Not many North American investors are familiar with what is happening in emerging markets. We hear the chatter from brokers and wealth managers about the importance of having some portfolio exposure to these growth areas. But places such as Argentina are really not known in other than anecdotal ways. Indeed, unless you have been there and seen for yourself what the "third world" is really like it's hard to understand the tremendous potential for knowledgeable investors. In this article we will look at one Argentine investment that should be in your portfolio.
First, a little current history. Argentina is located at the tip of South America and has a population of over 40 million, 98% literacy, a Per Capita GDP of $ 17,600 and one of the world's most beautiful cities; Buenos Aires (population 14 million). It is basically a European culture and the Human Development Index (HDI) published by the United Nations Development Program (UNDP) places Argentina among the countries in the high human development category. It ranks second in Latin America. So far, so good. However, Argentina's political history mirrors many of what exists in any emerging market. But despite the ups and downs, Argentina and its educated population have pushed forward successive incompetent politicians-a plague on most nations these days.
We all know about "Peek Oil" and the fact that petroleum based fuels are destined to become scarcer and more expensive. This is a particular difficult situation for developing nations. Indeed, Argentina has an energy deficit estimated of over $ 13 billion. But there is good news for investors and for Argentina's energy future.
With the new alternative oils such as shale drilling and natural gas extraction techniques, Argentina may be entering into an energy boom.
One of the richest, if not the richest deposit of oil shale and natural gas in the world has been found in Argentina's Neuquen Basin. After the Spanish Company Repsol (YPF) found the massive deposits, Argentina expropriated 51% of YPF shares in the Argentinian operation calling it strategic to the security of Argentina. Well, Argentinians applauded the move but it went over like a you-know-what in a punchbowl for foreign investment. But the pretty president from Argentina, Kristina Kirchner, and her advisors were on to that expected repercussion and within months after the expropriation started to offer foreign investment incentives to help build out the massive reserves in the Neuquen Basin. Tax incentives, price supports and a recent large contract between Chevron and the Government of Argentina for a $ 1.24 billion pilot program have addressed the interest of the large vertical producers such as Exon, Chevron and other industry giants. So, how can an investor take advantage of this new window of opportunity? Remember, when everyone else knows about it, it's usually too late.
One of the largest land owners in the Neuquen Basin is Americas Petrogas Inc. ("API" or TSXV "BOE"), a Canadian, Calgary oil and gas exploration and production company with assets in Argentina and Peru. With over 2,000,000 acres over 16 blocks in the Neuquen Basin, the company works its own operations as well as joint ventures with Exxon. Indeed, analysts that watch the stock feel that BOE could be a buyout opportunity for the big players moving quickly to set up their operations in the Basin. But for you investors out there who want to play the stock rather than invest, analysts feel that the company's stock can move up to its high of $ 4 a share within the next few months. Currently, the stock is at $ 1.99 and has made a sharp trend reversal to the upside. If you have a little contrarian in you, take a look at BOE and its excellent management.