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A global fund highlights Argentina's potential to attract investments and “create dollars in the next 10 years” - Infobae
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Un fondo global destaca el potencial de la Argentina para atraer inversiones y “crear dólares en los próximos 10 años”
Fernando Grisales, Senior Portfolio Manager de Schroders, precisó que las exportaciones de energía, litio y el agro combinadas con reformas y un plan fiscal, garantizarán el ingreso de divisas en el largo plazo
www.infobae.com
April 23, 2024
Fernando Grisales, Senior Portfolio Manager of Schroders, specified that energy, lithium and agricultural exports combined with reforms and a fiscal plan, will guarantee the income of foreign currency in the long term.
By Juan Gasalla
Argentine assets are once again in the focus of international investment.
Fernando Grisales is Senior Portfolio Manager at Schroders , one of the most important international investment managers in the world and the one with the longest tradition in the Argentine market, where it has been active since 1932. This expert in market asset management is visiting our country. emerging markets analyzes the political and economic change faced by the government of Javier Milei and the renewed potential that Argentina exhibits for foreign funds.
In dialogue with Infobae, Grisales expressed that “the photo of Argentina at this moment shows that it is going through a stage of reforms, but the film can be very positive in the long term . As long-term investors we see that the energy sector can be very positive in the next ten years for Argentina and create dollars from gas and oil exports.”
“The lithium market is real and provinces like Catamarca, Jujuy, Salta can attract very strong investments from both North America and China and other countries. We have seen reports from the IMF with very strong projections. If we add the agricultural sector , with the production of soybeans, the ability to pay in dollars in the next ten years can be very strong in Argentina. If it is combined with reforms, with a fiscal plan - which we have not seen in many years in Argentina - and a level of inflation that can go down in six months , this very good movie for the markets can be consolidated ," said the expert from Schroders, in Buenos Aires to speak with local investors and gain a clearer perspective of the shift in economic policy that is being applied in Argentina.
Fernando Grisales is a portfolio manager of emerging country sovereign bonds at Schroders, based in New York.
In this regard, he considered that “Argentine bonds have risen, and correctly, due to those very positive structural reforms that had not been happening in the past.”
Grisales, who joined Schroders in 2012 as a senior portfolio manager in the Emerging Market Debt Relative team in New York, also referred to the particular international context, pending the path of monetary policy rate cuts in the US and the geopolitical tensions, which establish a new framework for the bonds, stocks and currencies of Latin American countries.
“The markets have been very volatile regarding rates. We saw it in 2023, we started with low rates, they rose to a very high level and then fell towards the end of the year like a roller coaster. At the beginning of the year, the US Federal Reserve was a little more favorable regarding the level of inflation and later during the year it looked more hawkish (prone to restrictive monetary policy) when it saw that inflation levels were much higher. The market reacted a little violently, but then we saw the Fed telling the market that 5% was a bit high and will create economic pressure in the US and we saw that rates went down again,” described the expert. .
“In 2024 we started with the market thinking about five Fed rate cuts, when the Fed said it was evaluating three cuts, that is, a much more bullish market than the Fed. Now the market expects two rate cuts, a little more hawkish , and it's correct. We think that two cuts this year are possible, but let's not rule out zero cuts this year either. The US economy remains strong , inflation in sectors such as services and real estate remains at a very high level of 5% , when in the last 20 years it was less than 3 percent. The price of oil has risen 20% this year and now that it is falling it helps take pressure off inflation. In short, we do not believe that the Fed is going to cut rates three times in the remainder of the year, the US economy has a lot of momentum , we do not believe in three cuts this year, perhaps one or none,” Grisales assessed.
“Regarding Latin America, the markets wanted the Fed to cut its monetary policy rate at a rapid level, because in the region inflation is normalizing as in Brazil, Mexico, Chile and Peru. But now with a Fed that is a little more hawkish, we believe that central banks are going to have a little patience. We believe that in 2025 rates will fall much more strongly. Now, that has an impact on currencies, on the growth of emerging markets. When international rates fall, the cost of credit falls and activity begins to grow . And when the Fed lowers the rate, currencies begin to appreciate against the dollar. So in the short term, the market is in hold ,” he pointed out.
For the Schroders manager, “2024 is a year of normalization after a high level of inflation in most countries, and 2025 is going to be a year in which real rates normalize at the Latin American level, which would be very positive , but for now the priority is to lower inflation to a level of 5% less in many emerging countries, to achieve convergence with the US."
Grisales specified that “in the short term the markets were repricing the Fed's rate cut forecasts. When the Brazilian real was below 5 reais per dollar , there was the expectation that the Fed was going to cut the rate more quickly, then the value of the dollar is less because the return on the dollar rate towards the end of the year was going to be much less. This repricing has occurred, which finds interesting value in Latin American currencies, because central banks are going to be more patient with this anchor of the real rate. We are looking a lot at exports and imports, the level of trade balance in Latin America remains very positive in many countries. The devaluation of the Brazilian currency to 5.20 (reals per dollar) in the last two weeks was more idiosyncratic due to the fiscal level; The fiscal level in the next two or three years is going to be less strong than what the market expected and a correction occurred on that.”
Schroders was the first international investment management company to establish itself in Argentina. It was established in 1932 and since 1994 it has made investments in the country. “Schroders is a global asset manager , with more than 220 years of activity. In Argentina we have been present uninterruptedly since 1932, we are the largest independent manager in the country and we manage around USD 800,000 million internationally and in Argentina we have a business of about USD 1,400 million invested, where we are long-term investors," he explained. Mariano Fiorito , Country Head for Argentina and Uruguay of the company.
