Don’t Cry for me Argentina was a famous pop song released in 1976 has been covered by various artists and has become an iconic and enduring piece of music. This year in the global stock market Argentina was a song of joy and profits for investors.
According to Bloomberg data, Argentina’s S&P Merval index TR ARS index is the best performing stock market in the world year-to-date with +307% return. ARGT US equity is the USA listed Argentina country ETF, tracking the MSCI Argentina Index. In the global currency market however the ARS Argentina Peso is the 2nd worst performing currency in the world against the U.S. Dollar.
Argentina to most investors stands for great wine and great steaks, world class football team and Tango in Buenos Aires but not necessarily as part of a global and well diversified investment or retirement portfolio.
According to the World Bank, the Gross Domestic Product (GDP) of Argentina was worth 632.77 billion US dollars in 2022. This represents 0.28% of the world economy. Recently Argentina and south America have garnered more interest from global investors due to its commodities and lithium supply, crucial for the modern world economy.
Argentina is thought to be on track to be Latin America’s leading lithium producer by 2030.
Lithium, sometimes referred to as “white gold” is a key story for investors looking at exposure in and to Argentina. Lithium is regarded as a critical component of the energy transition. The lightest metal in the world, lithium is commonly used in electric vehicles, cell phones and rechargeable batteries for laptops.
Argentina’s lithium production hinges on the upcoming presidential election on October 22nd and how the outcome affects the country’s macroeconomic outlook, as well as the likelihood of interventionist policies.
Argentina politician Libertarian Javier Milei is considered a radical outsider promising to cure Argentina’s economic ills. The 2023 Argentine general election could be market moving for the country ETF, ARGT.
General elections are scheduled to be held in Argentina on 22 October 2023, to elect the president, vice president, members of the national congress and the governors of most provinces.
Despite often dysfunctional local political and financial debt sustainability concerns, Argentina country ETF has outperformed the USA country ETF SPY S&P500index ETF by +13.21% over the last 5 years. Year-to-date Argentina ETF has outperformed the SPY by 10%.
Since its inception in 2011, the Global X MSCI Argentina ETF has appreciated by 22.6% on a YTD basis and has compounded at an annualized +3.4% rate in market price and NAV terms. The potential for a more market-friendly government and successful reforms could significantly improve the operating backdrop for Argentine corporates.
Argentina was one of the world's wealthiest countries in the late 19th and early 20th centuries. Its prosperity during this period was primarily driven by its booming agricultural sector, which was known as the "Golden Age of Argentina." This era of economic affluence is often associated with the late 19th century up until the early 20th century.
Argentina's status as one of the world's richest countries gradually declined over the course of the 20th century due to various factors, including political instability, economic mismanagement, inflation, and a series of financial crises. The country struggled with periods of hyperinflation, currency devaluation, and high levels of external debt, which hampered its economic growth and development.
The investment case for Argentina has both potential opportunities and significant challenges. Argentina is a country with abundant natural resources, a well-educated workforce, and a diversified economy. However, it also faces economic instability, political uncertainties, and a history of defaulting on its debt
Argentina is rich in natural resources, including agricultural products like soybeans, wheat, and beef, as well as minerals and energy resources like shale gas and lithium. These resources can present investment opportunities in agriculture, mining, and energy sectors.
Argentina's diverse landscapes, including Patagonia, the Andes Mountains, and the vibrant city of Buenos Aires, make it a popular tourist destination. Tourism-related investments can be profitable.
With a population of over 45 million people, Argentina represents a sizable consumer market with potential for various industries, including retail, food, and beverages.
Before considering an investment in Argentina, it's essential to conduct thorough due diligence, assess the specific risks associated with your industry or sector of interest, and consult with local experts or legal advisors who can provide insights into the current business and political landscape. Diversification and risk management strategies are also crucial when investing in a country with a history of economic instability and political uncertainty.
By Rainer Michael Preiss, Partner & Portfolio Strategist at Das Family Office in Singapore.
