“The market is akin to a rowboat. On one side, you have the saver generating the investment. On the opposite side, you have those who seek to utilize those savings. If there is a competent helmsman, everything operates smoothly as it remains balanced. The issue arises when the weather turns bad or if the helmsman starts to navigate aimlessly, causing a lack of clarity regarding the intended direction. At that point, everyone pulls in the same direction, and balance is disrupted.
This nautical analogy is used by Nicolás Alfonso to illustrate the recent weeks of the tension between “the markets” and the Javier Milei administration, along with the resulting currency stress. Since 2015, this financial specialist has advised on these issues and managed portfolios for individuals, companies, and institutions through his own firm, Focus Investment Management (Focus IM).
He began to familiarize himself with the stock market long before his studies at the UNC School of Economics, around the age of 12 or 13. His father, recognizing his passion for numbers, arranged for him to do a summer internship at the Scarafia family’s brokerage firm.
“At that time, everything was analog since there were no screens like today. The Stock Exchange had a trading floor, where my task was to deliver paperwork for buying and selling transactions,” he recalls in an interview with The Voice.
“What people often refer to today as the ‘market’ is you, me, and others. It is the collective of individuals who make economic decisions. The willingness to withdraw support from a leader is contingent upon the certainty that he can provide.”
–So, is certainty the information the government needs to provide?
–Yes, there is a clear lack of certainty. Additionally, the market has shifted drastically since December, which harms various interests. When a crisis begins to unfold, there is often resistance to returning to the status quo, as it requires relearning many things.
-A shift of 180 degrees?
–Last year was characterized by a demand-driven market. With their pockets full of pesos, everyone wanted to spend and would buy anything at any price. Meanwhile, suppliers decided whether to sell or not. Their concern was the risk of replacement cost, as selling meant uncertainty regarding whether they could repurchase at a reasonable price. However, the truth is that they profited by not selling, as their stock grew in value month after month without any action needed.
–It’s even more advantageous if they had a financial advisor to assist with the strategy…
–Absolutely; consider if “a Nico” appeared and proposed, “We’ll take your company to the Sociedad de Garantía Recíproca (SGR), enter the market, and incur debt in pesos at a fixed rate. Alternatively, we could do it through the bank at a fixed rate, as long as it’s feasible.” We secured an interest rate of 50% per year while inflation soared at 250%. This meant the asset price adjustment for the stock was 250%. We bought stock with 50% borrowed at an adjusted rate of 250%. It was profitable in every aspect.
–Without any commercial effort…
–None; not even marketing. Because demand was eager to buy. Even if the stock was perishable, it was possible to invest in tax-advantaged assets. For example, purchasing an American Treasury bill, which is not taxed due to exposure to foreign currency as it is billed in hard currency. This strategy avoids Argentine risk and the costs associated with maintaining stock. It offered liquidity and could also be used to secure further debt in pesos. In the event of devaluation, the debt would be extinguished. Significant profits were made, few taxes were paid, all without any deceit, and thoroughly documented in the balance sheet.
ORIGAMI. The logo of your company is a small origami rabbit made from a one-dollar bill. Why? “It symbolizes the idea that a dollar is worth a dollar, but if you’re skilled in folding it, it can hold much more value. With technical acumen, we aim to enhance our clients’ wealth,” explains Nicolás Alfonso. (Pedro Castillo / La Voz)
–Just navigating the context…
–At the corporate level, navigating exchange rate disparities, inflation, and devaluation can be chaotic and burdensome, yet it becomes more manageable as it allows room for various inefficiencies.
–But that’s what led to the drastic turnaround, right?
–Indeed, this year the market dynamics have shifted. It is now a supply-driven market. Demand has receded as people lack pesos in their pockets. The government’s approach aims to tighten the market to curb inflation. This approach inevitably affects the real economy. We observed the latest exchange tensions when the appeal of pesos started to wane, as interest rates plummeted, prompting savers to gravitate towards the dollar.
–In other words, this process of macro “normalization” poses significant challenges for companies.
–Companies must actively seek demand and compete with other suppliers. They need to find ways for customers to prefer their offerings over their competitors’. Consequently, you may see companies struggling with excess stock that are running low on cash and are compelled to lower prices to generate liquidity. They might hold stock that incurs maintenance costs while also failing to secure debt.
–That’s when “a Nico” becomes necessary again, am I correct?
–Exactly; that’s our current focus, albeit from a different perspective. No longer exploiting gaps or leveraging devaluation, but rather strengthening the commercial aspect. We now collaborate more with commercial managers than financial ones. We inform them that there are financial tools available that enable them to tell clients: “Okay, instead of paying me in 30 days, settle in 120 days, but purchase at this price.”
–How is this financing structured?
–We assist the company in reaching out to the SGR to discount checks within the capital market. This provides an exit, either through the bank or market channels. If a company sells to the public sector and expects payment in 180 days but does not issue a check today for that term, the market presents a significant advantage; with the SGR’s backing or leveraging financial instruments like American Treasury securities, it can facilitate financing.
