Argentina awoke to a murder mystery last Monday. It involved a locked room, a discharged gun and a dead man.
The security team outside had seen nothing, and at first the police said it must be suicide. But some details didn't make sense. There was no suicide note for starters. And if the man was going to kill himself, why had he made out a detailed shopping list for the week ahead?
All this might sound like one of those quaint Agatha Christie murder mysteries. But when you know the full story, it starts getting more like a full-blown Hollywood thriller.
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The thing is, the dead man wasn't any old Argentinian he was a state prosecutor.
On the morning he died, Alberto Nisman had been due to deliver a damning report to Congress, which accused the president of being part of a conspiracy with Iran.
The president, Cristina Kirchner, had originally gone along with the official police verdict of suicide. But in the face of public anger she was forced to backtrack. She conceded that it wasn't suicide, but instead pointed the finger at rogue elements in the Argentinian secret service.
For most investors, the latest political scandal is yet another warning to stay away from Argentina. However, they're wrong.
Since last year, my Argentina tips have performed strongly and we can continue to make money by keeping faith with this unloved country.
This has all the makings of a Hollywood thriller
Nisman believed that Iran had been behind the 1994 bombing of a Jewish centre in Buenos Aires. The city is home to the largest Jewish population in Latin America and the attack, which killed 85 people, was the biggest atrocity against Jewish citizens since the Holocaust.
Nisman didn't just finger Iran though. He also reckoned he could prove that the Argentinian government, which has never officially found the perpetrators, had made a deal with the Iranians. In return for a cover-up, the Argentinians would get a beneficial grain-for-oil trade with Iran.
Nisman died before he could explain the report to Congress, but fortunately, copies of his evidence had been passed on to allies.
It all seems damning for Kirchner, but she has her own side of the story. According to her, rogue elements in the Argentinian secret service had fed Nisman incorrect information and then killed him to implicate her. As a result, she's now taking the extraordinary step of disbanding the secret service.
The web of intrigue and conspiracies would make a good film. But sadly for Argentina, it's fact, not fiction. All governments are capable of dirty deals, but citizens hope that other institutions such as the press, judiciary or police will contain them.
What really angers Argentinians is that they have no faith that any of the country's institutions are strong enough to get to the bottom of this.
Most investors think Argentina is a basket case but they're wrong
Over the years, most Western investors have learned to mistrust Argentina and stay well away. Anti-Western soundbites from Kirchner have also helped to cement the idea that Argentina is no place for international investors.
This is backed up by some of you New World readers. Every time I write a bullish piece on Argentina, I normally get a few commenters that clearly think I'm nuts.
Here are a few examples:
"The best way to profit from Argentina's twisted economy is by staying away from Argentina."
"Sounds like even more of a nightmare than I thought!"
I love hearing from readers, but I don't agree with that view. Sure, Argentina has plenty of problems. It suffers from poor institutions and entrenched corruption. I've spent a lot of time living and working there and know just how frustrating these issues can be.
But if you look past the problems, there is real opportunity.
Argentina is incredibly rich in natural resources, with the world's second-biggest shale gas reserves and fourth-biggest shale oil deposits. It is also an agricultural powerhouse.
Think about it like this: Argentina is just a bit smaller than India. But whereas India has to provide for 1.2 billion people, Argentina has just 41 million. The population is also an asset. Its education system may be creaking, but it's still one of Latin America's best, and supports some decent local manufacturing, technology and service companies.
Sadly, Argentina won't win the battle against corruption, bad government and weak institutions any time soon. But over the medium and long term, it should create lots of wealth. Indeed, Argentinian stocks have rewarded those brave enough to ignore the bad headlines.
We've done very well from Argentina in the past
Fortunately, it's a story I've been following for a few years.
My three original Argentinian picks were steelmaker Ternium (NYSE: TX), landowner Cresud (Nasdaq: CRESY) and ecommerce platform Mercado Libre (Nasdaq: MELI).
Last April, I wrote that investors who had bought shares in Ternium in August 2012 should take profits, as it was up 60%. Investors could use the proceeds to increase their holdings in Cresud and Mercado Libre.
Well, since then, Mercado Libre is up by 43%. So now would be a good time to sell Mercado Libre and put the proceeds into Cresud.
Cresud owns agricultural land in Argentina, Brazil and Paraguay. It also has a stake in a real estate firm that gives it exposure to wider demand in the Argentinian economy. Best of all, it's cheap.
Thanks to the falling price of soft commodities, the firm hasn't had a stellar few years. Now, I'd never try to guess the exact spot price of anything, but given that the world's population is increasing exponentially I'm pretty sure that food prices will recover in the future.
Likewise, the real estate part of the business has struggled as Argentina's economy has slowed. There are plenty of short-term worries, such as the dispute with the bondholders, uncertainty around the election later this year and a continued slowdown in China, but eventually Argentina's economy is going to pick up too.
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