Venture capital and

Venture capital and development of risk capital can serve as a tool for economic development, supporting start-up ventures and smaller companies trying to grow. But instead of focusing on the element of risk attached to such investment, should focus more on its catalytic role as entrepreneurial capital. In Latin American and Caribbean countries with less developed financial sectors, venture capital plays a key role in facilitating access to finance for small and medium enterprises (SMEs), stimulating an entrepreneurial culture, create jobs and improve corporate governance and standards of corporate accounting. Giving support to venture capital funds in countries in the region can bring a range of benefits including financial and marketing knowledge of the new investors, and patent protections that may be helpful for business during the critical years growth and expansion.What is clear is that by promoting this industry, a set of other actions begins to unfold: support to entrepreneurs, improvement in the legal and regulatory improvements in business climate, capital market development, among many other benefits. The Multilateral Investment Fund (MIF) Inter-American Development Bank, the industry pioneer in the region, injecting capital in about 40 funds at present. When the MIF invests in these funds, seeks to attract other investors who may be new to the industry but they can rely on the expertise of MIF in the area. This results in the much sought after attraction of capital from local sources and external to the region.The MIF has also been a leader in investment in sectors not previously known to the market, such as environmental funds, clean technologies and renewable energy Equally important has been the MIF active cooperation with public and private sector regarding regulatory changes, to make markets in the region more attractive to international investors and local private sector. The MIF approved the granting of funding to the Latin American Venture Capital (LAVCA), which will work with other venture capital associations in the region to assist them in making needed changes in the legal and regulatory environment to improve business climate.

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