Idea Brunch #2 with Ian Bezek (Venezuela Edition)
Welcome to Sunday’s Idea Brunch, your interview series with great off-the-beaten-path investors. We are very excited to interview Ian Bezek!
Ian is currently a private investor living in Colombia, focused on Latin American equities. Ian previously worked as an analyst at Kerrisdale Capital and now writes Ian’s Insider Corner, a newsletter focused on Latin American stocks. Ian is active @irbezek on X and was previously featured on Idea Brunch in November 2023.
Editor’s Note: We very much enjoyed publishing this interview with Ian Bezek. If you know of any great investors who live in dynamic emerging markets, please nominate them for Idea Brunch by emailing edwin@585research.com
Ian, thanks for doing Sunday’s Idea Brunch again! Can you share with readers a little more about your background and why you decided to relocate to Colombia?
I got an economics degree and then worked at a NYC-based hedge fund out of college. While in New York, I realized I didn’t want to be in the hedge fund analyst lifestyle for many years before being able to afford a house, have time for a family, and pursue other life goals. In 2014, I took a year to go traveling in South America and learn Spanish. While in Colombia, I met my future wife. We lived in Argentina, Guatemala, and Mexico for a few years but ultimately decided to relocate back to where her family lives after we got married. I’ve been in Colombia full-time now since 2018 and have been publishing Ian’s Insider Corner since 2016 along with managing my family’s money.
What was the reaction in Colombia to Maduro’s recent removal? Do you think we could see further leadership changes in Cuba, Colombia, or Nicaragua in the near future?
Overwhelmingly positive. Polling firm Altica found that 77% of Colombians approved of the action, with only 10% against. Similarly favorable readings were found in other countries around the region including Panama, Chile, and Peru. Also, of note, an Economist poll out this past week also found that a majority of Venezuelans approved of Maduro’s removal, with only 13% being opposed to it.
An estimated 20-25% of Venezuela’s population are currently living as refugees in foreign countries; Colombia has absorbed the greatest quantity of these economic refugees, but there are considerable numbers in many places across the region. This has led to rising unemployment for working-class laborers, along with a flood of folks engaged in begging, doing things such as cleaning windshields at traffic lights to earn a meager living, or turning to illicit activities to survive. In theory, as Venezuela’s economy recovers, these refugees can return home and establish normal lives again, rather than living in tent camps or shanties in Colombia and other LatAm nations. This, in turn, will relieve strain on social safety nets in countries like Colombia while reestablishing Venezuela, traditionally a meaningful trade partner for various Latam countries, as a significant contributor to our regional economy.
Venezuela’s dictatorship was running so poorly that even left-wing presidents around the region, including Chile’s Gabriel Boric and Mexico’s Claudia Sheinbaum refused to acknowledge Maduro as the legitimate leader of Venezuela after the rigged 2024 Venezuelan presidential election. Boric, in particular, condemned Maduro for sponsoring terrorism and political violence across Latin America. When even the region’s other socialist presidents were sick of Maduro, it’s not surprising that the general LatAm public is very happy with the end of Maduro’s reign.
I don’t believe, however, that this would apply if the U.S. meddles in democratically elected left-wing governments such as Mexico, Colombia, or Brazil. There’s a huge perception difference between taking out a dictator and removing the president of a functioning democracy. My take is that the Venezuela action was strongly bullish for Latin America, but if the intervention streak continues into democratic countries, it would likely generate significant backlash in the region and become bearish for local currencies, bonds, and equities.
As for Cuba, that is the one other country where there’s a decent chance of intervention occurring and the region being okay with it. Cuba is extremely isolated as so many left-wing governments around LatAm have fallen and now they’ve lost their closest Western Hemisphere ally in Venezuela. I don’t think Nicaragua has as much strategic importance to the U.S., so I’d be somewhat surprised if something happened there, but it’s not out of the realm of possibility.
You wrote an excellent article, “Maduro Toppled; An Investor’s Guide To Venezuela & LatAm”. Can you summarize your thoughts from the article and where investors should be looking for upside given the limited ways to buy Cuban or Venezuelan equities directly?
My broad takeaways were that this action would be well-received within Latin America (and that’s since been confirmed by polling). In turn, this would be mostly bullish for other Latin American stocks, with the possible exception of the oil sector, where Venezuelan crude is a potential significant competitor to output from firms such as Colombia’s Ecopetrol (NYSE: EC — $25.5 billion). But in general, getting a market of more than 30 million people back to normal economic functioning should have positive knock-on effects in terms of greater regional trade and opportunities, along with a reduction in the negative economic and social externalities from the Venezuelan refugee crisis.
There’s not much available in terms of U.S.-listed tickers that directly have exposure to Venezuela (or Cuba). Generally, the most direct plays are things such as natural resource companies that have legal claims against the prior Venezuelan government which expropriated their assets. Special situations aren’t my expertise, though, so I’ll leave those sorts of legal arbitration-based plays for other folks.
Within the S&P 500, Colgate (NYSE: CL — $68.1 billion) was the hardest-hit U.S. firm when the Venezuelan economy disintegrated in the mid-2010s; that wiped out about 7% of the company’s revenues. Presumably it should enjoy solid sales growth there as that market reopens as Colgate has near monopoly market share for toothpaste in many South American countries. Coca-Cola FEMSA (NYSE: KOF — $20.8 billion), the world’s largest independent Coca-Cola (NYSE: KO) bottler, is another beneficiary. It serves about 276 million customers today; the return of the Venezuelan market, with more than 30 million people, potentially represents a double-digit growth opportunity as compared to the existing customer base. And I’m bullish on KOF in general, even leaving Venezuela aside, as it benefits from improving economic conditions in other countries it serves such as Colombia and Mexico.
