Grammy award-winning, Colombian singer Shakira was honored by Harvard University with 2011 Artist of the Year a few weeks ago. After accepting the award, Shakira challenged Harvard students to take action and help 200 million children by improving education in developing countries. She admitted she’s certainly no Mother Teresa, but certainly sees the value in educated minds as the foundation of wealthy societies, especially in Colombia.
The focus on Colombia continues, as Standard and Poor’s just upgraded that country’s credit rating. Colombia now joins a growing group of investment grade countries in the region including Brazil, Mexico, Chile, Panama and Peru.
This sovereign debt rating upgrade is a precursor of better times ahead.
Standard & Poor’s also boosted the corporate credit and debt rating on the country’s state-owned energy company, Ecopetrol SA (NYSE:EC) elevating it to investment grade status and reducing interest expense costs for future projects. Just in time too! Ecopetrol wants to expand its operations, and it’s not the only company exploring for oil in Colombia. OGX Petroleo e Gas Participacoes SA (which is owned by Brazilian billionaire Eike Batista) recently announced concession agreements with the Colombian government for the exploration of five oil blocks.
Today, access to capital markets for Latin American companies still means going through North American exchanges and investors. Although only a handful of Colombian-domiciled companies currently have ADR programs in the U.S., the number of IPOs from the country is expected to grow, including gas and electricity company, Grupo de Energia de Bogota and banking company, Banco Davivienda.
Take a look at other emerging market companies currently raising capital to fund internal growth or increasingly mergers.
Chilean bank, Banco de Chile (NYSE:BCH) is taking the organic route to grow in its own geographic market. The bank announced plans to raise $100 million in capital and reinvest CLP 67.2 billion ($138.3 million) of its 2010 profit to increase its client base.
Brazil-based steel maker, Gerdau SA (NYSE:GGB) is building up a war chest for acquisitions. The company recently announced plans to raise a whopping BRL 3.8 billion to BRL 4.2 billion ($2.2 billion-$2.5 billion) to fund its investments.
Spain’s Repsol YPF SA (NYSE:REP) is reducing its holdings in Argentina-based YPF SA (NYSE:YPF) to 70% ownership through direct strategic sales and a $1 billion public equity offering. Repsol remains a long term strategic investor in Latin America and has been made no secret that it was seeking to shift its geographic portfolio and reduce risk. This has had a temporary negative price effect on YPF shares, which now yield 7%.
For every seller there is ultimately a buyer and yes, I’m still very positive on Latin America! Places like Argentina were once favorites among investors and with the recent economic improvements in the region may again be too.
So let me leave you with one thought: One day, granted not too soon, Argentina will be investment grade. Today Columbia, tomorrow Argentina!
That’s my take on it. Happy trading!
Rudy
Rudy Martin, editor of Emerging Market Winners, is widely recognized as an authority on stock and ETF investing. With more than 25 years of investing experience, Rudy started his investment career by co-managing a $2 billion private equity portfolio for Transamerica. He also served as an analyst for DeanWitter and Fidelity Investments, and research director of a quantitative research firm that is now part of TheStreet.com. Recently he has been providing his investment ideas directly to a select list of global hedge funds as Managing Director of Latin Capital Management, an institutional money management firm with more than $180 million in assets under management. For more information on Emerging Market Winners, click here.
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