When I first began covering private equity, my newsletter had a stringer covering Latin America. Then came the Argentinian debt crisis, followed by the rapid emergence of markets like India, China and the Middle East. We had to let her go.

More than a decade later, Latin America’s eclipse may be fading.

Ground zero for the revival is Brazil, where private equity firms invested approximately $3 billion in the first half of 2010. This is more than twice what was invested in all of last year, and is on track to top the record-amount invested in 2007 (which was due more to global M&A boom than anything Brazil-specific).

Much of this year’s activity has been sponsored by local firms, but the spike comes from outsiders.

Apax Partners, for example, recently invested over $540 million for a control stake in Tivit SA, a São Paulo-based provider of IT and BPO services throughout Latin America. It was the firm’s first-ever acquisition in Brazil. More recently, Warburg Pincus co-led a $206 million deal for a Brazilian renewable energy company. That deal came out of a São Paulo office that Warburg Pincus opened just this past February.

Then there is The Carlyle Group, which has done three deals since last year out of its 8-person São Paulo office.

But the biggest move may have come yesterday, when The Blackstone Group agreed to acquire 40% of Pátria Investimentos, a Sao Paulo-based investment firm with $3.7 billion in assets under management. The deal will give Blackstone a ready-made team in Brazil, where it’s never done a deal. For Pátria, it means the flexibility to do much

larger transactions.

With the exception of size, the two firms look like mirror images of one another. Both founding teams previously worked within investment banks, and used private equity as an anchor to launch real estate, hedge and corporate advisory practices. Pátria also has a thriving infrastructure practice, while Blackstone is in the midst of raising its own dedicated infrastructure fund.

“We began having relations with them on the advisory side around ten years ago, when Pátria was being bought and sold out of banks,” explains Blackstone spokesman Peter Rose. “It’s a great cultural fit and, in hindsight, maybe we would have partnered earlier.”

Pátria will continue to manage its own portfolio, and make decisions on new deals in Brazil. Blackstone has the option to co-invest out of its existing global funds, and may be asked to fund opportunities that Pátria cannot afford.

Financial terms of the transaction have not been disclosed, except that Blackstone is tapping both cash reserves and its publicly-traded units. All of the cash received by employee-owned Pátria will be used for investment purposes (including to seed future funds).

So why all of this attention to Brazil right now? The basic answer is growth.

The question now is whether private equity will stay in Brazil for the long-haul, or just until all the low-hanging fruit is picked. And, if it remains, will it serve as a beachhead for the rest of Latin America?

As for the first part, the likely answer is affirmative. Not only because of the PE-to-GDP gap, but also because firmsseem set on institutionalizing their presence via dedicated funds of Blackstone-like deals. Don’t be surprised if some of other U.S. firms begin sniffing around for the next Pátria.

As for expanding beyond Brazil, the outlook is a bit more cloudy. Not only because of the language barrier (Brazilians speak Portuguese, not Spanish), but also because there are few other countries large enough to handle dedicated teams from global firms.

“The emphasis right now is clearly on Brazil, because it’s the largest market with the largest set of opportunities,” says Sarah Alexander, CEO of the Emerging Markets Private Equity Association. “However, for the last six to twelve months the institutional investor community has migrated from Brazil-only to more of a pan-Latin American interest.”

She adds that the next country to get on-the-ground teams from U.S. firms could be Colombia, but “most firms probably will begin by doing their first few deals there out of Brazil… or even New York.”