When to invest in Argentina

Alright guys, given the continued deterioration of the peso and hopefully Christina's reign, when should a corporation (that has identified a good opportunity in Argentina) look to enter the market? As the peso loses value, all the existing players who denominate their debt and equity in dollars or other global currencies are getting pasted. If you are financing your widgets in dollars and getting paid in pesos, it's going from bad to worse. That pain for existing players, should provide opportunity for new entrants, keeping in mind that as we go from 6:1 to 10:1 on the exchange rate, foreign goods are going to be way f*cking expensive. However, if you are a provider of durable, infrastructure-type of goods (and can live with a 4-7 year payback) , there may be some opportunity. Further, if you come in at 10:1 and buy / build a small assembly plant, you are now a local manufacturer and you've got a foot into the Mercosur, on the cheap.

When does Argentina hit the wall? This year? Next year? Will the people ever see the fallacy of governmental populism? Can it get worse than 10:1? Is there the possibility that there will be significant social unrest (not just the professional protestors)?

Thoughts?

Why invest in a country that will not let you take the profits out of the country? Considering how many times Argentina has bankrupted itself and its people, I would not advise any corporation to do business there.

[QUOTE=Dccpa;424240]Why invest in a country that will not let you take the profits out of the country? Considering how many times Argentina has bankrupted itself and its people, I would not advise any corporation to do business there.[/QUOTE]Excellent point. However, the likelihood is that Argentina's economy will continue to be cyclical, which would seem to indicate a rise following the trough. Repatriating funds is a huge issue and the fact that the government is strictly controlling it makes foreign currencies even stronger. However, once the bottom falls out, and it will, the government will be forced to ease its restrictions and allow the marketplace to determine the currency flows and prices. China, while not directly analogous, has always had tight controls on forex.

Further, if the investment is LatAm focused, a depressed Argentina provides a cheap entry into the Mercosur and will provide ample labor at reasonable rates. Selling across the Mercosur countries will lessen the Argentine risk and will function somewhat as a cross hedge pesos with reals and other LatAm currencies.

I'm not talking about buying a casa on the cheap and hoping to make some retirement funds by renting it to tourists. I'm talking about a long-term play to participate in a multi-billion dollar LatAm market.

The key calculation is will it be worth the added risk to do it in Argentina as opposed to Chile or Brazil? The risk is much higher in Argentina, therefore the reward must be commensurate.

You should look into exedra LOL!

WW, You are probably right about the cyclical nature of Argentina. To me starting / buying a business in Argentina would be like playing the futures market. If things go wrong, you lose. If things go right, you may win or they may either change the rules so you lose or they may steal your assets. Argentina almost seems anti business. The overseas business sources I read are touting places like Medellin, Columbia and Panama.

I couldn't recommend investing in Argentina, but if someone was determined to do it, I would recommend waiting until the people are so desperate that some form of conservative government was voted into office.

[QUOTE=Dccpa;424263]WW, You are probably right about the cyclical nature of Argentina. To me starting / buying a business in Argentina would be like playing the futures market. If things go wrong, you lose. If things go right, you may win or they may either change the rules so you lose or they may steal your assets.[/quote]I agree 100%. That has been my first hand experience over the past 5-6 years. That is why private, foreign capital is allergic to Argentina, with few exceptions (historically petrol and natural resources, although Christina has put doubt about the continuity of business in every industry).

[quote=]Argentina almost seems anti business.[/quote]Because it is.

[quote=]The overseas business sources I read are touting places like Medellin, Columbia and Panama.[/quote]But I like Bs As.

[quote=]I couldn't recommend investing in Argentina,[/quote]It is highly unlikely that I will recommend risking a material amount of capital in Argentina, alone. I doubt that I can get over the sovereign risk, let alone all the other forms of risk.

[quote=]but if someone was determined to do it, I would recommend waiting until the people are so desperate that some form of conservative government was voted into office.[/QUOTE]When El Penguino croaked (I was in town then) , I had hope as did most of my corporate bedfellows, in Bs As. Unfortunately, as usually happens (at least over the past 200 years) hope for self-determination is quickly snuffed out, in Argentina. Even when things are moderately good (say 2007-08) , the people of Argentina are thinking about the next economic crash / calamity, to the point that it becomes a self-fulfilling prophecy. This is what happens to countries predominated by certain leftist philosophies, for multiple generations. Just like drug dealers, once they get you hooked you're theirs for life, which will probably be shorter than expected.

Set up a few hippys and grow really good weed, it will sell and the price will never go down