Argentine investors have spent generations searching for instruments that preserve value, a need their domestic financial system has never reliably met. The currency’s decline, albeit halted at times, has never been sustained over time, and the question of how to preserve value is no longer abstract portfolio optimization but a practical issue facing every Argentine with savings that must be resolved repeatedly over the course of a person’s life. But commodities trading has joined the discussion as a serious option, in large part because the products themselves are not denominated in money, and because the assets that are being traded are real productive resources on which monetary policy has little impact.
Gold was the first to come to the Argentinean investment consciousness, given a cultural logic that makes people buy gold in a widespread way across the country. It has been a natural benchmark for investors looking to diversify their investments into commodities given its behavior during Argentine financial crises, it has not been affected by the deterioration of its domestic currency assets, and it is not subject to any domestic decision making process. Those traders who started their trading career with gold as a concept of value preservation saw a continuation of that concept in the case of silver, platinum, and then in energy and agricultural products.
The resonance of soy and agricultural commodities has particular meaning in a nation where an export-oriented economy is heavily reliant on agriculture, where the movements of grain prices are real and have economic significance. A country that generates a good amount of foreign exchange from exporting soybeans does not perceive international prices for soybeans as abstract market information but as a factor affecting the amount of dollars coming into the country that affects the economy’s fiscal position and that ultimately affects the inflationary trajectory impacting the daily lives of people. Traders from Argentina who pay close attention to the dynamics of agricultural markets, with a special focus on the country’s agricultural production conditions, export tax policy, and government policies toward the agricultural sector have context-knowledge that cannot be matched by traders who are not so close to these dynamics.
The relation between the price of fuels in Argentina and the price of energy commodities in international markets has made these CFD products attractive to Argentine investors. International energy prices have a widespread link to local economic conditions: the cost of energy imports during periods of production shortfalls, the tension between domestic production capacity and energy consumption needs, and the complex energy subsidy program that Argentina has in place. All of these routes can be followed by Argentine energy investors with informed specificity. This linkage between market activity and the reality of the economy makes these instruments more relevant than just return makers, and so appeals to investors who have always been more interested in preservation than speculation.
The denomination of commodities in dollars helps to align them with Argentine saving instincts in a more clear-cut way than other asset classes can. An Argentine investor with a gold CFD position is basically holding a dollar-denominated asset, which further protects the investor’s holdings from currency risk by nature of its commodity. That double insulation from peso exposure is meant to overcome the particular fear that drives Argentine financial choices that on a structural level cannot be achieved by peso-denominated local instruments. International trade of commodities thus meets the currency preservation instinct, and the need for real asset backing, which Argentine financial experience has established as necessary features, not optional ones.
Commodities trading is what Argentine investors can do with the dollar that the peso cannot and what the domestic financial system cannot do because they cannot confiscate, freeze, or inflate, qualities that are not merely appealing but actively comforting to investors whose participation in financial markets was forced by those very threats.