(Rewrites to add private equity details, comments)
SAO PAULO, June 5 (Reuters) - Brazil's increasing political chaos will probably slow efforts by private equity firms to raise money and conclude new buyouts, an industry group said on Monday, emphasizing how a corruption investigation could potentially hamper investment in Latin America's largest economy.
This week, Brazil's electoral court could decide whether or not to remove conservative President Michel Temer because of allegations that he received illegal campaign funding. Long-term investing has become "an act of fiction" as uncertainty hurts predictability, said Fernando Borges, president of ABVCAP, the group representing buyout firms in Brazil.
Borges and other ABVCAP executives said fundraising could potentially bear the brunt of increased caution among private equity investors. They said already tough divestitures, or exits, turned more complex in recent weeks as political risk grew.
Last month, Temer was accused by a potential witness in testimony received by the Supreme Court that he worked to obstruct a widening corruption probe. The situation has paralyzed congressional voting of pension and labor reforms, while aggravating political disputes ahead of the October 2018 presidential election.
"With the situation like this, it's becoming quite hard to market Brazil abroad," Borges said.
The buyout industry this year has already experienced costly acquisitions and lackluster returns amid a nearly three-year-long recession.
Borges said investors will adjust to new political conditions "and asset prices will reflect that."
Fifty-six exits took place last year, compared with 30 in 2015. Investment commitments by private equity firms totaled 142.8 billion reais ($43.4 billion) at the end of last year, ABVCAP said.
($1 = 3.2878 reais) (Additional reporting by Bruno Federowski; editing by Grant McCool)