Jamie Dimon Touts Argentina as Incredible Opportunity in Annual Report

A Look at Why Jamie Dimon is Bullish on Argentina

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JPMorgan Chase & Co. Chairman and CEO Jamie Dimon recently published his 50-page 2015 annual report providing an overview of the company’s financial performance and thoughts on the future of the domestic and global economy. In the letter, Mr. Dimon highlights Argentina as an “incredible opportunity” following its return to the global markets and anticipated strong growth over the coming years as it implemented intelligent new policies.

In this article, we’ll take a closer look at these developments and whether or not international investors may want to consider making a move into Argentine assets.

New Leadership

Argentina elected Mauricio Macri as president in November of 2015. Unlike his predecessor, the former mayor of Buenos Aires promised to implement free market policies designed to re-open access to international financial markets and stimulate the economy.

The first order of business was to takes steps to re-enter the international bond markets by repaying creditors and removing an injunction that barred the country from paying creditors and raising new money in the bond markets. These moves represent a step in the right direction, but the country must still repeal a law that prevents it from paying these hedge funds and make full payments to bondholders that settle in time.

Macri also promised sweeping economic reforms designed to tackle weak growth, high inflation, and growing fiscal deficit after more than ten years of social welfare spending programs.

The success of these programs will depend on his ability to keep the public on his side, convince a hostile Congress to be onboard, and deal with weakening commodity prices that have left its foreign reserves at critical levels.

Settling Old Debts

Argentina struck a $4.65 billion deal with hedge fund creditors in March of 2016, which ended a 15-year battle beginning with its default on $100 billion in debt in 2001.

The move could pave the way to re-enter the global bond market, raise much-needed capital to stimulate the economy, and bring the country back on course in a region of the world that has been moving towards the socialist end of the political spectrum.

Mr. Dimon noted that JPMorgan took a little additional risk in the country with a special financing to help stabilize the economy and help bring it back into the global market. He expressed hope that the country can be an example to the world of what can happen when a country has a good leader who adopts good policy, while praising its highly educated population, ample natural resources, and peaceful neighbors.

If successful, the move could encourage other countries that are in similar situations to adopt similar policies and open up the door to investment. Brazil’s political turmoil has left a hole in the region for a leading country to step up set the stage for the region’s recovery. The slide in commodity prices has hurt a lot of countries in the region, but there’s little doubt that political turmoil has been significantly more detrimental to long-term performance.

Investing in Argentina

There are many different ways that international investors can buy into Argentina’s economic potential moving forward.

While a lot of risks remain at the moment, these investments may prove to be attractive opportunities over the coming years.

The easiest options are exchange-traded funds (ETFs), including:

  • Global X Funds Argentina ETF (NYSE ARCA: ARGT)
  • Claymore BNY Melon Frontier Markets ETF (NYSE ARCA: FRN)
  • iShares MSCI Frontier 100 ETF (NYSE ARCA: FM)

The Global X Argentina ETF is the only pure play in the space, but the two frontier market ETFs provide exposure of about 14% and 4%, respectively.

The Bottom Line

JPMorgan’s 2015 annual report highlighted Argentina as a tremendous opportunity in the Latin American region. After electing Mauricio Macri as president last year, the country has begun implementing a number of reforms designed to re-enter the global bond markets and stimulate the economy. These efforts could lead other countries in the region to reduce their socialist tendencies and make some of the same moves to improve their economies as well.