Argentina’s credit score was upgraded by Fitch Ratings, signaling growing confidence in President Javier Milei’s push to overhaul the economy and secure financing to cover the country’s upcoming debt obligations.
The South American nation was raised to 'B-' from 'CCC+', six notches below investment grade, the ratings firm said in a statement on Tuesday. The outlook is stable.
The move “reflects structurally improved fiscal and external balances, progress on economic reforms, improved prospects for FX reserve accumulation and our expectation that the government will secure adequate financing to cover debt obligations,” analysts Christopher Dychala, Richard Francis and Shelly Shetty wrote in the statement.
Milei’s administration has won over investors with a mix of aggressive fiscal adjustment, deregulation and steps to normalise Argentina’s monetary and exchange-rate regime. Markets have rallied sharply since Milei strengthened his position in Congress after October’s midterm elections, fuelling expectations that his reform agenda can now move forward with fewer political obstacles.
The ratings action also reflects a series of policy steps aimed at gradually restoring market access, including a US$1-billion local-law bond issuance in December, a US$3-billion repurchase agreement with international banks in January – the third such operation under Milei – and a broader push to rebuild foreign reserves at the Central Bank. Investors see the moves as critical to improving Argentina’s credit profile after years of defaults and capital controls.
Bond yields in Argentina have fallen sharply from the distressed levels seen on the eve of the midterms, with yields on the 2035 global dollar bond now around 10 percent. Country risk – a measure of spreads over comparable US Treasuries calculated by JPMorgan’s EMBI index – dropped to the lowest in more than seven years, though a global repricing of risk following the war in Iran has since pushed it higher.
Investors have been waiting for Argentina to return to international capital markets with a foreign-law bond issuance, even as Economy Minister Luis Caputo has ruled out the possibility of an issuance on the short term, and has chosen instead to rely on local sources of funding.
Still, Fitch cautioned that the country’s international liquidity position remains weak and Argentina is particularly vulnerable to potential confidence shocks. Its credit is also constrained by high inflation and a record of macroeconomic instability, the ratings firm said.
by David Feliba & Zijia Song, Bloomberg
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