After a third review of Argentina’s economic progress, the International Monetary Fund (IMF) released a $10.8 billion round of funds as part of a major financing deal reached last year. The latest efforts by the IMF to prop up the country’s languishing economy helped Argentina-focused ETFs.
On Friday, the Global X MSCI Argentina ETF (NYSEArca: ARGT) was up 1 percent and the iShares MSCI Argentina and Global Exposure ETF (BATS: AGT) was 1.02 percent higher. Both funds are up year-to-date with ARGT showing a 17.64 percent gain while AGT is posting a 17.74 percent gain.
While both ETFs are up YTD, economic risk do remain. Argentina, Latin America’s third largest economy, is facing recessionary pressure, which does warrant caution by prospective investors.
Nonetheless, its local currency, the Argentinean peso, has been rising steadily against the dollar–continuing its upward trajectory from mid-2018 after falling due to rampant inflation.
Source: tradingeconomics.com
Nonetheless, IMF managing director Christine Lagarde said that the latest economic policies implemented by Argentina are “bearing fruit.”
“Economic activity contracted in 2018 but there are signs that the recession has bottomed out, and a gradual recovery is expected to take hold in the coming quarters,” Lagarde said.
Last year, Argentina agreed to a $56.3 billion financing deal with the IMF when uncontrollable inflation caused its currency to lose half of its value against the U.S. dollar. The country’s leaders agreed to implement tighter monetary policies and austerity measures to control public sector debt and reduce the fiscal deficit.
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Late last year, the IMF said Argentina would receive its “full support” in the wake of its financial crisis when interest rates spiked stratospherically and its currency was heavily devalued against the U.S. dollar. Chief IMF spokesperson Gerry Rice said that a delegation would meet with Argentine officials to formulate a “revised economic plan.”
The statement came after Argentina president Mauricio Macri requested an early release of funds from a $50 billion bailout package. That bailout package was a cause of contention for students and university professors who rallied in Buenos Aires to protest austerity measures, such as budget cuts to educational programs as part of the bailout.
According to a survey conducted in May, 75% of survey respondents cite the IMF’s bailout funds as helping to spur the country’s financial crisis in 2001. More protests have continued as the Argentina government continues with its austerity measures.
Thousands of demonstrators marched in protest through the Argentine capital Buenos Aires on Thursday against President Macri’s latest austerity measures. The protests come as general elections are forthcoming in six months.
“This demonstration is one more expression of the unrest there is,” said Juan Carlos Schmid, leader of the Transport union Confederation. “Keeping on this path means we are heading to the abyss. Economic policy has to change, until now there has been a policy of permanent adjustment.”
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