So You Think You Might Want To Invest In Argentina?

Copernico Capital Partners launches Advance Copernico Argentina Equity Fund

Copernico Capital Partners, a specialist Latin American fund manager, reports the launch of the Advance Copernico Argentina Equity Fund. It says the fund, a Cayman-domiciled open-ended investment company, is the first actively managed, long-only fund of Argentinean equities.

Readers who are familiar with the long-term financial history of Argentina and its continental neighbours might reasonably ask if there could be a reason for there not being one earlier. My own background as a journalist features five years writing about Latin American debt problems in the 1980s for a weekly Financial Times newsletter, FT Euromarket Letter. Slightly unusually, my sceptical comments are well informed. Human behaviour, I firmly believe, doesn't change. Only speed and scale.

The fund, Copernico says, invests in value opportunities with the intention of outperforming the local MERVAL Index.  It is not offered to US investors.

The Argentine economy is as we all know one of the largest economies in Latin America, second only to Brazil. As we all equally well know it also has a crimesheet as long as your arm in defaulting on debt, rescheduling, going through a form of financial rehab, re-entering the international markets and defaulting again.

Some say they wouldn’t touch it with someone else’s bargepole, despite the claim that it has an educated work force (97% literacy), has a substantial middle class (GDP per capita is approximately $9,000, estimates Copernico) and the fact that it is a member of the G20. The latter titbit brings to mind Groucho Marx’s oft-quoted line about his not wanting to join any club that would accept him as a member.

Despite strong growth in the economy over the last decade, Argentina’s capital markets have become marginalised as a result of political and sovereign crises and self-imposed capital controls. In 2010, Argentina was reclassified by MSCI as a frontier market, a term that comes embedded with images of general lawlesslness, saloon bar brawls and inebriate cowboys being thrown through the louvre doors into the street.

Despite these prejudices, Ricardo Maxit, CEO of Copernico Capital Partners, sounds optimistic. “We believe the current situation in Argentina provides an opportunity for investors to earn outsized returns through a focussed investment programme,” he says in the despatch communicating the fund’s existence to the world.  “Companies are trading at a significant valuation discount to regional peers; the Argentinean peso is amongst the most undervalued currencies in the world [wonder why??].  Also, there is strong and continued demand for Argentina’s agricultural exports and an election will be held in October 2011, at which a change of leadership is a real possibility.” 

To which one can only respond, SFW?