Fitch Ratings has upgraded Argentina’s credit score, reflecting an increasing confidence in President Javier Milei’s efforts to reform the economy and obtain financing for the nation’s forthcoming debt commitments. The South American nation was upgraded to ‘B-‘ from ‘CCC+’, which is six notches below investment grade, according to a statement released by the ratings firm on Tuesday. The outlook remains stable. The action “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 noted in the statement.
Milei’s administration has garnered the confidence of investors through a combination of assertive fiscal adjustments, deregulation, and initiatives aimed at normalizing Argentina’s monetary and exchange-rate framework. Markets have experienced a significant rally following Milei’s consolidation of power in Congress post-October’s midterm elections, heightening expectations that his reform agenda may advance with reduced political impediments. The ratings action is indicative of a sequence of policy measures designed to incrementally re-establish market access. This includes a US$1-billion local-law bond issuance in December and a US$3-billion repurchase agreement with international banks in January, marking the third such operation under Milei.
Additionally, there is a comprehensive effort to enhance foreign reserves at the Central Bank. Investors regard these actions as essential for enhancing Argentina’s credit profile following a prolonged period of defaults and capital restrictions. In Argentina, bond yields have experienced a significant decline from the elevated levels observed prior to the midterm elections, with the yield on the 2035 global dollar bond currently hovering around 10 percent. Country risk, as indicated by spreads over comparable US Treasuries derived from JPMorgan’s EMBI index, has declined to its lowest level in over seven years. However, a global repricing of risk triggered by the conflict in Iran has subsequently led to an increase in this measure.
Investors have been anticipating Argentina’s re-entry into international capital markets through a foreign-law bond issuance. However, Economy Minister Luis Caputo has dismissed the likelihood of such an issuance in the near term, opting instead to depend on domestic funding sources. Fitch has indicated that the international liquidity position of the country continues to be weak, highlighting Argentina’s particular vulnerability to potential confidence shocks. The ratings firm noted that high inflation and a history of macroeconomic instability also constrain its credit.