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Argentina Upgraded to Emerging Market

The country was downgraded to 'Frontier'market in 2009.

By | [email protected] | June 20, 2018 9:50pm

morgan stanley

Argentina has finally received good news on the economic landscape.

Morgan Stanley Capital International (MSCI) announced this afternoon that the country has been upgraded to “emerging market,” opening the door to new investment. The measure will come into effect next year. The firm had downgraded Argentina to “frontier” market in 2009, following the implementation of market restrictions by then-President Cristina Fernández de Kirchner.

When justifying its decision, the MSCI indicated it “followed the broad acceptance of reclassification proposal by market participants that took part in the consultation.” However, the provider did address the recent economic turbulence the country has been going through and clarified it “would review its reclassification decision were the Argentinian authorities to introduce any sort of market accessibility restrictions, such as capital or foreign exchange controls,” the press release issued to explain the decision adds.

The release goes on to quote MSCI Managing Director Sebastien Lieblich, who said that by supporting the inclusion of the country – as well as Saudi Arabia’s, which has also been upgraded – “institutional investors confirmed that they are now able and ready to access and operate in these markets.”

More conservative analysts estimate the upgrade could usher new funds for US $3.8 billion, while more optimistic ones post the figure could amount to US $7 billion. Many investment funds are prevented by their own bylaws from investing in countries the MSCI categorizes as frontier markets. According to Infobae, most funds will likely be destined to companies that are present not only in the local stock exchange market, but also on Wall Street.

The government expect the news will contribute to restore confidence from the private sector on its policies, as the generalized feeling of uncertainty in the economic landscape has been a determinant factor in the turbulence the country is going through.

Many expected Argentina to be re-categorized last year, due to the political and economic shift the country took with the Macri administration. However, the MSCI decided to continue considering it a Frontier market, indicating it was still necessary to confirm its policies could be sustained through time.

The news comes on the same day as the International Monetary Fund’s Executive Board formally approved the stand-by agreement reached with the country, and authorized the first disbursement of funds, amounting to US $15 billion.