Buenos Aires — Argentina could secure investment grade status during a potential second term for President Javier Milei, according to Rob Citrone, founder of Discovery Capital Management. Speaking in an exclusive interview with Bloomberg Línea, the fund chief — who bet on Argentine assets to seal total returns of 52% in 2024, making him the year’s top-performing macro strategy manager — laid out his bull case for the country.
“President Milei has a real plan, and if he were to be re-elected and deepen reforms even more significantly, there’s a good probability that Argentina will reach investment grade by the end of 2031,” said Citrone, who previously worked under legendary investors Julian Robertson at Tiger Management and George Soros at Soros Fund Management.
“He [Milei] could really cement stability in Argentina for years, decades, and generations to come.”
Investment grade status — the coveted credit rating awarded by agencies like Moody’s, S&P, and Fitch — signals a country’s robust ability to meet its financial obligations. The designation typically unlocks lower borrowing costs, attracts foreign investment, and bolsters economic stability. Countries must demonstrate sustainable fiscal health, economic growth, and a sound financial system to earn the rating.
Fed Policy and Emerging Markets Impact
Despite his bullish stance on Argentine assets, Citrone notes that global liquidity conditions could remain tight through 2025.
Market expectations for Federal Reserve rate cuts this year are diminishing, and so are his own. Citrone’s base case sees the U.S. central bank holding rates steady throughout 2025 as inflation persists.
While December’s core Consumer Price Index reading came in below expectations, offering some relief to analysts and traders, “the numbers are still very high” and January’s data will be “quite disappointing,” said Citrone.
“I don’t think the Fed will be able to cut in the first half of the year. They might have the opportunity to make small cuts in the second half, but my base scenario would be that there will be no cuts from here for the rest of the year,” stated Discovery’s head.
The hawkish outlook doesn’t worry him, however, as he expects sustained U.S. economic growth to benefit the Americas and Western hemisphere. “I think the Donald Trump administration will focus more on Latin America than any other Government in many years, especially with Marco Rubio as Secretary of State and Scott Bessent as Secretary of the Treasury.”
Outlook For Treasury Yields
Citrone is also forecasting a climb to between 5% and 5.25% for US Treasury yields, before eventually finding stability slightly below those levels.
This scenario won’t deter capital flows into Argentine assets, he argues, because country investments hinge on “management, just like when investing in companies: management is key,” he added.
On that front, Argentina boasts “the best management, without doubt in Latin America, and maybe in the world,” he added.
Argentina’s Economic Trajectory
Citrone sees Argentina transitioning from initial macroeconomic stabilization into a growth phase. He points to 2024′s export growth, the central bank’s $21 billion in foreign exchange market purchases, and external debt payments as evidence. The progress is also showing in falling country risk metrics and a sharp inflation decline.
“We expect growth in Argentina to exceed 6% next year and we believe inflation will fall below 19%. Those are phenomenal numbers for the country,” he said, adding that he expects the government to perform well in this year’s midterm elections, with Milei’s La Libertad Avanza and its partners likely securing a House majority.
Such political consolidation would pave the way for deeper reforms, Citrone believes. “Growth will continue, inflation will keep falling, but structural reforms will begin, such as, for example, a deeper labor reform,” he predicted.
“I believe productivity in Argentina is going to improve, and there is a focus on improving it,” the Discovery chief said, noting that Milei’s political stability “is already quite strong.” “I think his popularity, which is at very high levels, will continue growing this year, especially with the economy improving: people in the streets are going to really feel the positive momentum in the country.”
Argentine Bond Strategy
Discussing Argentine debt strategy, Citrone expects risk premiums to keep shrinking and forecasts lower yields on short-end Argentine bonds like the Global 29s and 30s, which could potentially dwindle down to 8%. While less dramatic than last year’s move from 35% to 11%, he maintains that “a decline from 11% to 8% is still pretty good.”
“It’s hard to find spread compression of that type anywhere in the world,” he added, emphasizing that these bonds carry “quite low” risk.
The Peso’s Appreciation, Overblown
Addressing local economists’ worries about peso competitiveness, Citrone dismissed the idea that Argentine prices are high, especially when compared to U.S. levels.
“Argentina remains competitive at this exchange rate. It’s about reducing costs and increasing productivity. You don’t increase your exports by US$27 billion in the year if you have an exchange rate problem,” Citrone said.
He views the monthly crawling peg reduction from 2% to 1% as “a very good decision,” saying it will “help reduce inflation even further” and “lower inflationary expectations.” He also notes the government’s continued dollar purchases, saying he “doesn’t see any problem with the exchange rate.”
