Argentina Could Regain Emerging Market Status, According to J.P. Morgan
If the upgrade were to materialize, Argentina could receive net passive inflows estimated at approximately US$2.3 billion.
Quick overview
- J.P. Morgan believes Argentina has a realistic chance of regaining its Emerging Market status due to recent structural reforms by President Javier Milei's administration.
- Key reforms include the removal of capital controls, unification of the exchange rate, and modernization of financial market infrastructure, which have improved market accessibility for foreign investors.
- The potential reclassification process could take around two years, with a possible change in status occurring between 2027 and 2028, contingent on the continuity of current policies.
- If successful, Argentina could see net passive inflows of approximately US$2.3 billion, significantly benefiting its local equity market.
According to the investment bank, a potential change in classification could inject significant capital flows that would benefit the local market.
J.P. Morgan believes Argentina has a realistic chance of regaining its Emerging Market status, although it is currently classified as “Standalone” under the Morgan Stanley Capital International (MSCI) framework. The bank’s report highlights the structural reforms implemented by President Javier Milei’s administration as key factors that could support a reclassification.
“Structural reforms are paving the way for Argentina’s return to global equity indices. The process of moving back to Emerging Market status has accelerated following a series of market-friendly reforms introduced by the Milei government since December 2023,” said the bank’s research team.
The analysis points to the removal of capital controls, the unification of the exchange rate, and the modernization of financial market infrastructure as major drivers behind growing expectations of a reclassification. It also notes that liberal economic reforms have facilitated capital inflows and outflows, improving perceptions of market accessibility for foreign investors.
Timeline and Potential Capital Inflows
Despite these positive signals, J.P. Morgan cautioned that the continuity of these policies beyond the 2027 presidential elections will be critical to consolidating the process. The report also emphasized remaining challenges in market infrastructure and institutional stability, noting that MSCI requires durable, long-term changes before modifying a country’s classification.
Historically, the consultation process for a market reclassification typically takes around two years. As such, if MSCI were to open a formal consultation for Argentina in 2026, a change in status could materialize between 2027 and 2028.
The bank added: “Even if the earliest reclassification could occur between 2027 and 2028, Argentina’s volatile history within global indices means investors should closely monitor both market conditions and the political landscape for signs of sustained progress.”
If the upgrade were to materialize, Argentina could receive net passive inflows estimated at approximately US$2.3 billion, providing a significant boost to the local equity market.
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