Argentina Revival

Update on Argentinean equities

The probabilities for WW3 are not that low to ignore nor that high to panic. We have been closer to a global war before. A case in point is the Cuban Missile Crisis.

Or think about the unsung heroes of Cold War 1.0 who violated the chain of command to prevent nuclear war. Stanislav Petrov stopped a retaliatory attack followed by a false alarm from incoming ballistic missiles from the US.

Where should you hide in case of a nuclear exchange? Latin America. The map tells it all.

However, South America is not only interesting as a shelter. The region offers the lowest geopolitical risk, accompanied by generous resource endowments and still healthy demographics. The OldEconomy readers are well aware of these facts.

This is a 2Q24 LatAm review. Today’s report is focused on Argentina. But first, let’s see how LatAm countries faired YTD.

Argentina is the big winner, with 44.5% YTD gains. Peru follows, with 33.8% YTD returns. Colombia is headed nowhere. The losers are Mexico and Brazil. Brazilian Real and Mexican Peso scored massive losses YTD, negatively affecting equities. On top of that, we have internal political risk in the face of leftist governments.

As usual, the political risk is exaggerated. Despite their populist speeches, neither Lula nor Sheinbaum intend to go full Marx. This is not to say they are not making questionable decisions with short-term benefits and high long-term costs. They definitely do. Populist politics are the norm, not an expectation in Latin America.