Argentina elected a new president at the end of 2015. A long line of Peronist leaders finally came to an end when pro-democracy candidate Mauricio Marci was elected. Marci is a civil engineer and the son of one of the wealthiest men in Argentina. Marci was educated at the University of Pennsylvania’s Wharton School of Business so he has a solid background in economics. Economics wasn’t former President Cristina Fernández de Kirchner strong point, according to James Dondero, the co-founder of Highland Capital Management. In fact, Cristina Fernández de Kirchner did more to harm Argentina’s economic reputation than to help it.
As soon as Marci took office, he began to reconnect with the fragmented government ministries. He named a trusted veteran as the minister of the central bank, and he reorganized the finance ministry. Those two moves set his new economic plan in motion. Dondero had been watching Argentina for years. He knew that the country would make an economic turnaround based on the reports he was getting from his Sao Paulo office.
Highland Capital has offices in Sao Paulo, Singapore, Seoul, New York and the Dallas headquarters. Highland Capital decided to invest $4 billion in Argentina in 2014 because of the information Dondero was receiving from his South America contacts. That investment has been very successful, so when Marci announced a new $12 billion bond offering, Dondero was one of the first investors to commit.
There is still a lot of work to do in Argentina, according to Dondero. A U.S. court just agreed to lift an injunction based on Marci’s $4.65 billion offering to old creditors that were burned by Argentina’s most recent default. Argentina will use part of the new $12 billion bond offering to settle the debts owed to Elliott Management and Aurelius Capital. Even though Argentina’s Congress is not all pro-Marci, Dondero believes the new president will convince Congress to agree to the new bond plan as well as some of the other changes that will impact the economy.
Jim Dondero has a proven track record when it comes to investing in emerging market assets. The Argentina investment is a risk, but Argentina is getting help from the United States and China. Obama recently visited Marci and gave him assurance that the U.S. would help the country. Marci is also set the meet with Chinese leaders to discuss a new trade agreement, according to an article published by Bloomberg.com.