It’s worth taking some time to take a look at the flawed Argentina ETF and all of its holdings (some of which might be a better way to gain exposure to the country):
- P/E: 11.52 / Yield: 1.55% (Yahoo! Finance)
Argentina is having Presidential elections in October and front runner Javier Milei wants to get rid of their central bank and dollarize the economy. IF that were to happen, Argentina would become the world’s largest dollarization experiment. It might also be a game changer that can finally turn the country around by not allowing the government to more or less rob its citizens (to fund itself…) through inflation and by confiscating dollars at artificially low exchange rates.
Argentines are also said to have as much as $371 billion in dollar assets with much of it outside the local financial system and literally under the mattresses (beyond the government’s reach…). If this money were to see the light of day, it could be used to invest in and revive the country’s economy. But at this point there would still be considerable uncertainty with regard to who might become President what they will be allowed to do.
Our September 11th post already mentioned these articles:
Argentina… (Praetorian Capital)
- So, let’s look at the only 3 candidates who are likely to make it to the final election, starting with Milei who’s said on multiple occasions that he plans to “blow up” the Central Bank.
- Here’s his platform.
- Eliminate the Central Bank and Dollarize the economy, while eliminating fx restrictions
- Drastically reduce taxes and regulations
- Impose drastic cuts on retirement and pension expenses
- Privatize state-owned companies that are unprofitable
- Eliminate many of the price caps and export tariffs that hold back the economy
- Privatize the health care system
- Reduction of employer’s taxes on labor and eliminate severance payments
- Eliminate most of the government employees
Also see What Is Dollarization, and Why Is Argentina Considering It? (Bloomberg) (Archived Article).
- Bolivia has a dollar peg, Venezuela has a quasi-dollar driven economy, while Ecuador, El Salvador and Panama all officially use the dollar. Zimbabwe dollarized and then abandoned it, though economists estimate that 80% of its local economy remains in dollars.
- Argentina’s $650 billion economy, though, would be by far the largest dollarization experiment, were it to happen. The country is a major global exporter of soy, corn and beef, has one of the world’s largest reserves of electric battery metal lithium and huge shale gas and oil reserves in Vaca Muerta.
- A widely cited bit of official data suggests that Argentines have as much as $371 billion in dollar assets, much of it outside the local financial system, reflecting decades of people putting non-peso savings out of the government’s reach, weakening the domestic economy.
Argentina May Be Headed Down the Dollarization Path (AllianceBernstein)
- Milei, who led all candidates in Argentina’s recent primary election, has vowed to eliminate the country’s central bank and replace the Argentine peso with the US dollar, in a transition that could last from 12 to 24 months. In a recent interview, he said, “central banks can be divided into four categories: the bad ones, like the Federal Reserve; the very bad ones, like those in Latin America; the horribly bad ones; and the central bank of Argentina.”
- If Milei is elected and delivers on his campaign pledges, Argentina would become the fourth Latin American country to adopt the dollar as its official currency, following Panama, El Salvador and Ecuador.
As mentioned in our September 18th post, Tucker Carlson recently went to Argentina for an unfiltered view of Javier Milei and the mess that Argentina has become:
- (0:00) Intro
- (3:32) Inflation
- (6:00) Gender ideology
- (9:57) Abortion
- (11:45) Pope Francis’ affinity for dictators
- (14:45) Architecture
- (17:52) Advice to Americans and Donald Trump
- (22:23) Climate change
- (27:55) China
- (29:18) Prayer
- (30:39) Violent political protests
Our Monday post also mentioned this recent lengthy and fascinating trip report:
- People have been asking me to write a post about Argentina for a long time, so I was quite happy when Karl offered to write a post about his trip there. It’s a sad but fascinating portrait of what a country looks like when it commits itself to bad macroeconomic policy for literally decades on end.
These are surprising balanced documentaries explaining the country’s problems:
Why is Argentina’s economy such a mess? (YouTube) 13:10 Minutes (The Economist) Sept 2023
Rampant inflation, a booming black market for US dollars and crippling debt – welcome to Argentina, one of the world’s most dysfunctional economies. How did it end up like this?
- 00:00 – Argentina’s economy is in crisis
- 01:21 – What is happening now?
- 04:16 – Why is this happening?
