Elsztain Says Argentina Offers Best Opportunity in 25 Years
(Bloomberg) -- Argentina is offering investors the best opportunity in the past 25 years as President Mauricio Macri reforms the battered Latin American economy, according to real state developer Eduardo Elsztain.
“It’s hard to express how much value the changes made by Macri are bringing to the country,” said Elsztain, who runs the country’s largest publicly traded real estate company, IRSA Inversiones y Representaciones SA. “We are executing the most aggressive investment program during the last 25 years because the values are still low.”
South America’s second-largest economy will expand this year and next even as foreign investors remain cautious ahead of the October mid-term elections, according to Elsztain. The nation became the darling of the investing world in the 1990s, when President Carlos Menem tamed hyperinflation, sold off state assets and opened up the economy, something Macri is now trying to repeat.
Argentina is being managed by sophisticated professionals and its high borrowing costs relative to its neighbors have started to decrease after the country emerged from default last year, Elsztain said. Paraguay and Bolivia have recently sold bonds at rates that were 200 basis points below what Argentina is paying.
“The process of building trust is not a 24-hour process,” Elsztain, who also controls Israeli conglomerate IDB Development Corp., said in an interview at Bloomberg’s global headquarters in New York. “It’s an incredible achievement to be only two percentage points above Paraguay and Bolivia as there are still many challenges.”
Argentina must keep reducing its fiscal deficit, which was 4.6 percent of gross domestic product in 2016, and fight its soaring price inflation, said the 57-year-old investor, who has a degree in economics from the University of Buenos Aires.
The economy contracted for a second month in February as declines in manufacturing and commerce undercut the nascent recovery seen late last year, data from the national statistics institute showed this week.
Argentina’s Merval Index is one of the world’s cheapest stock markets even after hitting a record high this year. It trades at an estimated price-to-earnings multiple of about 9 compared with a ratio of 12.6 for the MSCI Emerging Market Index.
Elsztain said he will be “active in the future” in FIH Group Plc, a major landowner in the Falkland Islands in which he has a minority stake. The Argentine businessman decided to cancel a bid for control of FIH in March after the local government intervened to warn Elsztain it could effectively strip the company of its land and trading rights if he gains control.
His approach came after FIH said it had agreed to the terms of a separate offer from Staunton Holdings Ltd.
“We invested in that company 10 years ago as it has value in terms of fishing, oil, land and tourism,” Elsztain said in the interview. “The offer was too low and we said we are ready to improve it because this company is worth much more.”
British control of the Falkland Islands is disputed by Argentina, which refers to them as Las Malvinas. A takeover of one of the territory’s biggest landowners would test U.K. Prime Minister Theresa May’s stance on foreign buyouts and prove politically controversial.
“We think this is a good investment,” Elsztain said. “It’s a company that is very dynamic and in the long run there is no government that will think there is sense to having a military conflict between Argentina and the U.K.”