By Swann Collins, investor, writer and consultant in international affairs – Eurasia Business News. December 26, 2024. Article no 1346.
Investors are showing renewed interest in Argentine assets in 2024, largely fueled by optimism surrounding President Javier Milei’s economic reforms aimed at revitalizing the country’s struggling economy.
Elected one year ago, the libertarian President Milei said in a speech from the Casa Rosada on December 10 that the country can look forward to a “future of prosperity” that for many Argentines was still “unimaginable.”
Incentive Regime for Large Investments (RIGI): Introduced in July 2024, this regime offers significant tax and regulatory incentives for investments over $200 million across various sectors, including energy, mining, and technology. The goal is to attract both local and foreign investment in Argentina by providing a stable regulatory environment for up to 30 years.
Fiscal Adjustments: Milei’s administration has implemented aggressive fiscal measures, including a balanced budget and the cessation of central bank financing for government deficits. This has led to a notable decrease in monthly inflation from 25% at the end of 2023 to 3.5% by September 2024.
The fiscal balance will end 2024 in equilibrium after 15 years of deficit. The aggressive expenditure adjustment will enable a primary fiscal surplus of 1.7% of GDP, despite the contraction in revenues caused by declining economic activity. In 2025, we expect the Treasury to renew its commitment with the goal of zero fiscal deficit.
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Argentina has achieved a historic milestone in December by eliminating its fiscal deficit for the first time in 123 years, a significant announcement made by President Javier Milei.
Economic Performance
GDP Growth: After a contraction of approximately 3.5% in 2024, Argentina is projected to rebound with a growth rate of around 5% in 2025, driven by improved agricultural conditions and increased investments.
Trade Surplus and Foreign Reserves: The country has shifted to a trade surplus, which has helped build foreign exchange reserves, further stabilizing the economy.
Argentine President Javier Milei has committed to pursuing a free trade agreement with the United States in 2025, with specific plans tied to potential changes in U.S. leadership.
Investor Sentiment
Market Confidence: The S&P MERVAL Index has risen significantly, reflecting investor optimism. High-profile endorsements from influential figures have also bolstered confidence in Milei’s policies.
The S&P MERVAL Index, Argentina’s flagship index, seeks to measure the performance of the largest, most liquid stocks trading on the Bolsas y Mercados Argentinos Exchange (BYMA) classified as domestic stocks.
Foreign Direct Investment (FDI): There has been an uptick in FDI, with significant inflows as investors respond positively to the new economic landscape created by Milei’s reforms.
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Argentina’s economy is experiencing a remarkable transformation. Foreign direct investment (FDI) in the first quarter of 2024 reached an impressive $6.572 billion. This figure represents a substantial increase of $1.837 billion compared to the same period last year.
Challenges Ahead
Despite these positive developments, challenges persist. The austerity measures have led to increased poverty rates and social unrest, raising concerns about the sustainability of Milei’s reforms amidst public discontent.
In summary, Javier Milei’s economic strategies have sparked significant interest among investors in Argentine assets, as they anticipate a turnaround in the country’s economic fortunes through aggressive reforms and incentives designed to stimulate growth.
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© Copyright 2024 – Eurasia Business News. Article no. 1346.
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