A clutch of London listed companies are positioned to benefit from improving business relations between Argentina and the world’s developed economies.
Like much of the South American continent, Argentina is packed full of potential opportunities.
But a chequered political past and turbulent economics means investor sentiment towards the country could at best be considered ‘changeable’.
Nevertheless, fresh developments to draw a line beneath the country’s debt problem could provide a boon for those investing in Argentina.
The Paris Club, a collective of finance leaders representing some of the world’s largest economies, is now ‘open’ to holding talks about debt repayment, according to reports in Buenos Aires.
Argentina owes around US$9.5bn to Paris Club members, and last month it is understood to have made its first contact with the collective for a number of years.
Through this contact Argentina set out the conditions by which it would be prepared to repay the money.
And, according to comments attributed to Clotilde L’Angevin, Paris Club secretary general, preliminary talks have now taken place.
The Paris Club is open to continuing this dialogue, she said.
Given the recent currency wobble – which saw a sharp sell off pesos, along with other emerging market currencies – a settlement on the country’s international debts would provide quite an endorsement.
Significantly perhaps, the debt to the Paris Club is a legacy of Argentina’s default in 2002, and a settlement would be an important step towards the re-opening of the country to large scale international investment.
It is of course worth remembering that Argentina is headed towards a general election. Experts believe this is likely to create a much more pro-business stance.
Indeed, it is understood firms are once again starting to warm to the idea of investing in Argentina.
London’s AIM market hosts several companies that have staked their future in Argentina, typical of the junior market many of them are focussed on natural resources.
Among them Andes Energia (LON:AEN), an oil and gas producer and explorer, has seen its shares rise around 150% in the past three months, as excitement grows over its projects in Argentina’s oil sector.
Specifically, investors are zeroing in on the company’s assets in the Vaca Muerta shale, in Patagonia, which is the second largest unconventional play in the world and is thought to contain a massive 661 billion barrels of oil and 1,181 trillion cubic feet of natural gas.
The company also has conventional oil production, in the order of 1,400 barrels per day, and other assets in three other areas of Argentina, as well as in Colombia, Paraguay and Brazil.
The AIM quoted junior is far from the only one in this play, which is driven mostly by the likes of national oil firm YPF, US major Chevron, Shell, and the most recent entrant’s Germany’s Wintershall and Malaysia’s Petronas.
Although much of the attention centres on shale and Vaca Muerta, another AIM quoted junior, President Energy (LON:PPC), also has exposure to Argentina’s increasingly popular onshore oil sector – although the immediate attention is on drill plans in Paraguay.
President has stakes in two exploration areas in Northern Argentina, and its efforts on the Paraguay side of the border is targeting similar ‘on trend’ prospects. It is likely to be another beneficiary of growing investments into Argentina and this part of South America.
And as many a resource investor will know, before the Patagonia shale boom came a gold rush.
Companies such as Patagonia Gold (LON:PGD), Minera IRL (LON:MIRL) and Mariana (LON:MARL) were all favourites of the AIM market a year or two ago – before the gold price lost some of its shine, and industry uncertainties spooked investors.
Elsewhere, Argentina remains the cash generating centre for power producer Rurelec (LON:RUR), though new projects in Peru and Chile are the group’s focus for growth.