- 05:52 – Overspending
- 07:00 – Printing money
- 08:03 – Borrowing money
- 08:51 – Trade controls
- 11:06 – What are the solutions?
Meet Javier Milei, the front-runner to be Argentina’s next president: https://econ.st/3L9zKkk
Javier Milei would be a danger for democracy in Argentina: https://econ.st/45F8Ys1
Argentina is pushing international lending to its breaking point: https://econ.st/3qKfDSN
Argentina could get its first libertarian president: https://econ.st/3L47T4K
Annual inflation of 114% is pushing Argentina to the right: https://econ.st/3sAJ1eM
Javier Milei, an Argentine libertarian, is rising in the polls: https://econ.st/3PsqASB
Listen: Argentina’s economic woes push voters to the populist right: https://econ.st/3PjV88E
A century ago, Argentina was one of the ten richest countries in the world. But crisis after crisis has earned it the dubious distinction of being the only nation ever to regress to developing country status. With hyperinflation, devaluations and IMF bailouts now facts of life, we meet the people who have lived through a major economic crisis roughly once every decade – including a taxi driver who lost everything in the 2001 crisis and now earns more money selling antiques. We also travel to some of the worst-hit places, where sermons from slum priest “Padre Toto” give people hope.
But 2018 has once again tested Argentines’ patience. Inflation has topped 40% and the peso’s value has halved compared to the US dollar. Mauricio Macri’s government has tried to stem another crisis by signing up to the biggest bailout package in the IMF’s history.
With the country’s future in limbo, the FT provides a glimpse into life in constant economic turmoil and asks: Can Argentina finally break the cycle of boom and bust?
You can also read Milei’s plan for Argentina here and decide for yourself whether it would solve the country’s problems:
An Anarchist’s Pragmatic Plan of Government for Argentina (Mises Institute)
- Milei’s full plan – which he laid out in some detail on August 2nd, is nothing if not pragmatic from an anarchist point of view.
For a filtered view of Milei and what people in Washington DC want you to think about the Argentine elections and Latin America in general, check out this Substack and specifically his “Friday Reading List” collection post (Note: Boz will only link to “approved” sources and narratives…….):
Given Milei’s unorthodox plans which might actually do something to help fix Argentina, its hard to see him being allowed to win – let alone allowed to implement anything.
Remember: There is no risk and instant profits for the big banks and/or the IMF to lend Argentina money that was quantitatively eased (out of thin air…), printed (out of thin air…), or borrowed at (previously…) low interest rates. None of them will want to see the gravy train of loan fees come to an end…
Likewise, the Argentine elite, big local corporations (especially state-owned ones), and many Argentines themselves (especially those who work for or live off the government…) probably have no interest in someone coming along and changing a system that either works in their favor or they know how to work...
I should mention that in the early 1930s, my great grandmother with my grandfather’s younger sisters left Istria (then part of fascist Italy where Slavs were discriminated against under Mussolini’s forced Italianization policies…) for New York City to join my great grandfather (his youngest brother had been on the West Coast since just before WWI) while her youngest brother or more likely a nephew (it’s not clear how he was related BUT he was close to the family) went to Argentina (as it was very difficult to immigrate to the USA after WWI if you did not have close family already there…).
This was around the time of the first military coup when the long decline (or collapse…) more or less began. In other words, he arrived in Argentina when it was still a rich country and the USA was in the Great Depression. But by the time he died in the early 1990s, his adopted country had already regressed backwards into a bankrupted developing country…
Through a genealogy site and Facebook, I managed to track down his English speaking granddaughter in Argentina as we lost contact with them after her grandfather died (he and my grandfather’s sister had exchanged Christmas cards and letters until he died, but they were writing in Italian – which the rest of us don’t know…).
When I mentioned about looking into getting Croatian citizen by descent, she commented that she already had Spanish citizenship – I guess from a different side of her family plus she seemed to be surprisingly well travelled (e.g. regularly visiting Spain…).
Obviously, it’s difficult to ask about life in Argentina and the politics there when you are not face-to-face. But I can only guess that IF someone has Spanish citizenship, they probably have a Spanish bank account or at-least Euros out of reach from the government of Argentina (who again – basically robs its citizens via multiple exchange rates…).
