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A new era?

Politics aside, Argentina seems to be entering a new era after the death of Mr. Kirchner.

Ron Sommer -presently chief financial officer at an institution of higher education in New York City- recently wrote a column for Seeking Alpha showing a bullish scenario for specific stocks. Namely, Telecom Argentina. His detailed analysis based on his 35 years of financial management experience has led him to believe TEO offers a great opportunity for investment. With one caveat… “There are certain risks in investing in Argentina. Among the risks are political instability, an unfavorable regulatory environment and currency risk, among others” he explains in his blog.

These remarks carry a lot more weight than he would have you believe. Mr. Sommer may certainly be right in that value-wise TEO should be on our radar but when considering Argentina, disregarding any other factor ex-financials would be highly dangerous if not outright suicidal.

The death of Mr. Kirchner opens up the possibility of a large power vacuum in the political front with a possible subsequent power struggle that will engage all major and minor political forces into disputes that may range from the colloquial ones to those that have the potential to change Argentina’s future forever. Some of these disputes may revolve around the newly sponsored bills by a few congressmen that aim at splitting corporate profits among the working class -in the order of 10%-.  Needless to say, this would be the equivalent to crossing the rubicon in any western economy.

At the center of such bills is the push by Moyano and the unions he controls to seek a greater chunk of money participation. As it has not been enough that unions already get plenty of favors by the administration, both in terms of funds as well as political aspirations, now they have decided to embark on a new cause: to loot private corporations.

Politics, when it comes to Argentina, always takes over and nothing becomes more essential to assess possible investments and financial scenarios. Further advancement of former vicepresident Mr. Scioli within local politics may bode well for businesses going forward and help slow down any progress on the “profits” bills mentioned earlier. But right now, it will be best to take a wait-and-see approach until the dust settles. So even though Mr. Sommer’s point of view presents a bullish stance, it is good to remember that there is always the Matador that kills the bull.

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