Far from embracing libertarian proposals by Javier Milei, BlackRock he still doesn’t “see” reasons to bet on Argentina. On the contrary, the world’s largest fund warned its investors about the risk of possible devaluation due to “exchange delay”which could trigger a price spike. The Government is betting on the “crawling peg” and the reduction of parallel dollars to advance in the elimination of the stocks.
While the Argentine president awaits international recognition for its economic reforms, after leading meetings with important businessmen, the largest investment fund manager in the world analyzed the progress of the local economy and raised the alarm due to the evolution of the main macro variables.
In a report to their clients, financial specialists Sam Vecht and Christoph Brinkmann they assure that they continue “closely the political and economic situation in Argentina”after “the libertarian Javier Milei “will triumph” unexpectedly the presidential elections in November 2023.”
BlackRock warned its clients about the exchange rate delay in Argentina and a possible devaluation
The manager who leads Larry Fink affirms that the Argentine president “He is facing a very difficult situation”due to the high inflation from around 270% year-on-year, the “depleted foreign exchange reserves” and “multiple economic imbalances”.
Weeks after Milei’s victory, in January, a group of envoys from BlackRock arrived in the country “to better assess the sentiment on the ground.” The trip, they said, instilled “even more of our cautious view on the country’s economic prospects.
After coming into contact with the Argentine reality, and despite the first reforms promoted by Milei, like the mega DNU 70/23 of reform of the State which promoted the deregulation of multiple regulations and organizations, the fund affirms that there are currently no reasons to bet on the country. “We see no fundamental reasons why we would want to buy this market now,” they announced.
“We have become increasingly cautious regarding Argentina over the last month,” the statement to its investors continues, explaining the reasons: “The weakening of the informal exchange rate suggests that the official exchange rate could be overvalued” by which they warn of “the risk of another devaluation of the exchange rate, which could revive inflationary pressures.”
BlackRock, support for adjustment and warning about the effects on society
Despite warnings to its investors, BlackRock bet on Milei’s measures. This was made known in a statement released in March. “The country needs to go through a painful adjustment process”they assured, although they also expressed concern about “the difficulties that this may inflict on society.”
“We are hopeful that the country will emerge stronger from this adjustment process,” expressed the fund’s specialists, although at that time they already announced their caution in investing: “For now we have limited exposure to the Argentine economy.”
The manager currently has investments in different Argentine companies, including the majority state oil company YPF, in addition to having a strong presence in Coca-Cola, Bayer, Apple, Microsoft, and Telefónica. As of 2022, the fund also owned shares of several of the most important companies in the market such as Mercado Libre, Tenaris, Grupo Galicia, Banco Macro, Telecom, Pampa Energía, TGN, Arcos Dorados and Adecoagro.
In February, the most significant investment fund in the world acquired a modest amount of BOPREAL Series 1 as part of its assets. This title was designed to address the debt with importers inherited from the previous government and seeks to resolve the gap between permits granted for imports and access to the necessary dollars..
Although BlackRock’s investment in this bond is relatively low, with just US$1.8 million, it caused surprise in the market, since the instrument generated doubts at the local level despite improving performance with the progress of the bidding.
In early February, the president Milei held a virtual meeting with the fund’s CEO, Larry Fink, who expressed his intention to invest in infrastructure. “President Javier Milei maintained this Thursday a virtual meeting with Larry Fink, the CEO of BlackRock, the largest global investment fund with assets close to 10 trillion dollars. The President and Fink spoke about the current and future panorama of Argentina,” the president’s office expressed through social networks.
“During the meeting, Fink also expressed his interest in evaluating infrastructure investment opportunities in situ. in the country, which predicts a boost to economic and social development,” the Government stated at that time. For now, the fund is cautious and waits.
Source: Ambito
