In the United States – a country I have lived in for many years, where the names of the winner and loser in a Presidential election are known within a few hours after the close of the polling locations – the institutional stalemate and complexity of the Italian political scene are difficult to interpret and explain.
by Fabrizio Arengi Bentivoglio, Chairman and CEO Fidia Holding On the other hand, the economic implications are obvious to everyone, above all to institutional investors who see not only the opportunities within the Italian confusion but also the risks posed by the political-economic context.
When commenting on the situation in our Country, the most frequent body language used is that of the unsurprised smile, pretty much a given, together with undisguised incomprehension. Certainly, as it has been the case on many occasions, uncertainty does not help a Country with a fragile economy such as Italy’s, where there is an almost structural weakness in attracting foreign investments. The big international funds who focus on the long-term demand clear rules of the game, reliable standards and a stable legislative horizon. These are all ingredients that Italy, as we have learned in fairly recent history, has not been able to bring to the table, progressively losing ground and opportunities for growth and development.
Some recent episodes that, for example, relate to the national banking system are so typically Italian that they discourage foreign observers. The nationalization of Monte dei Paschi di Siena bank (MPS) by the Treasury could have had another outcome should the Italian Constitutional Referendum results of December 2016 have been different. It is possible that international financial players would have invested in MPS, as hoped, thus giving the bank a way out through the market instead of with Government intervention.
But that’s not all: the mess with the partial rescue of the Venetian banks by Intesa is yet another example of an operation that international investors view with mistrust.
Yet Italy is a country that is full of resources and rich in culture, with a very high level of skills and professionalism. Simply put, Italy still represents an opportunity. The Country cannot be reduced down to the 3Fs: Food, Fashion and Furniture with the addition of Ferrari. It is neither Greece nor Portugal and not even Spain. From an economic point of view, Italy is much more than this. Italy has always been a country able to develop highly-successful technologies and often unique specialties, manufactured locally and exported globally. International investors care deeply about buying these capabilities, albeit selectively and according to terms and conditions that might be challenging at times.
As in the case of Parmalat, where the company was sold to the French-owned Lactalis group, Pirelli also came under the control of the Chinese (ChemChina), albeit temporarily; Ansaldo Sts was sold by Finmeccanica to the Japanese (Hitachi); and the same fate even befell some of the great names in luxury goods such as Bulgari or Loro Piana, both of which became part of the French giant LVMH, not forgetting Maison Valentino, which was bought by the sovereign investment fund backed by the Qatari Royal Family.
Looking beyond these industries, the real-estate market, which has been going through a structural crisis for at least a decade, represents an opportunity to acquire high-quality assets at discounted prices. Such was the case a few years ago with Blackstone, with their acquisition of the historic Milan headquarters of Corriere della Sera; or, once again, the sovereign investment fund backed by the Qatari Royal Family, which acquired the Porta Nuova real-estate development from Hines.
Finally, despite the fact that the Italian banking system, with few exceptions, is going through a difficult period and the banks are being crushed by their modest size and by the oppressive Basel regulations, recently a New York hedge fund – Steadfast Capital Management – has become the main shareholder of Credito Valtellinese.
Keeping all that in mind, it is certainly time that Italians stop complaining and feeling sorry for themselves and cease being the strongest critics of their own Country, a country rich of resources and opportunities that others know how to capture, and Italians often do not, as they would not deserve them.