May 25, 2020

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James Dondero Explores Investments in Argentina

Latin America might not always top the list of locations in which investors wish to send their capital. News about the instability of Brazil’s economy fuels worry. The unfortunate example of Venezuela’s collapse further creates an impression of economic unfeasibility. Anyone trying to make sense of the Latin American economy does need to realize the region is not small geographically. Many different countries comprise Latin America. James Dondero of Highland Capital Management realizes this. He focused attention on Argentina, a Latin American country experiencing a thriving economy.

Changes in the political landscape of Argentina started to take shape thanks to the election of Mauricio Macri in 2015. Macri chose to depart from previous populist policies. This has had a positive impact on investment in the country. Pro-market economic plans seem to be luring in desired investment dollars. That could help stabilize Argentina’s market for many years to come.

In 2016, Argentina sold tranches — debt/securities similar to bonds — on the open capital market. This was something not done in many years. The end result proved successful as $16.5 billion flowed into the economy. Promises of an 8% yield on a 30-year tranch likely appealed to would-be investors. Based on the sheer volume of capital, many either don’t see too much risk with the tranches or don’t mind it.

Highland Capital Management recognized that Argentina presented a good potential for growth. The company’s adventures into Argentina began long before the new president took office. James Dondero looked into the investment potential of Argentina as early as 2012 — three years prior to Macri’s rise to prominence.

With Macri in power, even greater confidence exists in the market’s potential. Sovereign debt and its high yields draw in investment to be sure. Foreign investors likely wish to diversify their portfolios to include other potentially-profitable assets. Mauro Staltari, an analyst affiliated with Highland Capital Management, did mention the company wishes to increase its investment vehicles in Argentina. At present, provincial bonds remain the top assets. This may change in the near future. Local businesses might experience such success thanks to economic and market growth, they may explore IPO strategies. A successful IPO could reap massive returns for investors. Of course, the IPO actually has to be successful to do this.

No analyst or investor can predict with any absolute certainty how Argentina’s economy or investment potential will be in a decade. That said, if the country remains on a positive and wise economic course, financial investment ventures into Argentina could pay off well.