Wednesday, August 3, 2011

Investing in Argentina's Wineries?

Part of the perks of having a blog that is read by thousands of people is that you get to meet really interesting people, and they're not always in finance. In fact, some of the most interesting people I've met though my blog are not traders or investors, but just regular, hard-working folks or entrepreneurs.

On Wednesday, I had lunch with Nathan, an entrepreneur who with his partners has invested in Argentinian wineries. Nathan contacted me and I was more than happy to meet up with him. We met at a nice Portuguese restaurant near my house that makes the best BBQ chicken (their grilled chicken salad is awesome!).

I found Nathan to be smart, charming, well traveled, and very on top of things. I had met a buddy of his, Brian Ostroff of Winderemere Capital, who along with Jacques Lacroix and Paul Beattie of BT Global Growth told me all about Canada's phosphate reserves.

Nathan is smart and understands private and public markets. He has investment banking experience and reads a lot, including my blog, Zero Hedge and a few others. We talked about Greece, Israel, Turkey, China, Brazil, gold, the stock market, interest rates, the euro, timberland, infrastructure, farmland and of course, wineries in Argentina. It was a fascinating discussion because I got fresh insight from someone who has traveled the world and knows the countries very well. Here are some insights I learned:
  • First, Argentina is simply breathtakingly beautiful. He showed me a series of photographs from the winery and I was in awe. They have the best meats and it's generally a safe country, especially if you compare it to other places like Brazil.
  • Speaking of Brazil, Nathan thinks they're headed for a major slowdown. It won't happen right away and they have money pouring in to prepare for the World Cup and then the Olympics, but he thinks after that the country is in trouble. He told me despite what government officials say, income inequality is getting worse: "The poor and working poor are making more but it's not enough to keep up with the ultra-rich. Crime is a huge problem. If you go to Brazil, you don't want to venture off to the favelas. Their airports are crappy; they really need to revamp them fast for the Olympics and World Cup."
  • Interestingly, I told him Brazil is the "hot spot" for Canadian pension funds investing in emerging markets. They are buying up everything, including shopping malls and public shares. He thinks that might come back to haunt them.
  • In terms of the euro, I told him that I don't see it or the eurozone collapsing because there are too many global interests who want to see a unified Europe under one currency. He told me some very wealthy friends of his agree with me (those global macro funds shorting the euro, betting on a collapse, will get slaughtered).
  • The stock market made a comeback, making up all its losses, pretty much like I had predicted. Nathan was surprised but I told him there is no choice but to "reflate this sucker." He asked my thoughts on gold and I told him that I never invest in gold but it has been rising steadily (know a bear who keeps telling me the time to buy the Dow Jones is when it falls to 3000, the price of gold!!!)
  • I told him there are huge opportunities in Greece right now but there is no rush to move in. I even shared with him where he and his investors should be looking and what projects they can develop there. But right now, Greece is a mess and the taxi drivers are pissed off because their licenses are about to become worthless so they're wreaking havoc pretty much everywhere (the Greek government is so stupid! They should have partially compensated the taxi drivers and passed a law to make the strikes illegal).
  • I asked him if he has been watching the massive strikes in Israel and he said yes. It's quite weird but there seems to be unrest pretty much everywhere now. I told him that Israeli tourists are flocking to Greece for their summer vacations because relations between Turkey and Israel have been strained since the flotilla incident.
  • As far as Turkey is concerned, I told him the smartest move the National Bank of Greece did was close down their North American operations to focus on the Balkans and Turkey. But I also told him I am concerned about Turkey because it is becoming increasingly less secular (that is why the generals resigned last week) and it too could be hit hard in the coming years after growing like crazy over the last six years.
  • We then got into an interesting discussion on timberland, infrastructure, farmland and wineries in Argentina. Nathan told me the Dutch pension funds and select US funds are very smart about investing in farmland, but Canadian funds are behind the curve. I told him that Canadian funds are into infrastructure projects in Chile and that PSP and bcIMC recently announced the TimberWest deal. Each investment carries its own set of risks, including investments in timber, farmland, and infrastructure.
  • As far as Argentina, they are developing the winery to have tourists come tastes wines and enjoy the scenery. They also have tons of land to sell to prospective investors. Their main product is Private Vineyards. They sell small plots of land to people who would like to own their own small 3-10 acre vineyard. They have about 100 owners now - and the oldest owners (the ones who planted in 2007 and 2008) are now making wine with the grapes grown on their property.
  • The land is one of the best wine-making regions in Argentina and they have the top wine-maker in Argentina as a consultant, who helps our owners plan their vineyards and create their wines. They are also building a resort and a tourist oriented winery village. It really is spectacular but I did ask him about how the country is doing now. He told me: "Unemployment and inflation are still very high but they're much better off than 2001."
  • I told him if he and his investors are worried that the government there will nationalize land like they nationalized pensions and he said "no because property rights are enshrined in their constitution."
  • Finally, he told me to come visit the winery in Argentina and I think I'll take him up on the offer. Apparently March is the best time to visit, smack in the middle of harvest season.
I thank Nathan for this interesting lunch and will ask pension funds and family offices interested in receiving details about the project in Argentina to contact me by email (LKolivakis@gmail.com). Given the volatile state of public markets, it may make a lot of sense to invest in wineries. And if the stock market crashes, at least you'll be able to drink some good wine to help you forget about it. :-)

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