–And what about suppliers?
–For somewhat larger companies, we work collaboratively within their value chains. We connect with suppliers to communicate that our client requires financing to continue purchasing services or products from them. For instance, take a developer. If you are the supplier who used to receive payment in 60 days, now you will be compensated in 120 days, but we will work together to enhance your financing capacity. You’ll receive a longer-duration check that you can discount. If there’s any difference in interest rates between the original payment and the final cost, the developer will cover it. This improves the supplier’s financing capacity while allowing the developer to avoid selling at a loss, thus advancing projects and benefiting the entire chain.
–Do you observe SMEs in Córdoba adopting these strategies?
–I see this increasing steadily. Our role is to educate on these matters, helping people understand that we are collaborators, not competitors, to their accounting and tax advisors. In fact, we work closely with them, often at the same table. Institutions like the Argentine Institute of Finance Executives (IAEF), which I coordinate locally, also aim to educate on these principles.
–It’s a challenging task in a country where many have grown accustomed to paying to store dollars.
–That’s relatively uncommon in other nations due to stability, lower transaction taxes, and reduced evasion. Here, we encounter phenomena like the “problem” of “old-fashioned” dollars.
–That’s an interesting topic!
–It often begins when older individuals like me (laughs) travel to a neighboring country, like Brazil, carrying dollars, and a young clerk at the exchange office says: “That bill is fake.” Do you know why? Because it’s from the 1950s or 1960s, years before that clerk was born. My father kept it in a shoebox for 30 years after selling an apartment. It’s entirely valid, yet that kid has never encountered one before. In the United States, an ATM or someone my age would accept it without hesitation. Argentina is among the few nations globally where we retain a currency without yield for 30 or 40 years. Ironically, it’s far riskier not to invest, as you lose ground against local or foreign inflation. Stagnation is the worst business model.
–You touched on a key issue: taxes. Are they significantly linked to financing strategies?
–Our approach emphasizes client needs, increasingly linking to strategy design and financing structures. Think of a plastic surgeon guiding us on the best course of action. The financial advisor also acts as a tax planning specialist. The clients we prefer are SMEs, where company management and partners’ financial affairs are closely intertwined, and tax planning between the partner and the company is essential.
LEARNING CURVE. “Our culture is flexible and open, ensuring the whole team can work comfortably and enjoy what they do. We maintain a total commitment to our clients, which is our primary focus. We are now beginning to develop an internal university to attempt to shorten the steep learning curve inherent in our field,” explains Nicolás Alfonso. (Pedro Castillo / La Voz)
–In Argentina, taxes are high.
–Indeed, you must pay them if you want a company to operate effectively. The distinction between assets that are exempt from taxes versus those that are taxable is crucial; it’s different to work with company debt compared to equity. Since the financial costs of debt are deductible from the annual results, while equity is not, there’s no tax shield to benefit from.
-Can you provide an example?
–A mutual fund (FCI) is taxed differently compared to a fixed-term deposit. One is taxed on received amounts while the other is on accrued earnings. If a company’s investment spans a year in a FCI and they don’t dismantle that position until after the fiscal year ends, the next fiscal year incurs Income Tax, which will be settled in the subsequent year. It utilizes that fund, which, let’s say, yields 50%, to secure debt. And it enters into a 50% debt agreement with capital or by discounting a check in the market. You might think: “What a fool: earning 50% and incurring 50% debt.”
-But…?
–But the first 50% will only be considered after the Income Tax is deducted, whereas the other 50% goes through tax shields on the income statement. Thus, there is a 35% differential between the two. Furthermore, in countries facing inflation levels like Argentina’s, deferring tax payments can mitigate their impact. If you calculate it in official dollars, paying taxes in 2022 when the dollar was $150 or doing so in 2024 when it reaches $800 or $1,000 means a significantly reduced tax burden this year. There, you find a considerable advantage without any deceit—simply by developing expertise and equipping companies to comprehend how such mechanisms work.
Numbers fanatic
Mission: “evangelize” in finance
Name. Nicolás Alfonso (46).
Married to. María Noel Brisson.
Children. Nicolás (16) and Delfina (13).
Likes. Playing tennis (a passion since childhood) and running. He is participating in the six major marathons, having completed London, Berlin, Chicago, and New York, with Boston and Tokyo still pending.
Training. He graduated in accounting from UNC and has continually trained in finance and related fields. He worked at PwC and the Scarafia brokerage firm, and in 2015, he founded Focus IM.
Roles. He has coordinated the local chapter of the Argentine Institute of Finance Executives (IAEF) for almost eight years and chairs the newly established Fintech cluster in Córdoba.
Company. Focus Investment Management, offering financial advisory and investment portfolio management services, with a team of seven specialists and offices in Córdoba Capital and Villa María.
