The country risk at 700 points opens an opportunity for Luis Caputo to access dollars to get out of the trap

First, the key factor: the dollars. The Minister of Economy, Luis Caputo, acknowledged this week that the exchange restrictions persist and that the net international reserves (RIN) remain in a negative balance of US$4,000 million, which continues to be a significant obstacle to lifting the exchange rate. Although he assured that the elimination of the stocks is scheduled for 2025, he emphasized the need to continue accumulating reserves while debt commitments are met.

For his part, the president Javier Milei, In a recent interview, he noted that the government is evaluating various options, including the issuance of new debt in private markets, in case the opposition obstructs an agreement with the IMF. Caputo confirmed that the terms of a new program are being negotiated with the Fund, focusing on the amount of financing and the possibility of early disbursement. The government would seek a substantial advance that reinforces the exchange rate policy, although this proposal contrasts with the IMF’s usual practices, which usually schedule gradual disbursements conditional on the fulfillment of specific goals.

According to a Balanz report, the country risk accumulates a compression of 62% so far this yearsurpassing its peers of equal credit quality such as Ecuador and Bolivia, whose country risk indices fell 36.4% and 12.3% in 2024. “Argentina’s better relative performance deepened in the last month, thanks to the maintenance of the fiscal surplus and the downward trend in inflation,” they explained.

But what happens if the country risk continues to decline? Is the chance to access international markets open? This week, leading market analysts came out to try to answer this question.

Country risk at 700 basis points: closer to requesting external financing?

According to GMA Capital analysts, “Despite progress, there is still a long way to go“and stressed that the debt market of 2016 is not comparable with the current one. However, he highlighted that at that time, the country risk averaged 434 bps, while the international risk-free rate was 1.79%.

In comparison, the sovereign spread is 757 bps and the 10-year tresurie rate is 4.41%. “Today the cost of issuing debt would be around 12%, almost double what this simple relationship indicated in April 2016. The differences with the present could not be greater. Taking into account this context, for Argentina to be able to issue 1-digit rates in the international market, The country risk should be less than 550 bps. Likewise, if the target rate were the average cost of the bonds issued between 2016 and 2017, then the country risk should be close to 200 bps,” the report said.

On the other hand, a recognized market consultancy added the importance of the fall in country risk. “It added a source of financing that was not on the radar in recent months.” In that sense, he stressed that the Government would be willing to return to international markets with a rate of less than 10%, which would place the country risk at 550 points. “It is likely that the Government will begin to ‘test’ the market if the country risk falls to 600 points.”

From Econviews, They highlighted that these 720 bps are a new record in the Milei era achieved mainly by positive macro indicators and advance the agreement with the IMF. In this framework, they highlighted that the bond rally “may continue a little longer.” In line with GMA, the consulting firm’s analysts stated that the country risk “may continue to compress a little more, but only with the exit of the stocks and a stronger reserve position could we go to the area of ​​500/600 pointswhere the Government could return to the international markets.” In that sense, a drop of 100 points in the country risk would imply an increase of 6% for bonds in the middle and long part of the curve.