monitors.

6. Investor Perspectives

The conversation highlights evolving investor attitudes toward Latin America, noting increased openness and interest in diversification.

• Educational Process:
  "Latin America is always like an educational process to investors because it's not the place where people look most at and we believe the fundamentals are there and these are interesting opportunities."
  (32:53)

• Diversification Appeal:
  Investors are now more receptive to exploring Latin American markets as a means to diversify their portfolios amidst a multipolar global landscape.

7. Future Goals and Personal Insights

Rodrigo shares his vision for the future of 3B1 Partners and personal reflections on life and growth.

• Creating Value and Social Impact:
  "Our employees and the companies in Venezuela... better health care, better benefits... create larger players, regional players, big competitors."
  (34:31)

• Personal Growth:
  Rodrigo expresses a desire to reconnect with reading and cultural pursuits, emphasizing the importance of historical and philosophical understanding in the digital age.
  "I hope to become wiser in the next five years... I really want to read that book and I keep buying books."
  (36:22)

Conclusion

Rodrigo Bitar's insights offer a compelling perspective on the untapped investment opportunities in Latin America, particularly in Venezuela and Central America. Through strategic acquisitions, operational excellence, and a deep understanding of local markets, 3B1 Partners exemplifies how patience and expertise can unlock significant value in seemingly overlooked regions.

Notable Quotes with Timestamps:

• "The economy in Latin America has been progressing nicely the past few years." — Rodrigo Bitar (05:58)
• "We believe Venezuela is a very interesting investment case... a country that was overlooked by investors for understandable reasons." — Rodrigo Bitar (08:22)
• "If you have the capability to transact, you have the management team to integrate and grow these companies and you have the capital... then you have a winning formula." — Rodrigo Bitar (12:00)
• "The biggest risk that I see is illiquidity. You need to be patient." — Rodrigo Bitar (32:14)
• "Latin America is always like an educational process to investors because it's not the place where people look most at and we believe the fundamentals are there and these are interesting opportunities." — Rodrigo Bitar (32:53)
• "Our employees and the companies in Venezuela... better health care, better benefits... create larger players, regional players, big competitors." — Rodrigo Bitar (34:31)
• "I hope to become wiser in the next five years... I really want to read that book and I keep buying books." — Rodrigo Bitar (36:22)

Further Resources:

• Visit 3B1 Partners: For more information on Rodrigo Bitar's investment strategies and portfolio, visit 3B1 Partners' website.
• Join the Community: Engage with Capital Allocators by joining their mailing list for access to premium content and past episodes.
• Follow Ted Seides: Stay updated with Ted's insights on institutional investing by subscribing to the Capital Allocators podcast on iTunes or YouTube.

Note: The opinions expressed in this summary are solely those of Rodrigo Bitar and do not reflect the views of Capital Allocators or its affiliates. Investing involves risk, including the possible loss of principal.