Exclusive: Leading Latin American Economist Shares Insights On Politics, Bonds, Mining & Stocks

Benzinga recently had a chat with Diego Martinez Burzaco, Chief Economist at the world’s leading Spanish-language financial analysis firm, Inversor Global, an Agora Inc. partner. In this article, we will take a look at the expert’s comments on Latin American politics, potential investments and the mining sector.

Moving To The Right

Martinez Burzaco first went into the change in the political cycle in Latin America, initially in Argentina, and later, in Brazil. We’ve been seeing a turn toward center-right, market-friendly governments. The same is going on in Peru now, he added.

Interestingly, this has also been reflecting on capital markets, which are the best year-to-date performers in the world, as measured in U.S. dollars. This signals a change in the political mood and an ameliorated economic perspective. Having said this, however, he pointed out that global challenges linger.

There’s a lot of uncertainty around the U.S. presidential race. The “Trump Factor” is one generating much uncertainty, not only in the US, but around the world as well. It could certainly be a de-stabilizing event, he added.

Fixed Income

Martinez Burzaco then shared a look into fixed income investments. While yields around the globe (US, Europe, Japan) are very low, yields in Latin America are quite high. For instance, the Argentine government bonds Bonar 2020, offers a 4.5 percent annualized yield to maturity, with a B- risk assessment.

In a recent article, the expert said he saw the largest potential in “the long part of the curve… In this line, bonds like the DICA [Discount Ley Argentina] or the PARY.BA have chances to generate larger yields, and are consequently worth considering as an investment right now,” especially for those betting on a compression of spreads.

The New Mining Champions

Martinez Burzaco then talked about mining in Latin America. Referencing an article published last week, we inquired: Do you agree with the hypothesis that Peru, Brazil and, to a lesser degree, Argentina, are poised to arise as new mining champions in Latin America?

Peru certainly seems poised to breakout as the second-largest mining player in the region, trailing Chile. After years of problems, and the recent controversy around Newmont Mining Corp NEM’s Conga copper and gold mine, Peru once again looks like more of a friend of mining capital, the economist explained. Something similar is going on in Brazil, where a stock worth watching is Vale SA (ADR) VALE.

Argentina also offers an opportunity, especially as the new president decided to eliminate the 5 percent tax on mining exports. Particularly interesting here are lithium mines in the NorthWest.

The lithium Triangle is a geographic area shared by Argentina, Bolivia and Chile; it contains about 85 percent of the world’s reserves.

At least three companies are interested in the Argentine mines. One is South Korean, POSCO (ADR) PKX; the other, Australian, OROCOBRE LTD NPV OROCF; the third, French, Eramet.

Out of these, Martinez Burzaco likes OroCobre, a small-cap gem that certainly falls into the backdrop of changing rules we’re seeing.

Check back soon for the economist’s comments on the Brexit and its impact on Spain and Spanish banks.