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Unsolicited Ratings On The Republic Of Argentina Affirmed At 'B', Outlook Remains Negative

October 1, 2012 Standard & Poor's
Recent government policies could increase risks in Argentina's
macroeconomic framework, squeeze its external liquidity, and hinder
medium-term growth prospects, in our view.
Compensating these weaknesses, at the current rating, is the government's
declining principal payments on capital market debt over the next two
We're affirming our 'B' unsolicited long-term foreign and local currency
sovereign credit ratings and 'raAA' national scale rating on Argentina.
The 'B' transfer and convertibility assessment remains unchanged.
The outlook remains negative.
BUENOS AIRES (Standard & Poor's) Sept. 28, 2012--Standard & Poor's Ratings
Services said today that it affirmed its 'B' unsolicited long- and short-term
sovereign credit ratings and our 'raAA' national scale rating on the Republic
of Argentina. The outlook on the ratings remains negative. Our 'B' transfer
and convertibility assessment on Argentina remains unchanged.

We assigned the negative outlook in April 2012 based on the implication of
policies enacted since the October 2011 presidential elections that we believe
could over time increase the risk of a deterioration in the country's
macroeconomic framework, put pressure on its external liquidity, and weaken
Argentina's medium-term growth prospects.

"These policies include rising restrictions on international trade and access
to foreign currency, a modification to the Central Bank charter, and a growing
level of public-sector intervention into different sectors of the economy,"
said Standard & Poor's credit analyst Sebastian Briozzo. "The government
implemented these changes unilaterally and with little negotiation with the
other participants, underscoring the weakening system of checks and balances
in Argentina, in our view."

We believe that these actions could exacerbate the existing weaknesses in
Argentina's economy, including high inflation (which continues to appreciate
Argentina's real exchange rate) and increasingly rigid government
expenditures, and result in a deteriorating medium-term fiscal outlook and
investment climate. These policies have contributed to a significant slowdown
in economic activity in Argentina in 2012, despite high agricultural commodity
prices. We expect real GDP to expand about 1.5% in 2012.

Congressional elections scheduled for October 2013 will determine how much
room to maneuver the administration will have during the second part of its
four-year term. Despite the more challenging domestic environment, Argentina's
GDP could certainly benefit in 2013 from high agricultural commodity prices
and the expected recovery in Brazil's economy (40% of Argentina's industrial
exports go to Brazil). We expect real GDP growth to improve marginally in 2013
to a level close to 3%.
Company — Argentina
  • Full name
    Republic of Argentina
  • Registration country