Despite some macroeconomic progress, the persistent vulnerabilities of the Argentine economy limit its ability to improve its credit profile in the short term. The main rating agencies agree that current conditions remain insufficient.
The main ones global risk rating agencies They continue to view with concern the vulnerabilities of the Argentine economy and question the country’s ability to meet its debt commitments in the coming year.
Despite recognizing certain macroeconomic improvements in recent months, both S&P like Moody’s have decided to keep Argentina’s credit ratings unchanged. In July, Moody’s maintained its rating at Ca, while S&P did the same in August, maintaining the CCC rating. Both agencies agree that, despite some “recent progress”, There are no sufficient reasons to raise the country’s rating.
Debt renegotiation expectations
Moody’s explained in its latest report that the “stable outlook” of the rating reflects the expectation that Argentina’s overall credit conditions are unlikely to improve significantly.Expected losses will remain in line with a Ca rating, which incorporates losses of up to 65% for investors.“the agency said.
Moody’s Vice President, Jaime Reuschereaffirmed this position by declaring that the probability of a debt renegotiation or exchange is high, a scenario similar to that observed in the domestic market. “In the local financial market, several internal debt swaps have been carried out that have caused losses, and our expectation is that something similar will occur with the external debt,” he commented in a radio interview.
Progress and persistence of economic problems
In his report, S&P highlighted some progress in the Argentine economysuch as the decline in inflation to a monthly rate of 4%, a significant improvement from the almost 26% recorded in December 2023. In addition, the Central Bank’s foreign exchange reserves increased in the first half of 2024, although they still remain at low levels due to the severe negative starting position.
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The report also highlighted that the Central Bank has stopped financing the Governmenttransferring its debt liabilities to the Treasury and thus halting the growth of the monetary base. The Government has implemented a significant fiscal adjustment and is expected to achieve a primary budget surplus in 2024. In addition, laws have been passed that reform income taxes and labor markets, incentivizing large investments and facilitating access to foreign exchange markets.
Nevertheless, S&P warns that despite these advances, Argentina’s CCC rating continues to reflect persistent external vulnerabilitiespublic weakness, lack of access to international capital markets, high inflation and lack of economic flexibility. According to the agency, this rating indicates that Argentina may not meet its financial commitments if it faces adverse conditions in the commercial, financial or economic environment.
Source: Ambito
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