International investors are becoming more skeptical on Argentine opportunities after a year where the country underwent a dramatic shift in economic policy to become the market darling of EM asset managers the world over.
“The key now is that investors want a good story,” said Edgardo Sternberg, vice president at Loomis Sayles and Company at LatinFinance’s Cumbre Financiera Argentina in Buenos Aires on Wednesday. “Before we used to buy anything that had Argentina in the name, these days it is much more difficult for a company without a track record.”
The optimism when President Mauricio Macri took office in December 2015 and Argentina’s shift toward market-friendly policies has now led to a correction.
“The market was very overweight in Argentine debt, which explains the underperformance that we’re living through right now,” said Juan Manuel Pazos head strategist of local brokerage Puente.
Some, however, caution against reading too much into the current waning interest, pointing out it is only natural to see these kinds of flows after a period when investors were afraid of missing out on a new opportunity.
Speaking at the same event, Katia Bouazza, head of LatAm global banking at HSBC, said appetite was very much present for Argentina.
“There seems to be a bit of a shift, or a pause to see the direction, but it does not mean the investor community has moved on and it does not mean the investor community is not interested to invest in Argentina,” added Bouazza.
Government officials cautioned that those who watch and wait from the sidelines to figure out the best time to invest may end up regretting their decision.
“Those who are really speculating and waiting for risk to decrease will quickly find out they have missed the train,” warned José Luis Morea, undersecretary of public private partnerships at the Ministry of Finance.
Plenty of buyside opportunities exist still, particularly in Argentina’s energy sector.
“There are enormous opportunities in Argentina due to the failure of the previous energy policy,” Energy Planning Secretary Daniel Redondo said, pointing out recent renewable energy tenders.
Abroad, investors are mostly concerned about inflation and a fiscal austerity program that is not moving as quickly as some would like, explained Claudio Loser, a former IMF official now the director of the Centennial Group. But it is important not to lose track of the big picture.
“It has been a long time since I’ve seen an economic team in Argentina of the quality, of the pragmatism that this government has,” Loser said.
Even if there are some underlying macroeconomic problems that appear to persist, it can still be considered a bright spot.
“When looking at the whole region, it is the only country that has a positive outlook,” said Cecilia Minguillon, a senior director at FIX SCR-Fitch Ratings.
That characteristic extends beyond the economy.
“Argentina now has the most stable political system in the region,” HSBC’s Bouazza said, noting that “a lot has been done in a short period of time.”
For now, investors await concrete numbers to justify the optimism.
“It is time. All the expectations that were created over the last two years now have to be materialized,” said Puente’s Pazos. “The key now is results.”