- The Global X MSCI Argentina ETF returned 53% in 2023, making it the world's best-performing international-country fund.
- Further outperformance will depend on the effectiveness of new president Javier Milei's policies.
- While some on Wall Street have greeted his measures, challenges are growing.
An Argentina-focused exchange-traded fund generated world-best returns of 53% in 2023, Bloomberg data shows.
Assets for the Global X MSCI Argentina ETF (ARGT) multipled by four times, to $124 million, over the period. December's $30 million inflow marked the fund's biggest monthly inflow on record, coinciding with libertarian president Javier Milei taking office, Bloomberg found.
But for ARGT to continue outperforming similar ETFs, policies introduced by the country's newest president will have to pan out.
So far many investors have cheered on his policies as the needed overhaul to remedy Argentina's challenges with spending and hyperinflation. Since taking over, Milei has warned Argentines to prepare for a "shock adjustment," as he looks to pull the country's economy away from its sixth recession in a decade.
Milei has since applied emergency measures that included a peso devaluation of over 50% devaluation, moves to clear short-term national debt, and huge slashes to state spending equal to 3% of Argentina's GDP.
Before this, JPMorgan noted that there was merit in the approach, expecting inflation to decelerate successfully in the second half of 2024 if Milei's program is implemented successfully.
But others on Wall Street have been quick to point out the challenges.
"Fixing macroeconomic imbalances will require a multifaceted policy effort, and the sequencing will be key," Fitch Ratings wrote in mid-December.
It added: "The adjustment will be painful, and the path forward is laden with economic, political and social risks. Milei's party has little representation in the legislature and controls no provincial governorships, alliances with more influential parties and power-brokers remain in flux, and the social situation is fragile."
Already, the disruptions have set off calls for massive protests, which Milei's government has warned will cost participants their welfare payments. But the president's emergency decree was still set back on Tuesday, after a court suspended reforms regarding labor.
Meanwhile, the first central bank auction last week that was meant to help pay down Argentine importer debts largely fell through, with just $68 million sold of an announced $750 million in notes available.
The Argentina ETF is down 2.8% so far in the first week of 2024, though this mirrors broader risk-off sentiment among global investors.