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The Asset Sale of a Lifetime?

Listen up, Latin America: It's time to shelve the Argentina jokes. The Argentines, once reviled and ridiculed by the rest of Latin America for their supposed arrogance, have been humbled. Argentina's per-capita income is now on a par with the Dominican Republic's. And what little foreign investment the country is taking in is coming from places like Brazil and Mexico.

Regional investors elbowed aside by their deeper-pocketed European and American counterparts during the privatization gold rush of the 1990s now have a chance to cash in on Argentina's devaluation dividend. For many, the temptation to buy once-out-of-reach blue chips on the cheap is impossible to resist, despite a multitude of risks. "Opportunities like this only come around once in a lifetime," says Alberto Guimar?es, the CEO of Petrobras Energ?a Participaciones (PZE), the Argentine subsidiary of Brazil's state-run oil company, Petrobras. Guimar?es took advantage of that opportunity in January when he arranged for Petrobras to take a controlling stake in Pecom Energ?a, an Argentine oil-and-gas producer with annual sales of $1.5 billion and assets in Venezuela, Peru, and Ecuador. Petrobras paid $1.2 billion in cash, assuming $2 billion of Pecom's debt.

Another Brazilian company, brewer Companhia de Bebidas das Am?ricas (ABV) (AmBev) was the first Latin investor to pounce on Argentina's distressed economy. In January, it took a $600 million, 37.5% stake in leading brewery Quilmes Industrial (LQU), a company with pre-devaluation annual sales of $939 million. Then in July, Mexico's Grupo Bimbo snapped up Argentina's top breadmaker, Fargo. Other regional companies are also rumored to be shopping around.

As quickly as Brazilian and Mexican buyers step forward, Europeans and Americans are stepping aside. In July, Mexican cell-phone operator Am?rica M?vil (AMX) agreed to buy New York-based Verizon Communications Inc.'s (VZ) controlling stake in CTI M?vil, Argentina's fourth-largest mobile-phone operator. Verizon and its former partner GTE poured $2 billion into CTI over the course of a decade. Am?rica M?vil will pay an undisclosed sum of cash and take over $200 million in CTI debt. "We couldn't have entered Argentina if others weren't first leaving," says Am?rica M?vil CFO Carlos Garc?a Moreno.

Other outside investors, including Home Depot, France T?l?com and Cr?dit Agricole, have also pulled up stakes, despite the fact that Argentina's economy is on course to expand by 7% this year, after contracting nearly 11% in 2002. But apart from the astute bargain-hunting of other Latin companies, the country has yet to experience the kind of post-devaluation investment boom that revived Russia and Mexico after their currencies crashed. Part of the blame lies with the fragile global economy, which has dampened investment worldwide. But President N?stor Kirchner also bears some responsibility. He has battled with the foreign owners of Argentina's telecom and power utilities, blocking rate increases until their concession contracts undergo an exhaustive review.

So why are the "multilatinas" moving in? Latin investors face minimal language barriers, and they have decades of experience navigating the region's boom- and-bust cycles. "There's no amount of volatility Argentina has gone through that we as Latin Americans aren't famil- iar with," says Magim Rodriguez Jr., CEO of AmBev. If Latin American investors can help the once-haughty Argentines recover their pride -- and eventually, their prosperity -- there is bound to be a new era of regional good feeling. By Joshua Goodman in Buenos Aires

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