A former Goldman Sachs trader is investing up to $100m (£600,000) to establish a giant taxi company in Argentina, despite growing fears that the South American nation is on the verge of its second sovereign debt default in 13 years.
Russell Abrams, a 48-year-old US fund manger, has acquired 30 taxi licences since 2008 and says he intends to buy 1,000 more. That would make his vehicle fleet five times the size of the nearest national rival.
The government in Buenos Aires is under mounting pressure from a group of US hedge funds, which have acquired a share of the countries bonds and are refusing to take part in a sovereign debt restructuring deal agreed over the past decade.
The US Supreme Court ruled last month that Argentina should pay $1.4bn to the holdout creditors by this week, but the administration of President Cristina Fernandez de Kirchner has refused to comply, raising the possibility of another default. In 2002 Argentina defaulted on $100bn of sovereign debt, plunging the country into an economic crisis.
But Mr Abrams has told Bloomberg he sees no imminent threat to his taxi investment. “Argentina is already in an economic crisis and I believe it will bottom out over the next six months” he said.
The country’s GDP contracted at an annual rate of 0.2 per cent in the first quarter. Nevertheless, Mr Abrams claims he has made a 10 per cent return on his capital from taxi fares in the first half of the year, or around 20 per cent on an annualised basis.
Argentinian taxi licences, or “medallions”, have more than doubled in value over the past six years. Mr Abrams expects them to more than triple again over the next five years.
In the 1990s he researched derivative strategies at the US investment bank, before founding the hedge fund Titan Capital Group in 2011.
“When you’re trading options, you’re dealing with a kind of virtual world. This is tangible. You see your cars, you talk to the drivers. It’s harder, but the returns are also greater,” he said. Mr Abrams first travelled to Argentina almost three decades ago and his wife is from the country.