Argentina to remain a ‘trade’ unless it can lower volatility, BlackRock exec says

BlackRock executive Pablo Goldberg has warned that Argentina cannot be considered anything other than a high-risk investment until it improves its economic stability. Speaking at the IDEA Colloquium in Mar del Plata, Goldberg argued that the South American nation's volatility remains its biggest issue, and until that changes, international capital will treat it as a speculative opportunity rather than a long-term destination.

Goldberg, who has been following Argentina's economy for 25 years, used the Sharpe ratio to illustrate Argentina's poor risk-return profile. Compared to 60 other countries, Argentina ranks at the bottom, with successive defaults pushing it into the worst long-term performers among emerging market bond indexes.

Goldberg pointed out that Argentina's poor creditworthiness is due to high domestic political risk and a weak local capital market. This forces the state to borrow from abroad, paying in U.S. dollars while collecting taxes in pesos. Investors are also influenced by Argentina's past performance, as well as the reliability of its official statistics.

For Goldberg, the key to improving Argentina's creditworthiness is to reduce economic volatility. Achieving investment-grade status would drastically lower financing costs for the state and companies, nearly doubling Argentina's weight in bond indexes. He sees countries like Peru and Uruguay as models for Argentina to follow, emphasizing the need for stability and predictable rules.