Argentina’s national elections are this weekend and investors appear optimistic about the outlook for regime change in the South American country and that optimism is reflected in the Global X MSCI Argentina ETF (NYSEArca: ARGT). The lone Argentina exchange traded fund is up 7.1% over the past month.
However, some analysts believe Argentina’s election will not bring the needed reforms to bolster the country’s flailing economy, South America’s third-largest.
Pavillion’s Alex Bellefleur, François Boutin-Dufresne and Pierre Lapointe “write that while all candidates, including frontrunner Daniel Scioli, acknowledging that the economy needs help, “Argentina doesn’t have a particularly bright track-record of good macroeconomic management.” More to the point, with inflation up 26% year-over-year, a weak currency and falling reserves, it’s hard to see how effective the government can be in stabilizing the economy,” reports Dimitra DeFotis for Barron’s.
Last year, Argentina defaulted on its debt for the second time in 13 years.
“Argentina is headed for another collapse. The test for the next president will be how to juggle the economic adjustment while restoring institutional credibility and recovering a culture of tolerance,” reports the Wall Street Journal.
For close to two years, Argentina has been at odds with creditors, including some well-known U.S. hedge funds. Last year, the country offered “holders of its 7% Boden 2015 various options. They can either cash in at 97 cents on the dollar or swap into 8.75% Bonar 2024s at 99.70 for every 100 of the 2015s exchanged, plus accrued interest,” according to Reuters, a deal the country’s creditors are balking at.