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  • Not All 'Failed States' Are Failed Markets And Colombia Stands Above The Rest [View article]
    I think the failed state index raises some interesting points and while I would never call Colombia a failed state it has over the decades as well as even now, possessed many of the attributes of a failed state including:
    1. The central government is unable to extend its control into all parts of the country.
    2. The government is unable to control the multitude of competing organized armed groups who administer justice and manage their areas of influence as if they were fiefdoms. Don't forget that the Urabenos were able to shut down a large part of the north of the country for 3 days this year after the police killed their leader in an operation near Capagurna.
    2. While the major cities are generally under the control of the government, they all have no go zones where the rule of law does not apply. In Medellin these can for example be found in the barrios around San Javier such as Communa 13 but also around Acevedo and Santo Domingo. It is the same in Bogota with Bolivar City being the best example. 3. For decades the traditional features of a functional state have not existed country wide in Colombia including the rule of law through a functioning legal system and police force and other elements of public infrastructure. There are still issues in this regard now and they are not only confined to difficult to reach or remote areas like the pacific coast or Amazonas but also extend to the southern border regions as well as near the Venezuelan border and the central south of the country. There are also pockets in even the largest and most advanced cities.
    4. For a brief period in the late 1990s until 2002 the country was divided between the central government and Farclandia.
    5. It is questionable whether the Colombia we know now could have survived without the U.S aid it receives, especially when it is the fifth largest recipient of US aid after Iraq, Afghanistan, Egypt and Israel.

    I also don't agree with the statement that "Colombia is far beyond the point at which we can expect the sort of high economic growth that results from a relatively low starting point." The country has only truly engaged with the outside world and shown signs of significant economic growth since around 2006. My view would be that while economic development has progressed there will still be substantial economic development over the next decade as the country continues to experience 'catch-up growth' before it plateaus. However, this could be derailed by the security situation becoming increasingly unstable of which there are signs or a change in political direction which is highly unlikely. I think what many analysts miss is that Colombia is two very different countries operating alongside each other that are essentially codependent. 
    Jun 27, 2012. 08:43 PM | 1 Like Like |Link to Comment
  • Brazil's Banks: Are They A Healthy Bet For Investors? [View article]
    statiscool thank you for the information. Overall on my initial analysis BBD has shaped up to be the better of the three NYSE listed Brazilian banks. While I am a fan of Banco Santander, I found its first quarter 2012 results for its Brazilian sub BSBR quite disappointing.
    Jun 27, 2012. 07:50 PM | 1 Like Like |Link to Comment
  • Argentina's Telecommunications Sector: The Latest Target For Nationalization? [View article]
    William there haven't been any further developments other than Telefonica announcing that it is going to sell down non-core assets in Latin America to raise capital. It seems the Argentina government is still dealing with the YPF issues and is desperately trying to raise capital to fund accessing the non-conventional reserves in the Vaca Muerta. It has become a waiting game.
    Jun 25, 2012. 08:10 PM | Likes Like |Link to Comment
  • Important Considerations When Investing In Latin America And Other Emerging Markets [View article]
    David at this time I don't think we will see significant economic growth in Brazil for the short to medium-term, plus it appears that Argentina is moving closer to a crisis. At this time I believe investors that either have or are seeking Latin American investment exposure should be re-appraising their investments particularly in the case of Brazil. Howerver, I do believe that as the economic slowdown deepens there will be some exceptional value investment opportunities in the region.

    I also believe that we will see for the medium term increasing political risk across the region as the regions governments continue to assert themselves in an attempt to retain political credibility as economies falter due to declining Chinese and European demand. I am also of the view that traditional risk management methodologies do not work effectively in Latin America and that investors need to be particularly cognizant of Latin American history, politics and business culture when investing in the region.

