S&P Upgrades Argentina to B+

as Debt Decreases

 

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 Mon Oct 2, 2006

 NEW YORK, Oct 2 (Reuters) - Standard & Poor's said on Monday it upgraded Argentina's credit ratings to reflect improvement in the country's external liquidity and a decrease in its debt burden.

The ratings agency raised Argentina's long-term local and foreign currency ratings to "B+" from "B". The outlook on the ratings is stable.  "Impressive current account and fiscal surpluses, combined with rapid and broad-based GDP growth in recent years, have strengthened the sovereign's financial profile," S&P said in a research note. "The threat of economic disruption caused by the acrimonious process of debt rescheduling has also abated."

Net external debt may decline toward 95 percent of current account receipts in 2006 from more than 120 percent in 2005. Total public sector debt may fall to less than 60 percent of GDP during the course of 2007 from nearly 80 percent in 2005.

S&P said creditworthiness could improve if Argentina manages to sustain GDP growth with stability, breaking with its record of volatile economic performance, as well as greater regulatory certainty. 

Yet the agency warned that continuation, or deepening, of greater use of discretionary government intervention in markets as in recent years could hit investment over the long-term, constraining GDP growth and Argentina's sovereign rating. The stable outlook on Argentina is based on the expectation of favorable economic performance in 2006 and in 2007, with continued good GDP growth and fiscal and current account surpluses.

S&P also raised its foreign and local currency ratings on the city of Buenos Aires and the province of Mendoza to "B+" from "B". The outlook on Buenos Aires remains positive and the outlook on Mendoza is stable. 

"The upgrades on Buenos Aires and Mendoza are due to the sovereign upgrade and based on the strong links between different levels of government in Argentina," said Standard & Poor's credit analyst Sebastian Briozzo.

 

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