A bit of talk has been made of the sovereign risk that Argentina poses to Troy with some stating this as the very reason they are selling out, with significant loss.
I would like to make a couple of points with regard to this and am keen to hear from others.
YPF Much has been said about the nationalisation of YPF which has led, in part, to the OECD's rating of 7 out of 7 for sovereign risk. (1 is good, 7 not so). President Cristina Fernández de Kirchner is a Peronist. The Peronists view the nationalisation of strategic assets to be important to the econmic independence of Argentina. "When Perón became president on June 4, 1946, his two stated goals were social justice and economic independence." - Wikipedia - http://en.wikipedia.org/wiki/Juan_Perón Within the first 2 years of his presidency he nationalised the Central Bank, the railways, public utilities and universities. All strategic assets owned by foreigners. Oil is a strategic asset and as such YPF has been singled out for nationalisation. It is entirely in line with Peronist thinking to take control of foreign controlled strategic assets, especially given Argentina's energy crisis.
Oil is a strategic asset, gold is not viewed in such a way (yet?).
A Special Relationship Australia and Argentina have many common interests and as such have a mutually benificial relationship. They have a bilateral relationship not enjoyed by other countries. "Argentina and Australia have signed an investment protection agreement, which provides additional security to Australian investors by protecting against the possibility of expropriation of Australian investments and providing for an international dispute settlement mechanism." - http://www.dfat.gov.au/geo/argentina/argentina_country_brief.html
While the OECD may give a sovereign risk rating of 7, this investment protection agreement may go some way to offsetting those risks for Australian investors.
Yamana Gold Yamana Gold (AUY) has been referenced, as their price has also declined, and this article attempts to explain why. - http://seekingalpha.com/article/1184731-our-problem-with-yamana-gold
If that article has some merit, I would simply say, Yamana Gold is Canadian based and does not have the protection afforded to Australian investors.
Cheers. thg
TRY Price at posting:
$3.00 Sentiment: Buy Disclosure: Held
