Argentina's real estate, utility and agricultural sectors all offer a smart bet ahead of a change in government in December, said New York-based Bienville Capital Management, whose new Argentina-focused fund has raised about $250 million. Foreign investors have shied away from Argentina in recent years as President Cristina Fernandez's leftist government ramped up state controls. However, they expect elections in October will lead to reforms that reboot Latin America's No 3 economy.
Fernandez is constitutionally barred from a third term and all the leading candidates tout more business-friendly policies. "We have been focusing more on areas where we felt the underlying businesses would benefit from a normalization of policy - utilities, agricultural sector, real estate," Bienville co-founder and President Cullen Thompson said in a telephone interview.
"We like the financial services sector on a medium to long term basis because we recognize how under-leveraged Argentina is, but the adjustment process will take a while and banks seem a little expensive at the moment." Runaway inflation means banks are reluctant to make loans unless at exorbitant interest rates, leaving Argentina with one of the region's lowest levels of private lending. Also, the country has little access to global credit markets because of its battle with US hedge funds suing over unpaid debts.
Bienville launched its Argentina Opportunities Fund last July after the 2013 mid-term elections ensured Fernandez lacked the numbers in Congress to revise the constitution and run for a third term. Thompson, who travels to Buenos Aires for a week per month, anticipates policy reform whoever wins. "We think there will be at least some incremental move on economic subsidies, a settlement with holdouts so Argentina can once again tap international credit markets, and some desire to bring down inflation and unify the dual foreign exchange regimes," he said, referring to the currency black market.
"The question will be how quick and when those changes will happen. But considering how cheap the assets are we are buying, we like the risk-reward irrespective of who is elected." Thompson said that, as capital became more available, he expected a pick up in real estate activity, especially the commercial sector, which requires more financing. "We own 13.5 percent of the publicly listed homebuilder TGLT and the CEO there is looking to branch out into commercial real estate," said Thompson. "We've also been pursuing a number of other opportunities on the commercial real estate side."

Copyright Reuters, 2015

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