Winds of change are blowing through Argentina. The arrival of the new government has renewed expectations of the domestic financial sector, and, in that spirit, Horacio Reyser, Investment Advisor to President Mauricio Macri, has an office in the Casa Rosada, which is just 20 metres from the head of state. His main goal is to catch the attention of foreign investors who trust Argentina could hold opportunities for the future; according to Reyser, the country will receive productive disbursements of $25bn each year.
“The role of Argentina is so important, so crucial in the region, that in the G20 and as a partner of the European Union, we cannot afford not to speak”, European Parliament President Martin Schulz told the Argentinian press when he met President Macri in the last days of August, during a visit to the country that aimed to bring about a “new era” of bilateral relationship.
In that sense, the parliamentary leader revealed the importance of Argentina in the vision of the European Union, reflected in recent months through visits by senior EU officials. Schulz said such contact would increase up to the end of the year: “European markets know of the great opportunities for the country to become a stable partner for other parts of the world, including Latin America.”
Puente was responsible for the first IPO of an Argentine company since 2010
On the business side, companies view Argentina’s paradigm shift optimistically. In the past, investors came largely in the form of hedge funds and highly speculate buying companies. Today, we talk of institutional funds betting on the real economy. They are convinced Argentina will be the star of the emerging markets in the next three to five years.
In the financial sector, investments have already begun to take shape. “Because of the volatility in Europe from Brexit and Turkey, many international investors are seeking shelter in emerging economies, particularly in Latin America. And, within that region, the most likely is Argentina”, said Federico Tomasevich, Chairman of Puente, an institution with over 100 years of history. This company, dedicated to domestic capital investment, was responsible for the first IPO of an Argentine company since 2010 (Havanna), which proved to be a complete success. It was also responsible for the placement of debt for the Province of Chubut: $650m at a rate of 7.75 percent.
The issuance of the biggest manufacturer of alfajores (a very famous kind of chocolate in Argentina) in the world, Havanna’s was the first IPO in almost six years in the local market. Ilac traced a line that connected the financial success of the company (which expects to close 2016 with a revenue of $1bn) with the force that has the native brand abroad. Havanna today has a market value of $120m.
Following the success of Havanna, Puente’s commercial executives have held several meetings with over 20 local companies that showed interest in the business, which also aroused enthusiasm at the corporate level.
The stocks of this alfajores manufacturing company traded at $37 the first day, between 35 and 40 percent below titles of its competitors in international markets. “It came at a significant discount and that was great news for investors, so there was more demand than we expected from our customers”, said Tomasevich.
The investment in Havanna’s stocks could pay generous dividends: up to 95 percent profit sharing. This situation gives a very good insight to potential investors.
Public and private financing
Some months later, the commercial directors of Puente have received offers for more than $1.7bn for public debt of the Province of Chubut. “This continues to show a great interest among investors in this type of long-term financial instruments”, said Tomasevich. These government bonds will be paid in US currency within 10 years. Payment will be quarterly from the fourth year and bear interest quarterly at a rate of 7.75 percent per annum, among other deals that have been made between the public and private sectors.
The good news is public and private financing provided a surge of optimism to the local market, and the next step will be the long-awaited investment of foreign capital. “The accumulated deficit in investments in road infrastructure, port, energy, environment and also in the private sector after more than eight years of absence by relevant enterprises, along with the expected improvement in the ratings by the rating agencies could again make this country attractive again in the eyes of foreign investors”, said Tomasevich, “which will provide a strong impetus to the local capital market.”