An advice. “I advise my clients: ‘Don’t test the depth of the river with both feet’; you must always diversify your risk. In the short term, cash management is conducted in pesos. There are Lecaps yielding better returns than mutual funds. If willing to take on more risk, we can consider Bopreal and sovereign bonds, targeting yields above 20% in dollars, but limited to 7% or 15% of a portfolio due to inherent risks. The rest is invested in dollar-denominated ONs and provincial bonds, like Neuquén’s bonds secured by royalties from hydrocarbon exports.”
Telephone. +54 9 351 530-7497.
E-mail. comercial@focusim.biz
The Market as a Rowboat: Navigating Financial Tensions in Argentina
The market is like a rowboat. On one side, you have the saver who generates investment. On the other, those who demand those savings. If there is a good helmsman, everything moves smoothly because it is in balance. Problems arise when the weather is bad or if the helmsman starts to go in circles. Then, everyone pulls in the same direction, and the balance is lost.
The Recent Financial Landscape
This nautical image serves as a metaphor for the rising tension between “the markets” and the Javier Milei administration and the currency stress that is resulting from it. Nicolás Alfonso, a financial specialist advising on portfolio management since 2015, shares insights into the evolving dynamics of Argentina’s financial market.
From Learning to Leading in Finance
Nicolás Alfonso’s journey into finance began at a young age. Familiarizing himself with the stock market at just 12 or 13 years old, he secured an internship at a local stockbroking firm. “Back then, everything was analogue with no screens. The task was to take papers to the negotiation wheel at the Stock Exchange,” he recalls, highlighting a time when trading was much less digitized.
Understanding Market Dynamics
Alfonso emphasizes that today’s market represents individuals—consumers making economic decisions. “Whether or not they withdraw support from a leader depends on the certainty he can provide,” he explains. This need for certainty has grown as the market has become increasingly volatile.
Shifting Market Conditions
Demand vs. Supply: A 180-Degree Change
Alfonso notes a dramatic shift in the market landscape since December, labeling the current environment as a supply market. “Last year was characterized by demand. Everyone wanted to spend pesos, while this year, demand has receded,” he states. This change poses substantial challenges for businesses as they navigate these complex dynamics.
Bridging the Gap with Financial Strategies
To survive in this shifting landscape, companies must find demand and compete effectively. Alfonso suggests that businesses can now use financial tools to foster relationships with clients. Instead of traditional 30-day payment terms, companies can negotiate longer terms to manage liquidity and cash flow efficiently.
Practical Benefits of Financial Advisement
- Enhances liquidity management.
- Fosters better relationships between companies and clients.
- Supports long-term business strategies.
Case Study: The Role of SGR
One effective strategy involves collaborating with the Sociedad de Garantía Recíproca (SGR) to provide financing options. Companies can discount checks and utilize guarantees to improve their financial standing. For instance, a developer can negotiate with suppliers for extended payment periods while working together to ensure financial feasibility.
Education and Adaptation in a Volatile Market
Alfonso believes that education is critical in adapting to the current financial climate. “We work closely with accounting and tax advisors to provide a collaborative approach,” he says. The aim is to empower small and medium enterprises (SMEs) with knowledge and strategies that enhance financial sustainability.
Tax Planning: A Key Component of Financial Strategy
Your choice of financial strategies will affect tax liabilities, especially in a high-tax environment like Argentina. “We help clients understand how to navigate tax laws to mitigate costs effectively,” Alfonso explains. Knowledge of the differences between financial instruments, such as mutual funds versus fixed-term deposits, is crucial.
Financial Management in Argentina
In the context of Argentina’s unique economic situation, companies often seek the highest yield while simultaneously negotiating tax burdens. For instance, investing in mutual funds can yield better post-tax returns compared to fixed deposits, which face immediate taxation on accrued earnings.
Key Financial Insights
| Investment Type | Tax Treatment | Yield Potential |
|---|---|---|
| Mutual Fund (FCI) | Taxed on realized gains | Higher potential yield |
| Fixed-Term Deposit | Taxed on accrued interest | Lower yield potential |
Engaging with the Local Market
In Córdoba, businesses have started embracing these innovative financial strategies. Alfonso points out the importance of “evangelizing” financial knowledge, where his firm actively collaborates with local entities like the Argentine Institute of Finance Executives (IAEF) to spread awareness.
Nicolás Alfonso: A Passion for Numbers
Beyond his work, Alfonso enjoys tennis and running, completing notable marathons around the globe. He holds a degree in accounting from UNC and consistently improves his knowledge in finance. He’s also taken on roles coordinating local financial executive institutions.
Expert Financial Advice
Alfonso’s advice is straightforward: “Don’t test the depth of the river with both feet.” He emphasizes spreading risk as a fundamental principle in short-term cash management, while cautiously investing for optimal yield. “A good portfolio might be composed of a mixture of local bonds, fixed-income assets, and high-yield foreign securities,” he adds.
Contact Information
Name: Nicolás Alfonso
Company: Focus Investment Management
Phone: +54 9 351 530-7497
Email: comercial@focusim.biz