“It’s an old issue, I heard it all last year,” he added, stressing that “there will be many improvements in productivity and growth in Argentina in the coming years,” particularly once “structural reforms begin to be implemented after the elections,” which he expects to have significant impact.
Capital Flows to Argentina, Once Restrictions Are Lifted
Citrone anticipates substantial capital inflows once currency controls end in Argentina. “It will be multiple billions of dollars,” and “US$20 billion wouldn’t surprise me,” he said, referring to combined direct investment and portfolio flows.
“Milei has done a very good job at raising Argentina’s profile globally, and I think that will continue this year. Most investors, especially in the U.S. and elsewhere, have almost no exposure to Argentina. Therefore, there is potential for substantial capital flows into Argentina.”
Discovery’s Winning Portfolio in 2024
Discovery’s Argentine holdings, representing about 60% of its Latin American exposure, included several significant equity positions through September 2024 that delivered strong returns:
Grupo Financiero Galicia (GGAL): The fund’s largest position at 1,509,879 shares saw a 340% gain between January 3, 2025, and the same date, 2024.
Vista Energy (VIST): Second-largest holding of 1,258,766 shares rose 79%
YPF (YPF): 745,379 shares in the state oil company appreciated 164%
Adecoagro (AGRO): 1,283,994 shares in the agricultural firm fell 12%
BBVA Argentina (BBAR): 272,000 bank shares surged over 400%
Pampa Energía (PAM): 116,293 shares climbed 94%
These SEC-reported positions from November have since grown. Citrone says Discovery has added to its Galicia stake, bought more YPF, and accumulated Adecoagro below $10 per share.
Banking on Galicia’s 40% Upside
Citrone sees Galicia as “a major beneficiary of macroeconomic stability and the growth we will see in credit,” which he expects to “continue next year.” He notes that “the country has a very low ratio between private credit and GDP, less than 10 percent at the beginning of last year, which is not seen in many countries.” The fund manager sees “enormous” credit growth potential and expects “bank profitability should increase dramatically.” In fact, “Galicia is our largest position in the world,” with “potential for 40% appreciation in 2025.”
He calls Galicia “the best managed” bank in Argentina, highlighting its “fintech aspect” through NaranjaX. On earnings, he believes “the market is underestimating the earnings growth rate in the coming years.”
Looking at other holdings, Citrone says “we like YPF, Vista Energy, Pampa and Adecoagro,” viewing them as “attractive positions” with “potential for 25-35% rises for next year.” While noting that “much will depend on energy and oil prices,” he’s “constructive in the first part of the year,” as prices trend upward. He expects “a slight fall in energy and oil prices” in the second half, but sees oil rising near-term, with the “WTI barrel reaching US$90 in the first half of the year.”
Standing by Adecoagro
Despite being his portfolio’s lone Argentine decliner in 2024, Citrone maintains conviction in Adecoagro. “It was one of the smallest positions we had last year in Argentina, but we really like the management,” he told Bloomberg Línea.
“We believe the market is undervaluing the assets and the growth we see in those assets. It’s a very low-risk investment. It returns between 7-10% to shareholders each year,” he added. “We believe these levels are quite attractive to hold the stock. So we think there is very little downside and 15-25% upside for the stock.”
Regional Strategy: Argentina Over Brazil
Discovery’s successful 2024 strategy took opposing views on the region’s largest markets. “It has to do with leadership. And I don’t feel comfortable with the leadership I currently see in Brazil,” Citrone explained regarding his Brazilian short positions. However, he sees improvement after Brazil’s 2026 elections.
“The Real is definitely somewhat oversold,” he noted, while still not seeing buying opportunities. “The political change in Brazil will come, I believe, in October 2026: I don’t think Lula will win re-election,” he added, expecting “a center-right candidate will win.” He’s “eagerly” awaiting “Argentina to pass the baton of best-performing market to Brazil.”
For now, “it’s not time to enter yet” given “too high risks,” he explained. “At least 200 basis points more [of rate hikes] are expected in the next two meetings,” pushing short-term rates above 14%, after they’ve “risen 500 basis points in very little time,” which is “very disruptive.”
Citrone expects the “economy will slow down much faster than people think,” amid “still many fiscal risks.” He “doesn’t see a commitment from the Brazilian government” matching that of “Argentina or other countries.” This leaves him “very cautious with Brazil in the short term,” but “very optimistic about Brazil in the medium term.”
