Argentina’s bet on itself pays off for investors

A toxic combination of political instability and rampant inflation in Argentina ran off institutional investors for years, but President Javier Milei’s initiatives to shape up the country’s budget by slashing spending have paved the way for a robust economic recovery. 

The government has taken bold steps to reduce inflation and substantially cut government spending, and from the streets of Buenos Aires to the Iguazu Falls, business leaders and locals alike are buying into Milei’s strategy. 

During my recent travels through Argentina meeting with corporate leaders in financial services and energy sectors I witnessed a level of optimism I have never seen before. 

Today, the Argentine economy is on the cusp of explosive growth, thanks to its energy sector driving new production and exportation initiatives—and with it, returns for Argentines and investors alike. Banking is returning to business as usual and Milei’s popularity remains strong, even after a painful inoculation for Argentina’s economy. 

Leaving the past behind

Part of the rebound has been driven by Argentina’s putting its $65 billion war with creditors in its rearview mirror. Economic leaders are announcing their expectations that Argentina will repay lenders in the near-term, and the decline in inflation is so pronounced that locals, who once swapped pesos for American dollars in the streets, are now being chided for keeping too much cash at home underneath their mattresses.  

Years of economic stagnation held back development in Argentina’s Vaca Muerta shale-oil basin. In recent months, however, oil and gas production has surged, generating export opportunities and further re-establishing Argentina as a regional energy powerhouse. 

Timing favors Argentina. Its stocks had become the most discounted in South America, offering ample room for growth as Argentina restabilizes and expands its economy.

The main Merval stock market index in Argentina has roughly doubled across 2024, in a year that provided heady returns for developed markets investors. Still, there is much room for growth ahead as the capital markets re-rate to reach Latin American penetration. Milei is nudging banks to boost credit for consumers, which would effectively kick into high gear yet another economic stimulus. 

Globally, the shift away from fossil fuels and growing demand for energy storage solutions provides Argentina a unique advantage, as a leading producer of lithium, which has critical applications beyond electric vehicles—and will for years ahead. 

As 2025 approaches, Milei is taking badly-needed steps to restore Argentina’s growth and put the country on a long-term path to being a champion in emerging markets—and possibly at the same time, setting an example for developed countries’ leaders who may one day face similar painful budget decisions to avert a crisis. 

One wild card facing emerging market investors globally is how US president-elect Donald Trump will enact the trade policies he promised—or threatened—during his election campaign. Perhaps mindful of that, Milei moved fast to tighten his relationship with Trump, meeting with him and campaign ally Elon Musk at Mar-a-Lago shortly after the election. 

Both Musk and Trump have praised Milei for his efforts to shrink the government but their views on trade might not be so closely aligned. I believe, though, that we will see more bilateral deals and trade agreements from the incoming Trump administration as opposed to blanket protectionism. 

Countries that are seen as fair and amicable will be beneficiaries of the new regime, and Argentina will be one of them.

Thea Jamison is managing director of emerging and frontier market fund manager CHANGE Global Investment