More than two dozen countries in Latin America have passed laws to reduce or eliminate single-use plastics. The surge in demand for recycled plastic has outpaced the capacity of recycling businesses to meet the new mandates, creating a dynamic market for recycling investments and acquisitions to scale up operations.
“There’s a point where the current installed capacity to produce that volume is not there,” says Christian Urazan, a former plastics executive tapped by Circulate Capital to run its new Latin America strategy from Cali, Colombia. “You have a demand that will come and you have to be ready for it.”
Circulate has raised a total of a quarter-billion dollars from some of the world’s largest plastic producers and users to step into the global opportunity, including $66 million for Latin America.
The firm’s first swing in Latin America, shared exclusively with ImpactAlpha, is an investment in Polyrec S.A.S., a Barranquilla, Colombia-based recycler of flexible plastic, such as bags and wraps.
Positioned on Colombia’s northern coast, Polyrec has access to plastic feedstock from Latin America’s fourth-largest producer of plastic waste, as well from the Caribbean, where countries are among the highest producers of plastic waste per capita.
Colombian legislation requires producers to use at least 30% recycled content in packaging by 2030.
Policy tailwinds
Companies are responding to the aggressive Latin American plastics regulations, especially in the largest markets with the most advanced laws. Circulate will focus on Brazil, Mexico and Chile, along with Colombia.
“There’s a high correlation between the laws that are being issued and implemented, and the dynamism of the sector,” Urazan tells ImpactAlpha.
In Brazil, one of the world’s largest contributors to plastic waste, local governments have stepped in with plastic waste laws as national action has been slow. The State of Rio de Janeiro and the City of São Paulo, for example, have adopted plastic bags, straws, and other single-use products.
Nearly every one of Mexico’s 32 states have enacted bans and restrictions on different single-use products. And Chile has outlawed the use of plastic bags since 2021, the first country in Latin America to do so.
The investment in Polyrec aims to prevent 100,000 tons of plastic from reaching the oceans “and capitalize on the growing market opportunity for recycled plastics worldwide,” says Circulate’s Rob Kaplan. Kaplan founded Circulate in 2018 as a spinoff of Closed Loop Partners, which makes circular economy investments in the U.S.
Recycling pipeline
Circulate has identified over 100 recycling companies in Latin America that require at least $240 million in growth capital.
Earlier this year, Brazilian petrochemical company Braskem took a stake in advanced recycling company Nexus Circular. In Peru, Impaqto Capital backed recycling services Sinba, which had attracted early financing and an equity investment from IDB Lab, the venture capital arm of the Inter-American Development Bank Group.
Last year, Brazilian waste management company Orizon Medio Ambiente secured a 130 million reais ($23 million) sustainability-linked bond from the International Finance Corp. to finance waste solutions and increase recycling capacity. Brazilian plastic recyclers Global PET and Green PCR raised a combined 600 million reais ($100 million) from private equity firm eB Capital.
In 2022, Peruvian fund Nexus Group acquired Bogotá-based recycling company Apropet.
And Brazilian environmental management company Ambipar has made a string of recents acquisitions in the circular economy in the Americas, including ViraSer, a reverse logistics company that operates in its own recycling model in Brazil, and waste management firm Disal in Chile.
Catalytic capital
Circulate’s funds earmarked for Latin America came from IDB Lab, family offices Builders Vision and Luna Capital, and corporate backers of the firm’s Asia strategy, including Chevron Phillips Chemical, Danone, Dow, Mondelez International and Unilever.
In its annual report, Circulate says the $96 million it has invested in 16 companies in Asia has attracted another $250 million in co-investment.
“This catalytic capital helps close the financing gap and helps make this sector interesting for traditional capital,” says Urazan.
In 2023, those investments helped keep 100,000 tons of plastic waste in circulation, according to Circulate, and reduced or avoided close to 160,000 tons of carbon emissions. Portfolio companies have created nearly 2,000 jobs since 2020.
More than half of the companies in Circulate’s portfolio are led or founded by women; women also make up more than 30% of the companies’ workforces, an indication of “the kind of dynamism that the sector is having,” Urazan says.