    Jun 25, 2012. 08:02 PM | Likes Like |Link to Comment
  • Colombia: Poised To Reach Its Economic Potential [View article]
    No concerns with Colombia's level of debt it is quite manageable given the size of the economy and the economic growth the country is experiencing. It is also far lower than would normally be expected from an economy of that size.
    Jun 23, 2012. 12:01 PM | Likes Like |Link to Comment
  • Colombia: Poised To Reach Its Economic Potential [View article]
    Cobblestone Colombia's public debt as a percentage of GDP is around 45%, with total central government debt totalling $117 billion. Total private sector loans as a percentage of GDP are around 35%. Total debt as a percentage of GDP is 68%.
    Jun 22, 2012. 08:00 PM | Likes Like |Link to Comment
  • Banco Santander: Clean Bill Of Health Spells Opportunity [View article]
    Thanks Mike, Santander's numbers really told the story, the only concern was whether they were manipulating the numbers and the audit has confirmed the accurcacy of the numbers plus I couldn't dig up any information that indicated otherwise, which confirmed my gut feeling. My suspicions were raised a few times when I found some potential irregularities in BSBR's numbers around tier one capital and provisions but they came clean on them. Plus any issues in Brazil around non-performing loans is not going to affect Santander as Spain was the main driver of any issues. I am still confounded by the rumors about the health of the U.K ops. I have a pretty good understanding about where the U.K is up to economically, quality of loans etc and the sub-prime RE bubble was burst with the GFC. The economy has been pretty much stuffed economically since then but most of the pain has been dealt with. Furthermore Santander U.K's exposure to these issues was minimal and its current U.K loan portfolio is within managable risk parameters. I also don;t see where a large volume or value of toxic loans can come from in the U.K or that it will have a banking melt-down Spain style for the reasons previously stated. The FSA has also been keeping a very tight rein on the activities of banks since the GFC.
    Obviously Santander isn't out of the woods but the Spandish bad debt exposure was the key risk issue. I think the next issues for Santander will be around the quality of its loan portfolios in Latam particularly Brazil and to a lesser extent Chile because both countries have experienced consumer credit bubbles of sorts. This as we are seeing with Brazil and BSBR will see increased provisioning and NPLs as the Latam resource boom runs out of steam, the economy slows and defaults rise. But still this won't be significant break the bank type of issue as it relates to consumer lending and far smaller loans. But I would be interested in your view Mike, because I could be missing something?
    Jun 22, 2012. 07:23 PM | 1 Like Like |Link to Comment
  • Banco Santander: Paying The Price For Its Association With Spain [View article]
    Thanks ArtfulDodger,I quite like Santander and BBVA and the sentiment driving the sell-down in my view has been miss founded. I believe that Westpac is a good investment and for me preferable to the majority of U.S banks particularly when considering the dividend payment. But I believe that Santander and BBAV at this time represent better opportunities.
    Jun 22, 2012. 06:40 PM | Likes Like |Link to Comment
  • Banco Santander: Clean Bill Of Health Spells Opportunity [View article]
    Great article Mike and the results of the audit certainly confirm what you have been saying all along. Despite this information being publicized along with the IMF report being publicly available I have been surprised that investors are still selling the bank down. I have now heard a doomsday rumor about Santander's UK exposure, which apparently is going to launch the bank back into a liquidity crisis. It seems that herd behaviour still dominates. Looking forward to more great articles.
    Jun 22, 2012. 03:15 AM | 2 Likes Like |Link to Comment
  • Banco Santander: Paying The Price For Its Association With Spain [View article]
    Loserboy thank you for the comment. Santander's UK market exposure is within acceptable parameters and it is very managable particularly and this is shown by its credit risk and liquidity indicators. This has been recognized by the U.K prudential regulator the FSA. Sanatnder has already gone through the process of increasing its capital requirements to meet regulatory requirements and regardless is receiving a large capital injection from the sale of its Colombian business and the I{PO of its Mexican bank later this year. So it is hard to see why or how there are any capital issues particularly with regard to regulatory capital. We are already in a global slowdown and to date Santander has weathered it well. Any sustained global slowdown will also adversely affect Westpac and to date it has also been struggling as a result of lower commodities demand impacting the Australian economy.

    In addition, comparing Westpac to Santander is like comparing apples and oranges, Firstly Westpac is an Australian bank and does not have the same global footprint of Banco Santander, which includes its considerable exposure to Latin America which is one of the biggest growth markets for banking in the world. Secondly Westpac is particularly heavily leveraged with capital and liquidity measures worse than Santander's and I would say its risk management systems are not as robust. Thirdly Westpac's CEO has embarked on an aggressive growth strategy that sees the bank becoming even more dependent upon external funding which leaves it with considerably more volatile earnings. It also has a history of being one of Australia's worst performing banks. Fourthly the dividend yield is approximately half of Santander's and investors effectively pay more withholding tax on Westpac's dividends than they do on Santander's, especially if they take the scrip dividend. In summary they are 2 very different banks with very different growth and risk profiles and appeal to different types of investors.
    Jun 21, 2012. 10:37 PM | 3 Likes Like |Link to Comment
  • Important Considerations When Investing In Latin America And Other Emerging Markets [View article]
    DAG becoming dispassionate about our investments is a very important part to becoming a better investment and it took me quite while with regard to my personal investments. Managing other peoples money is far easier especially when your sitting in a bleak grey cubicle analyzing financials, market news and economics events. Having a dispassionate view is as you've highlighted a number of times quite important and has always been a catch cry from fund managers and financial advisors as to why you should use a professional to advise you. Unfortunately in many cases they have their own agenda and it is not always to act in the best interests of their client.
    Jun 21, 2012. 07:49 PM | Likes Like |Link to Comment
  • Brazil's Banks: Are They A Healthy Bet For Investors? [View article]
    Steve Banco Santander has around $76 billion of European sovereign debt exposure and BBVA around $85 billion. For both the majority of that sovereign debt exposure is to Spain, with very little exposure to Greece. For more details on both banks I have included links to my articles below.
    BBVA -

    SAN -
    Jun 21, 2012. 07:42 PM | Likes Like |Link to Comment
  • Brazil's Banks: Are They A Healthy Bet For Investors? [View article]
    Eduardo thank you for the on the ground insight.
    Jun 21, 2012. 07:32 PM | Likes Like |Link to Comment
  • Important Considerations When Investing In Latin America And Other Emerging Markets [View article]
    Thank you DAG I believe that the discussions and comments are just as important as the articles particularly if they raise new points or those that are contrary to the article or my own. It is from the discussions that I get many of my ideas for articles, otherwise I might just sit here pouring vitriolic articles about my views on Petrobras all day long and how much I like Ecopetrol, which would bore everyone to death. I'd also point out that some of the more senior or should I say longer serving contributors pointed out the importance of the discussions and comments to me and without them I think SA would lose some of its uniqueness and value.
    Jun 21, 2012. 12:36 PM | 1 Like Like |Link to Comment
  • Important Considerations When Investing In Latin America And Other Emerging Markets [View article]
    Randle thank you for the insight. At this time there appear to be a number of structural problems in Latam's biggest economies being Brazil and Argentina, most of which have arisen from excessive or wrong footed government intervention. In saying that I don't find the totally hands off free market approach that Colombia is taking for example as significantly better. Overall it is my belief that Latam governments need to make better policy decisions both economically and politically and take into account all factors and participants.
    Jun 21, 2012. 12:27 PM | Likes Like |Link to Comment