Argentina’s country risk, as measured by JP Morgan, decreased to 517 basis points on Monday — the lowest level observed since June 2018. The indicator assesses the likelihood of a nation experiencing a sovereign default. A low score, consequently, is essential for reestablishing access to the international debt market. Upon Javier Milei’s assumption of office in December 2023, country risk hovered near 2,000 points. By early last year, the pro-market reforms implemented by his administration resulted in a decline to approximately 700 points. However, uncertainties regarding the economic program and an unforeseen landslide victory for the Peronists in the Buenos Aires province legislative elections caused a decline of over 1,400 points during October. Monday’s figure serves as the latest evidence of a declining trend that commenced at the start of the new year.
Economic analyst Gustavo Ber attributes the decrease in country risk to the market’s “positive reading” of the recent Central Bank’s reserve purchases, alongside a “external context that is still inclined toward global and emerging market risk appetite.” The acquisition of reserves represents a significant inflection point. Following the agreement with the International Monetary Fund in April, the Argentine government appeared determined to refrain from international reserve acquisitions, citing concerns that such actions would lead to an increase in inflation.
In January, the Central Bank implemented a new “monetary scheme” that encompassed reserve accumulation. Since that time, the monetary authority has acquired more than US$800 million. Since 2018, Argentina has been unable to access international markets, a consequence of the failure of the initial economic program under then-President Mauricio Macri. Ber’s estimates suggest that Argentina may be “around 100 basis points away” — nearing 400 points — from “regaining deeper and more fluid access to financial markets, both local and international.”
Bonds experienced an uptick following the decline in country risk. In the local market, the dollar-denominated sovereign bonds experiencing the highest increases are Global 2035, which has risen by 0.7%, and Global 2038, which has also seen a rise of 0.7%. Global 2041 secures the third position, reflecting a 0.6% enhancement.