Ask the Manager: How Milei’s Reforms Are Unlocking Investment Opportunities in Argentina

In this new series, "Ask the Manager", on ETF Central, we’re chatting with experts and portfolio managers to dive into trending investment topics, market updates, and the economy—giving you insights to make smarter investment decisions and find new opportunities with ETFs.

Kicking things off, we spoke with Malcolm Dorson, Senior Portfolio Manager and Head of Emerging Markets Strategy at Global X ETFs. He shared his insights on Argentina’s economic transformation under President Milei’s reforms and how it is shaping the country into a compelling investment destination.

Argentina has been a shining star in emerging markets for the last year, boosted by Milei’s presidency. How was Milei reshaped Argentina’s economy to make the country a more attractive investment? 

If investing is based on predictability and confidence, then Argentina’s thesis is amid a process of swinging from one extreme to another. Argentina’s previous political administrations proved themselves economically irresponsible via policies that lead to hyperinflation and numerous defaults on the country’s sovereign debt.

President Milei has not only walked the walk in terms of economic orthodoxy, but he is now making good on his promises by improving Argentina’s trade balances, delivering a fiscal surplus, enacting policies that are bringing down inflation, and reinvigorating the country’s economic activity.

Though a significant change from what we’ve grown accustomed to in Argentina, this is an orthodox economic playbook and it’s checking a lot of boxes for the international investment community.

Global X’s Argentina ETF (ARGT) has been one of the firm’s best-performing emerging market funds in recent months. What’s driving inflows and how does ARGT’s success reflect broader investor sentiment towards Argentina? 

Global X has a strong brand across Emerging Market products and content, and we've been excited about the Argentina story since Milei began running for office. From retail investors to endowments, flows are coming from across the board.

Momentum is strong, and valuations remain attractive. Given ARGT is the first and only Argentina ETF on the market, its success serves as both a good barometer for investor sentiment on the country and a testament to Global X's innovative approach. 

What investments make up your ARGT fund? How is it structured? 

ARGT seeks to track the performance of the MSCI All Argentina 25/50 Index. This is designed to represent the performance of the broad Argentina equity universe, while including a minimum number of constituents. With 25 names in the strategy, ARGT offers more diversification than some other benchmark products. 

How does Global X approach research as you build out niche funds like ARGT? 

Global X boasts a broad menu of both passive and active funds across Emerging Markets. These range from broad EM, to thematic, to regional, to country specific, to those based on income. Having an active investment team with personal, academic, and professional experience is a key differentiator for us, as it allows us to speak about opportunities from both the top down and the bottom up. 

What internal and external factors are you monitoring that could catalyze further tailwinds for Argentina? 

We’re watching a few key catalysts including: 

• A new deal with the International Monetary Fund (IMF) 
• Currency liberalization
• A continued pick-up in foreign direct investment
• Milei's popularity levels as we approach next year's midterm elections

Given the challenges Argentina has faced in the past, do you believe the current economic trajectory is sustainable? 

Everything we’ve seen to date from Milei’s government have been measures to address the challenging economic policies of the past. When we speak about weakening a currency, shrinking a government, and cutting costs – these can be broadly unpopular measures to implement. In essence Milei has been giving Argentina the hard medicine it needs to recover economically. Now that the band aide has been ripped off, we’re beginning to see inflation come down and economic activity pick up. It’s still a very long road ahead for Argentina, but the fact that the numbers show the country has turned a corner is impressive. 

What could go wrong? Where is the downside in an investment in Argentina? 

Milei presents key-man risk in Argentina. He is fighting against the tide and doing so from a weak position in the lower house. It’s vital that he keeps his popularity levels high enough to build more support and momentum in midterm elections next year or risk becoming a lame duck president. That said, trading below book value, Argentine valuations leave a margin of comfort. Additionally, Milei’s work-to-date is showing that his policies work (economists are expecting positive 4% GDP growth next year vs. negative 3.8% this year), and it’s helping his momentum. 

Argentina has been the best performing market in the world this year. Have we missed the trade? 

Given Argentina is not in any EM or Frontier benchmark, given it trades below book value, given this is still Milei’s first year as president, and given there are still less than $1 billion in ETF assets (look at Brazil with over $5 billion), we could still be in very early innings.

While inflation is down, are local investors still pouring savings into the stock market as a hedge against it?

Local investors are beginning to play equities with more of a focus for returns than for just a hedge. This is important. Lower inflation implies lower interest rates and lower risk premiums – all of which could boost equities in Argentina.

Are austerity measures hurting Milei’s popularity, especially with increasing poverty rates in the country?

Amazingly, Milei’s popularity and the country’s confidence in the government remains strong. At the end of the day, approval ratings are all about meeting and beating expectations. Milei campaigned around fiscal discipline and was transparent about his economic plans and how they could bring short term hardships. Still, he won by a double-digit percentage margin. Now, he has delivered on his promises, and it seems we’ve turned the corner from swallowing the tough medicine to actually recovering.

To learn more about Why Argentina? And Why ARGT?, visit Global X's new research report