Argentina’s Economic Reform and ETF Investment Implications

Argentina’s economic landscape has undergone a dramatic transformation under President Javier Milei’s pro-market reforms, sparking renewed interest in the Global X MSCI Argentina ETF (ARGT). Since assuming office in December 2023, Milei has implemented aggressive fiscal austerity, deregulation, and structural overhauls to stabilize Argentina’s hyperinflationary economy and attract foreign investment. This article evaluates whether these reforms can catalyze sustainable returns for ARGT, which tracks the largest and most liquid Argentine equities, including energy giant YPF and financial services leader Banco Macro.

Milei’s Reforms: A Macroeconomic Reset

Milei’s agenda has prioritized fiscal discipline and deregulation. By slashing government spending by 30%, reducing ministries from 18 to 8, and cutting 37,000 public sector jobs, the administration achieved a fiscal surplus in 2024—the first since 2008—while inflation plummeted from 25.5% in December 2023 to 2.2% by January 2025 [1]. These measures, coupled with a strict monetary contraction, narrowed the gap between official and parallel exchange rates from 158% to 27% by late 2024 [2]. The World Bank and IMF have supported these efforts, with the latter disbursing $12 billion under an Extended Fund Facility (EFF) to bolster stabilization and social protection programs [3].

The deregulation drive, averaging two reforms per day, has targeted sectors like agriculture, energy, and transportation, aiming to reduce Argentina’s historical regulatory burden [1]. For instance, the RIGI (Régimen de Incentivos para Grandes Inversiones) program offers 30-year tax concessions for projects exceeding $200 million in energy, mining, and technology, signaling a shift toward market-driven growth [4].

Sector-Specific Impacts on ARGT Holdings

ARGT’s top holdings, including YPF and Banco Macro, are poised to benefit from these reforms, though challenges persist.

Energy Sector (YPF):
YPF, Argentina’s state-owned energy company, has seen mixed results. While deregulation and RIGI incentives have spurred interest in oil, gas, and lithium projects, 2024 Q4 results showed a 38.6% quarterly drop in adjusted EBITDA due to weak upstream performance and seasonal demand fluctuations [5]. However, YPF’s long-term prospects are bolstered by its Vaca Muerta shale project and the VMOS oil export pipeline, which aims to expand capacity to 700 kbpd by 2028 [6]. The company’s strategic focus on unconventional production and infrastructure development aligns with Milei’s pro-investment agenda, potentially enhancing its credit profile and profitability.

Financial Sector (Banco Macro):
Banco Macro has navigated a high-inflation environment with resilience. In Q2 2025, its net income surged 209% quarter-on-quarter, driven by improved net interest income and a robust capital adequacy ratio of 30.5% [7]. However, rising non-performing loans in consumer portfolios (projected to reach 3% by year-end) and elevated funding costs pose risks [8]. Milei’s deregulation of foreign currency exchanges and capital controls could alleviate liquidity pressures, but the bank’s reliance on domestic credit exposes it to ongoing inflationary volatility.

ARGT’s Performance and Risks

ARGT has surged 27.81% over the past year, outperforming many emerging market ETFs, as Argentina’s economic stabilization reduced country risk and attracted foreign capital [9]. The ETF’s 0.59% expense ratio and concentrated exposure to large-cap stocks like YPF and Banco Macro make it an efficient vehicle for capturing Argentina’s reform-driven growth.

Yet sustainability remains uncertain. Milei’s austerity measures have exacerbated poverty and unemployment, with social unrest a potential threat to policy continuity [10]. Additionally, the peso’s strength, while beneficial for imports, could hurt export competitiveness in the long term. For ARGT, this means balancing optimism about macroeconomic stability with caution over structural imbalances and political risks ahead of 2025 midterm elections.

Conclusion: A High-Reward, High-Volatility Bet

Javier Milei’s reforms have laid the groundwork for Argentina’s economic revival, with ARGT serving as a direct beneficiary of improved macroeconomic fundamentals and sector-specific tailwinds. However, the ETF’s sustainability hinges on the government’s ability to maintain fiscal discipline while addressing social inequities. Investors should view ARGT as a high-reward, high-volatility play, ideally hedged against currency risks and complemented by a diversified emerging market portfolio.

Source:
[1] Milei Takes “Deep Chainsaw” to Bureaucracy and Red Tape, [https://www.cato.org/free-society/spring-2025/deregulation-argentina-milei-takes-deep-chainsaw-bureaucracy-red-tape]
[2] Argentina economic outlook, November 2024, [https://www.deloitte.com/us/en/insights/economy/americas/argentina-economic-outlook.html]
[3] Argentina Overview: Development news, research, data, [https://www.worldbank.org/en/country/argentina/overview]
[4] Lithium, Oil, and LNG: How Argentina's $8 Billion Scheme Courts Big Business, [https://medium.com/the-investors-handbook/lithium-oil-and-lng-how-argentinas-8-billion-scheme-courts-big-business-182aa011655a]
[5] YPF 4Q24: Macro Tailwinds and Strategic Progress Offset..., [https://www.emspreads.com/p/ypf-4q24-macro-tailwinds-and-strategic]
[6] Initiating Coverage on YPF: Outperform Opportunity Amid..., [https://www.emspreads.com/p/initiating-coverage-on-ypf-outperform]
[7] Banco Macro Announces Results for the Second Quarter of 2025, [https://www.gurufocus.com/news/3083337/banco-macro-announces-results-for-the-second-quarter-of-2025-bma-stock-news]
[8] Argentinian Funding Costs And Loan Challenges Will, [https://simplywall.st/community/narratives/ar/banks/base-bma/banco-macro-shares/8yyjm7sd-argentinian-funding-costs-and-loan-challenges-will-persist-then-ease]
[9] Global X MSCI Argentina ETF (ARGT), [https://money.usnews.com/funds/etfs/miscellaneous-region/global-x-msci-argentina-etf/argt]
[10] Argentina's Economic Success: Can U.S. Learn from Milei's Reforms?, [https://luckboxmagazine.com/topics/argentinas-economic-success-can-us-learn-from-mileis-reforms/]