Recently, investor attention has been drawn to a less-familiar South American country — Argentina. With a seemingly certain default looming, concern is that the contagion will spread to other bond and equity markets. Just how grim is the situation though? Most media outlets have painted a very bleak picture for Argentina's future, but in reality, things may turn out better than expected.

Some opinions concerning Argentina have not changed drastically since the last default in 2001. Many think that the same delinquent government responsible for hyperinflation and a public debt of 166% to GDP at the turn of the century is losing face again. Now deemed a repeat offender, the term "deadbeat" is even being thrown around in media coverage of Argentina. In truth, the situation today holds very few similarities to the one over a decade ago.

Argentina has already technically defaulted, since it was unable to pay interest on exchange bonds agreed upon after restructuring most of its defaulted debt in 2005 and 2010. This is because of a recent ruling by a U.S. District Judge in favor of holdout investors, which barred payment of interest on exchange bonds until the remaining defaulted debt was paid. Argentina chose to default again, even though it was willing to pay the interest due on the exchange bonds.

Politics are not the only difference between today and the default 13 years ago, Argentina's economy is markedly healthier and more stable. Debt as a percentage of GDP has fallen from 166% in 2002 to 46% in 2013, a number that the U.S. and many European countries should be envious of. Unemployment has declined from over 20% in 2002 to 7% in 2013, and GDP growth has increased sixfold over the same period. The only cautionary data point is that inflation crept back into double digits during the first quarter of 2014.

Argentine stocks have certainly benefited from the mild inflationary pressures though, with the Buenos Aires Merval Index soaring over 300% in the past two years. Even the majority of Argentine ADR stocks trading on U.S. exchanges have enjoyed triple-digit gains over the same period. So if Argentina's economy is steadily improving rather than deteriorating, why is everyone so worried?

While more steps do need to be taken on Argentina's path toward sustainable growth, the simple truth is that most people are still poorly informed or overly pessimistic concerning the situation. The notion that Judge Griesa's ruling will set a precedent for other debtor nations and their ability to negotiate with creditors relies on the assumption that investors are not already lining up to buy the debt and new clauses cannot be written into future deals. And as far as Argentina is concerned, if they can recover so miraculously from one of the worst defaults in history in a little over a decade, this small setback will surely not be the last straw.

This story is likely not coming to a conclusion anytime soon, though, so near-term pressure on Argentine stocks is likely to continue. When it is all over though, I expect this only to be a minor corrective consolidation in this overall bull market off the 2009 low. The weekly chart of the Merval Index linked below outlines my expectations. How can we as U.S. investors benefit from the current pessimism though?

Unless you have trading access to the Buenos Aires Stock Exchange, Argentine ADR stocks are probably the best bet. There are a number of attractive-looking charts out there that could prove to be fruitful investment opportunities if they pull back during these default issues. Banks like Banco Macro S.A. BMA, -0.39% , BBVA Banco Frances S.A. US:BFR and Grupo Financiero Galicia S.A. GGAL, -0.25% all have terrific long-term potential if they can correct some from here into early 2015. A detailed chart of BMA in particular has been linked at the bottom of the article illustrating the potential setup.

Argentine banks are not the only charts that offer attractive potential though; companies like Petrobras Argentina US:PZE, YPF S.A. YPF, -1.97% , Empresa Distribuidora y Comercializadora Norte S.A. EDN, +2.91% and more could also be big winners in the not-so-distant future. In addition to great technical setups on the charts (all of which are linked below), these stocks are also undervalued, have relatively low amounts of debt to equity, and considerable growth potential.

There is enough evidence in my opinion that this default issue in Argentina will just be another short-term blip in the impressive growth story that is Latin America. I believe that market participants should be approaching these situations looking for opportunities to invest rather than getting scared away. As I have outlined in previous articles, emerging markets are poised for tremendous potential going forward, and Argentina is no exception.

See charts illustrating the wave counts on the symbols discussed in this article.

