Buenos Aires — The LIBRA crypto token scandal that’s rocked Javier Milei’s government during the last week is being viewed by two US hedge funds and one of the region’s largest investment banks as a new buying opportunity for Argentine assets.
While MSCI’s Argentina ETF, comprised by stocks with high exposure to the Argentine market, has gained 1.53% since the crisis erupted on Friday, February 14, dollar-denominated sovereign bonds have posted declines of 0.8-2% over the past five days, despite a moderate rebound Thursday.
The controversy exploded on February 14, when Milei shared on X the launch of LIBRA cryptocurrency, a project that promised to fund Argentine ventures. The token surged to almost US$5 before collapsing to less than US$1, causing losses for 40,000 investors, as reported by Bloomberg News, and triggering legal complaints in Argentina and the United States.
The case sparked a political storm that led the Kirchnerist opposition to push for impeachment proceedings, while New York law firm Burwick Law is finalizing legal actions representing 200 clients from six countries, according to La Nación.
The government denies any civil, commercial, or criminal liability on Milei’s part, while Latam Advisors head Sebastián Maril, an expert in litigation against the Argentine state, emphasized that “filing a lawsuit in the U.S. is extremely simple and anyone can do it. Then, you need to prove jurisdiction, culpability, damages, etc.”
On Thursday, the ruling party, La Libertad Avanza, managed to block the formation of an investigative commission in the Senate. There were 47 votes cast in favor of the initiative, against 23 negative votes, when a two-thirds majority was needed to proceed with a commission.
All of this took place amid the country’s negotiations for a new agreement with the International Monetary Fund, on which the market anticipates concrete developments in the coming weeks.
Rob Citrone’s take: Discovery Capital Management founder speaks out
“This is the last chance to buy Argentina cheap, because I believe it will rise dramatically after the IMF deal,” Rob Citrone, founder of hedge fund Discovery Capital Management, told Bloomberg Línea. He added: “Should he have gotten involved? No, but I think he had good intentions. This wasn’t malicious, Milei wasn’t trying to deceive anyone, and hopefully they’ll learn from this.”
The staff-level agreement with the IMF could come in the next two weeks, according to former IMF official Claudio Loser, and will be a huge catalyst for the Argentine market, in Citrone’s view. He estimates fresh funds from a new program could range between US$12-20 billion.
Largely due to its positions in Argentine bonds and stocks like YPF and Grupo Financiero Galicia, Discovery achieved a 52% gain in 2024, making it the most profitable macro fund of the past year.
Markets seem to agree with the optimists, considering the rise in equity and minor drops in fixed income over the last week. “The fundamentals remain very solid, and that’s the main reason,” Citrone explained. “Most investors don’t care about this because very few Argentines lost money. This is a China and U.S. issue, a crypto world issue.”
Moreover, the investor downplayed Milei’s controversial comparison between buying the Libra token and gambling in a casino. “I think Milei was told that the promoters would use part of the profits to benefit Argentine companies. I’m 100% sure he was told that. For me, the real problem lies with the promoters: those are the problematic guys, they’re the ones that need to be cleaned up,” he defended.
“Milei was duped by these guys. They’re very slick,” Citrone insisted. “He wants to be at the forefront of blockchain technology, cryptocurrencies are the biggest part of that, and I’m sure they told him that if they had a meme coin there and could benefit Argentine institutions and small businesses, then they could start attracting more talent.”
Andrew Cummins of Explorador Capital Management sees buying opportunity
“For investors, this incident will be seen in hindsight as a misstep. It will probably be another entry point [buying opportunity] for those who are late to the new Argentina,” Andrew Cummins, director of Explorador Capital Management, told Bloomberg Línea.
He noted: “We have a very enthusiastic president. He may make occasional communication mistakes. This was unfortunate and he quickly corrected course,” adding that most believe in Milei’s sincerity to improve Argentines’ lives.
“I don’t think most people believe Milei wanted to promote something to take advantage of others,” argued Cummins, while pointing out that the president “is an imperfect human being, like all of us.” “Many believe he is sincere in his attempt to improve the lives of everyday Argentines,” he added.
“There will be ‘broken plates’ from time to time in this painful process of change that Argentines have asked for,” warned Cummins. “But if the electorate maintains support for this new path of economic policy, as seems to be happening, Argentina will become a freer and more prosperous nation and take its rightful place on the world stage.”
Bradesco BBI sees minimal impact on Milei’s image
Bradesco BBI, one of Brazil and Latin America’s leading investment banks, maintains that the so-called “Crypto-Gate” will not have a material impact on Milei’s popularity. In a video conference held on February 18 with political consultant Ignacio Labaqui, the expert argued that media attention on the case will not affect government approval due to the public’s lack of familiarity with cryptocurrencies.
However, Labaqui warned that the incident could affect legislative dynamics, potentially delaying key proposals. The consultant noted that opposition weakness, high turnover of officials, and lack of critical thinking within the administration led to a propensity to commit unforced errors, like the recent Libra case.
The impeachment request is unlikely to succeed due to the lack of a two-thirds quorum in both chambers of Congress, the consultant argued. “Milei’s high approval rating and legislative support provide a solid defense. In Latin America, leaders subjected to impeachment usually lack popularity and legislative protection, two qualities that Milei possesses,” he noted in the report to Bradesco BBI clients.
According to a survey by consulting firm Giacobbe published by La Nación, conducted between February 17 and 18 across 1,500 cases, Milei’s negative image jumped 10.4 points to 46.6%, while his positive image remained stable at 49.6%.
The poll, which usually serves as an analysis parameter for the government, showed that most of those who had a regular image of the president migrated toward a negative perception, although the hard core of support remains intact. The measurement was taken after the controversial television interview where a presidential advisor interrupted the recording to prevent a potentially compromising statement from Milei.
For the market, this was just noise, says 1816
Argentine consulting firm 1816, in a report titled “For the market it was just noise,” highlighted that “both before and after LIBRA, macro continued bringing positive news.” January’s inflation of 2.2% was the lowest since July 2020, with goods rising below services, a trend that according to the consultancy “will continue in the coming months, now with the 1% crawl.ing peg”
On the fiscal front, the report indicates that the government maintained primary and financial surplus in January, despite the expected year-over-year increase in real spending, while on the external front Argentina maintained its trade surplus for the fourteenth consecutive month, although it decreased due to a 24.6% increase in imports.
The consultancy warns that with the Expanded Monetary Base limit fixed and banks managing their liquidity with LEFI, “there isn’t much room left to remonetize the economy with pesos,” so it anticipates that the IMF agreement “will surely come with definitions about the future of monetary policy.”