With all of that said about Argentina, here is a look at the more recent performance of the Argentina ETF covering the COVID period (the charts are linked back to Yahoo! Finance):
And the long term performance chart:
That’s not a bad performance for an ETF for a country suffering perpetual economic and political crises. It should also be remembered that stock markets in Turkey and apparently Zimbabwe (as of late…) have seen inflows of money from locals trying to stay ahead of hyperinflation and currency devaluations.
However, a look under the hood of the Argentina ETF’s holdings reveals this big red flag:
In other words, buying four shares of the Argentina ETF is more or less the equivalent to buying one share of Latin America’s version of Amazon (which is now headquartered in Uruguay and incorporated in the United States). The ETF’s other holdings also includes similar stocks that would only be deriving a portion of their revenues directly from Argentina.
Of course, this would be a function of the need for an ETF to hold stocks that have liquidity – do note that many of the Argentina ETF’s holdings have listings on the NYSE (also see our Argentina ADRs list which includes other Argentina resources).
While the Argentina ETF might see some speculative inflows on Milei election hype, any investor looking for real exposure to Argentina (for better or for worse…) will need to look more closely at the ETFs individual holdings.
To make your life easier, this post includes:
- A quick description of the stock holding with links to the IR page and stock quote(s) on Yahoo! Finance or Finviz (for US Listings).
- A link to any Wikipedia page (for what it might be worth…)
- Forward or trailing P/E and dividend yields linked back to the Yahoo! Finance statistics page.
- The latest long term technical chart linked back to Yahoo! Finance.
And as always, this post is provided for informational purposes only (and to make your life easier by providing you with relevant information, links, and charts). It does not constitute investment advice and/or a recommendation…
Adecoagro Sa (NYSE: AGRO) is an agro industrial company that produces and manufactures food and renewable energy. The company mainly operates through three segments: Farming; Sugar, Ethanol and Energy; and Land Transformation.
- Forward P/E: 8.73 / Forward Annual Dividend Yield: 2.82% (Yahoo! Finance)
Arcos Dorados Holdings Inc
Arcos Dorados Holdings Inc (NYSE: ARCO) is the world’s largest independent McDonald’s franchisee, operating the largest quick service restaurant chain in Latin America and the Caribbean. It has the exclusive right to own, operate and grant franchises of McDonald’s restaurants in 20 Latin American and Caribbean countries and territories with more than 2,300 restaurants, operated by the Company or by its sub-franchisees, that together employ over 90 thousand people (as of 12/31/2022).
Banco Macro Sa
Banco Macro Sa (NYSE: BMA) is a universal bank, that provides a wide range of financial services with focus in low & mid- income individuals and small & mid-sized companies. Banco Macro started operating in 1985 as a nonbanking financial institution and today it has grown to be a private national bank with one of the largest branch network in the country. Banco Macro was founded by members of the Brito and Carballo families who are now the major shareholders.
- Trailing P/E: 26.09 (no forward P/E) / Forward Annual Dividend Yield: 10.98% (Yahoo! Finance)
- Argentina: Where Growth & Stock Market Returns Diverge (Mobius Blog)
- Peso Plunge: Collapse of Currency Dredges Up Old Frustrations, Threatens Argentina’s President (Washington Times)
- Brazil’s Argentina Moment (Project Syndicate)
- Trying to Make Sense of Argentina’s Debt Mess (BA Herald)
- Four Scenarios for Argentina’s Inflation Crisis (America’s Quarterly)
- South American Economies Dive South as Growth Outlook Dims (Bloomberg)
- Argentina Vows Not To Go Full Weimar, Will Stop Printing Money Amid 60% Inflation (Zero Hedge)
- Argentina: In the Midst of the Storm (Pictet)
- What it Looks Like When a Country Doesn’t Trust its Banks (VOX)
- Argentine Central Bank’s Sudden Dollar Shortage Sparks Fears Of Mass Corporate Credit Crisis (Zero Hedge)
- Latin America Slow Descent into Interventionism (Daniel Lacalle)
- Cash-Strapped Argentina Goes All or Nothing on New Economy Chief (Bloomberg via Yahoo!)
- South American Rumbles: Argentina and Brazil Developments (Pictet)
- The Trouble with Argentina’s Economy (Project Syndicate)
- Nomura’s Morden: Argentina Faces Risks From the Duration of Brazil Contagion (Barron’s)