Fitch Ratings has upgraded Argentina’s credit rating, highlighting the nation’s efforts to eliminate currency controls and its achievement in obtaining multilateral funding. The ratings agency elevated the South American country’s status by one level to CCC+, placing it seven tiers into junk territory and aligning it with Ecuador and Sri Lanka, as stated in a release on Monday. Fitch refrains from assigning outlooks to sovereigns rated CCC+ or lower. The shift occurs amid a climate of optimism regarding Argentina, as President Javier Milei commits to revitalizing economic growth through a comprehensive reform agenda. The nation’s debt emerged as one of the top-performing assets in the realm of emerging markets last year.
In April, the government removed the majority of currency-market controls as part of a US$20-billion programme with the International Monetary Fund. Numerous analysts on Wall Street contend that the removal of most capital controls enables the country to more effectively replenish its international reserves, which are essential for stabilizing the peso and fulfilling debt obligations overseas. The recent advancements “have bolstered external liquidity and the durability of President Javier Milei’s economic stabilisation programme,” Fitch analysts including Todd Martínez noted in a communication to clients. “The economic recovery and disinflation have already exceeded our prior expectations and should be further supported by these policy changes.”
The country’s benchmark dollar bonds due 2035 initially rose on the news, subsequently retracting to trade at 68 cents on the dollar, as per pricing data compiled by Bloomberg. According to analysts, the policy changes also place the crisis-prone nation in a more advantageous position to attract foreign direct investment and ultimately access international debt markets. Nonetheless, additional increases in assets could depend on Milei and his team persistently executing a strategy of rigorous fiscal austerity, while also fostering economic growth and sustaining public backing in the lead-up to a crucial midterm election in October.
Fitch warns that the government continues to be excluded from capital markets and has reiterated its commitment to refrain from accumulating hard-currency reserves until the peso appreciates to approximately 1,000 per US dollar. “Reserve accumulation is not assured under the new FX regime due to the authorities’ preference for a strong currency, while external market access remains prohibitively costly,” Martínez said. “Legislative midterm elections in October will likely be a significant factor influencing international reserve dynamics and market access.” In January, Moody’s upgraded Argentina’s credit rating by one level to Caa3, changing the outlook from stable to positive. S&P Global Ratings confirmed its CCC rating in early February.