After 23 years trading stock options at Goldman Sachs Group Inc., Merrill Lynch & Co. and his own hedge fund, Russell Abrams is piling into his most exotic gamble yet: as a Buenos Aires taxi impresario.
Abrams, 48, plans to invest as much as $100 million of his own money to build a fleet of Buenos Aires cabs, undaunted by the prospects for Argentina’s second default in 13 years, the fallout from the peso’s devaluation in January, inflation of about 40 percent and the economy’s first quarterly contraction since 2012.
For Abrams, the financial morass in South America’s second- biggest economy is an opportunity to buy medallions on the cheap from drivers in need of cash, a gambit he predicts will pay off should economic policies change when President Cristina Fernandez de Kirchner steps down next year after two terms in office. Barclays Plc and JPMorgan Chase & Co. are among banks that say Argentina is on track to repair its economy and regain access to overseas credit markets after the 2015 presidential elections.
“This is a fascinating business,” Abrams, who first visited Buenos Aires at 21 and whose wife, Sandra, is Argentine, said from his office in the capital. “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.”
Prices for the licenses, known as medallions, have more than doubled in dollar terms over the past six years to $24,159, and he predicts they’ll more than triple in the next five years to the levels of those in Santiago and the Uruguayan capital of Montevideo.
A Buenos Aires taxi investment can bring annual returns of 25 percent to 48 percent, with the highest gains for drivers who own their medallions and cars, according to Mariano Otalora, the director of the Buenos Aires-based Argentine School of Personal Finance.
“Taxis in Buenos Aires can be an interesting option for a foreign investor with significant capital who understands the risks,” he said.
Abrams has bought 30 taxi licenses since 2008 and says that’s just the beginning. He plans to buy 1,000 more cabs, for a fleet five times bigger than the closest competitor, irrespective of rules that limit their size to 200.
“There aren’t even that many licenses for sale,” Horacio Perez, president of the Argentine Taxi Business Chamber in Buenos Aires, said in a telephone interview. “It sounds excessive. He’d have to set up five different companies and break the market.”