I also see tourism and travel benefitting significantly. Caracas used to be one of the ten busiest airports in Latin America; it has now fallen outside of the top 30 in recent years. I believe there’s a bunch of pent-up demand when Venezuelans living abroad can finally visit friends and family once again. And tourism has been pretty much shut down; I’d expect a flood of Americans to visit Venezuela once it’s safe. The airport operators stand to benefit from this as a sizable travel market comes back online. Additionally, Copa Airlines (NYSE: CPA — $5.42 billion) probably has the most upside out of the airline sector, as its Panama hub is ideally situated for pushing a ton more capacity at the Venezuelan routes.
In the event that Cuba has a governmental change, that’d likely be an even bigger boost for tourism. It’s much closer to the U.S. and Canada than Venezuela, meaning easier access. And I’d expect a massive cruise ship market for Cuban voyages to develop in the years after sanctions are lifted and that economy reopens.
You have been particularly bullish on Colombian equities in anticipation of the May 2026 Presidential elections. What is the case for investing in Colombia, and how important are the upcoming elections? Do you have any worries President Trump could disrupt the country?
I think direct intervention in the country would be highly risky. It might be popular within Colombia (current socialist president Petro has an approval rating around 30%) so I could see a case where the majority of Colombians are happy if he’s removed from the picture. But, Petro was chosen in a fair election with a competitive result (50% to 47% in 2022). And since then, the Colombian Congress, Supreme Court, and Central Bank have all remained independent and quite opposed to Petro’s agenda. The country’s institutions have held and prevented any sort of democratic backsliding or any real collectivist economic push. Now, the next Colombian election is just months away and there’s every reason to think the election will be free and fair, and that the right-wing will win.
Furthermore, Colombia has been the United States’ closest and most dependable ally in the region since Colombia put its modern constitution into place in 1991. I believe the U.S. will wait for the elections to play out, as scheduled, and assuming the right-wing wins as expected, the U.S. will resume a deep economic partnership with Colombia. As we’ve seen in Argentina over the past few months, the U.S. is now willing to provide direct support to its economic allies in the Western Hemisphere.
A new right-wing government with close economic partnership with the U.S. should excite a lot of investors who’ve just witnessed big runs in Argentina and Chile over the past few years as those countries swung back to the right-wing. Colombian stocks (the banks are easiest to buy) remain cheap compared to historical valuations. I see banking conglomerate Grupo Aval (NYSE: AVAL — $5.01 billion), for example being able to grow its ROE from 11% now to 17% in an economic expansion. Combined with faster loan growth, and there’s a path to at least 75 cents of annual EPS over the next few years on a stock currently trading in the low $4s.
In your November 2023 Idea Brunch interview, you were particularly bullish on the Latin American airport industry (NYSE: PAC — $11.4 billion), (NASDAQ: OMAB — $4.64 billion), (NYSE: ASR — $8.95 billion), and (NYSE: CAAP — $4.24 billion). These stocks have since risen between 50% and 150%. What went right with these companies and is there still upside here?
Corporacion America Airports (NYSE: CAAP — $4.24 bilion) is the Argentine-based operator and the simple answer there is that Milei won in Argentina. He deregulated the local airline industry leading to a significant rise in competitiveness and flight availability for that market. Throw in a tourism boom and renewed interest in foreign direct investment in Argentina and it’s a good time to be collecting tolls on that country’s airports. Some of CAAP’s other capital investments, such as modernizing its airports in Italy and expanding commercial operations at Brazil’s capital city airport also appear likely to deliver high IRRs. The stock was dirt cheap and still is quite cheap (sub-8x EBITDA today). With it printing high single digits traffic growth and double-digit EBITDA growth, not hard for the share price to keep steadily climbing.
As for the three Mexican airport operators, there was a scare in late 2023 when the government talked of renegotiating concession terms. This ended up being largely a walk-back of extra profit margin the airports had been earning since the pandemic and didn’t ultimately change the investment case. Traffic has continued to grow nicely for the airport operators, particularly those with a focus on industrial and logistics-related traffic such as PAC’s Tijuana and Guadalajara airports and OMAB’s Monterrey.
Risks would be that tourism growth has significantly slowed down, I think Cancun in particular is a mature market that is unlikely to grow all that much more. And weaker consumer spending is a risk more broadly. There’s also a proposed merger between two of Mexico’s three major airlines which could curtail domestic traffic growth over the next few years.
Longer-term, however, I remain quite bullish on these three operators. Mexico and the U.S. economy continue to integrate ever more closely (Mexico is now the #1 trade partner with the US for both imports and exports, having fully dislodged China from those spots over the past few years). And with an estimated 40 million Mexican-Americans in the U.S., there’s a large and growing amount of spending power held by people that want to fly back and forth to Mexico frequently, to say nothing of the booming population of U.S. and Canadian retirees that own vacation homes in Mexico.
I also want to highlight ASR in particular for its shrewd dealmaking; it continues buying airport concessions outside of Mexico. Its most recent deal, where it picked up 20 airports from a Brazilian operator at just 10.5x EBITDA, was a master stroke. That gets them San Jose (Costa Rica), Belo Horizonte (5th-busiest airport in Brazil), Quito (Ecuador), and Curacao, among others. I’m quite upbeat on Costa Rica’s long-term tourism potential, and the Curacao airport is also interesting in light of Venezuela reopening for business, as Curacao is a less than one-hour flight to Venezuela.