Argentina is Back on Investors' Radars
Smart investors ought to be paying attention to Argentina, something big is afoot and you don't want to miss out. Plan to strike in 2025 and 2026, 2024 will be bumpy.
Shortly after Milei’s victory, the majority state-owned oil company, YPF, soared more than 40% and the broader market shot up 20%. The excitement in the air is palpable and hope springs among the average Argentinean that the new path will be better than the old. They wish that Argentina’s former greatness will be rekindled.
Milei’s mandate is strong, having received more votes than any Presidential candidate in the country’s history, and winning by the largest margin since 1983. He’ll need to gain consensus as his party, the Freedom Advances, holds just 39 of 257 seats in the lower house and 8 of 72 in the Senate. It doesn’t have a single governor in Argentina’s 23 provinces.
📢 If you haven’t already read them, our recent three-part series on the investment case in Argentina is required reading. We discussed what went wrong in Argentina (Part 1), why the country has immense potential (Part 2), and how it’s poised to take the crown from Brazil as the new king of South America (Part 3).
Western Media Despises Milei
For some odd reason, the Western media is squarely and vociferously adverse to Milei and has done its level best to discredit the movement and the international phenom. It’s not clear what’s driving the animus, but many observers believe it stems from a recognition by the elite that Argentina is positioned almost perfectly to rapidly springboard economically causing shockwaves in the region. This is scary to an elite who naturally will always favor the status quo and slow and steady changes.
The well-heeled talking heads refer to Milei and his plans to reform and dollarize Argentina as “radical”, “far-right” and “dumb”. Savvy investors and businessmen, such as Mark Mobius, have a different view believing that “…[dollarizing] will be an incredible boost for the economy and for the country… [and that] you will see inflation down dramatically.” Are you on the side of the talking head hyenas, or emerging market investor legends like Mark Mobius?
A dirty little secret is that dollarization is already occurring in Argentina with wages and certain property rentals often already being priced in dollars rather than pesos. Locals scurry to sell pesos and buy dollars even at the very unattractive black market rates (i.e., blue rates) available to the people.
The claims from the media, and axe-grinding political pundits, that there aren’t enough dollars in Argentina to dollarize are unfounded. Argentina has the largest stash of greenbacks outside of America and Argentinians presently hold around $265 billion according to John Hopkins University professor, Steve Hanke. Professor Hanke is the top intellectual on the topic of dollarization, has advised Presidents on previous successful dollarizations, and has been actively working with elements within Argentina’s government to explore dollarization since at least 1989 when President Carlos Menem invited him into the fold. Watch the godfather of dollarization break it down:
How did Milei overcome such over-the-top and incorrect media mischaracterizations?
First, young people gravitated to his fiery style and reputation as outsider and rebel. His background intrigued these voters as a former Rolling Stones cover band front-man, owner of five cloned dogs, and former tantric sex teacher. His army of energetic TickTok followers won the day for the brash yet somehow lovable and trustworthy candidate.
Second, he was viewed by the voters as crazy, but in a good way, and angry, but only in the face of lies and forces destroying his country. The media attempted to frame him as an unhinged, deranged and unstable man. But the people processed the imagery differently than anticipated and saw a man righteously and justifiably angry, and fighting against all odds and a beast of a corrupt system, not for personal gain or power, but for them.
2024 Predictions
Emerging Real Estate Digest predicts the following for Milei’s Argentina next year.
1️⃣ Milei goes all in with deep austerity during his honeymoon period
2️⃣ Reclaims Falkland Islands to boost support during austerity pushback
3️⃣ No dollarization this year as structural problems must first be fixed and further devaluation of the peso required
4️⃣ Inflation remains high and suffering for workers continues (keep them in your prayers 🙏)
Therefore, institutional real estate investors shouldn’t get too excited just yet. Plan to strike in 2025 and 2026, but start learning and building capacity now. A great opportunity is forming, but a big mess caused by the previous “tenant” must be cleaned up before investors will be invited to come tour and stay in the new house.
