MSCI reclassifies Argentina as an emerging market after 9 years, but what will change?

By June 20, 2018

Argentina has just found out that it will leave its status as a frontier market and become an emerging market. This is a long anticipated moment, but what does it actually mean for the country?

First of all, an emerging market has access to a much larger pool of potential investor companies. Apertura explained that the frontier market index has 110 companies from 29 countries available to invest, whereas the emerging market index has a whopping 830 companies from 24 countries. Being upgraded will result in more investments, and therefore more liquidity.

Cronista estimated that if bumped up, Argentina would see an influx of anywhere between US$3.5 to US$5.5 billion, which will give a strong push to the market.

Maybe one of the most important elements that will change is something that Argentina has been striving for for a long time; trust. More trust will result in more investments and therefore more liquid assets. With some extra cash in their pockets, Argentina should be able to ease the pressure on the economy in the short term, bringing more calm to the market.

“As a first measure, I think the world will see us differently,” Bull Market Brokers employee Leonardo Svirsky told Cronista. “We could even take more loans out if necessary.”

Argentina used to be an emerging market, but was downgraded to frontier in 2009 as a consequence of the restrictions the country placed on the influx and outflux of capital in the local finance market. In June 2016, the Morgan Stanley Capital International (MSCI) started the process of consulting the Argentinian markets for a potential upgrade, with decision expected to be reached in 2017. However, 2017 came and went with no answer, as the MSCI decided to prolong the process until mid-2018, so Argentina has been waiting nearly two years to finally be upgraded.

After the long wait and months of economic turbulence, this new status is welcome news for Argentina.