Argentina sits below Brazil on the map. Brazil has been an international superstar for the five of the last seven years, but the Brazilian star has lost some of its glow thanks to a three-year-long recession. The recession is turning the Brazilian economy into a shadow of its former self. Argentina, on the other hand, has been struggling with high debt, rampant unemployment, and a government that seem to know what it was doing, but didn’t. Argentina took a back seat on the global financial marketplace, and the country wants a front seat now.
James Dondero, the CEO of Highland Capital Management, based in Dallas, has been investing in assets that appear to worthless for years. Dondero got his feet wet in the investment industry when he worked for American Express. When fellow investor, Mark Okada talked to Dondero about opening their own company in 1992, Dondero jumped at the chance. That partnership produced Highland Capital Management. Highland Capital now manages more than $19 billion in assets all over the world.
Argentina has been on Dondero’s radar for several years. He knew the country was a prime investment even though debt continued to strangle the country. Dondero decided to buy some of that debt in 2014. James didn’t hesitate when he got the chance to buy $4 billion in Argentine debt, according to an article published by Bloomberg.com. When Highland Capital bought that debt Cristina Fernandez de Kirchner was president, but Dondero had a feeling that even though she didn’t have what it takes to get Argentina back on track financially, her opponent Mauricio Macri did.
One of the first things Macri did when he was elected was to start a program that included selling bonds filled with Argentinian debt. That was good news for Dondero. His $4 billion investment in Argentinian debt was already producing a 20 percent return, so buying a large chunk of future Argentinian bonds made a lot of sense. Macri has reversed some of the policies the former president enacted that kept Argentina down on the world stage. Macri also has the international connections to turn the country around, according to Jim Dondero. Dondero told Bloomberg.com that a turnaround is already happening.
Highland Capital Management plans to start a fund that invests in Argentinian debt and equity. Other investment companies will do the same thing, according to Dondero. Argentina is a good risk, and the big investment firms and hedge funds don’t overlook good risks.