Argentinas country risk falls to lowest level since 2018

Argentina’s country risk, as measured by JP Morgan, fell to 517 basis points on Monday — the lowest level since June 2018.  The indicator measures the probability of a country incurring un sovereign default. Having a low score, therefore, is key to regaining access to the international debt market. Country risk was close to 2,000 points when Javier Milei took office in December 2023. By early last year, his administration’s pro-market reforms brought it down to around 700 points. However, doubts over the economic program and an unexpected landslide Peronist win in the Buenos Aires province legislative elections took it over 1,400 points during October. Monday’s figure is the most recent indicator of a downward trend that began at the turn of the new year. The reason for the drop According to economic analyst Gustavo Ber, the decline in country risk is due to the market’s “positive reading” of the recent Central Bank’s reserve purchases, as well as an “external context that is still inclined toward global and emerging market risk appetite.”  The purchase of reserves has been a crucial turning point. After striking a deal with the International Monetary Fund (IMF) in April, the Argentine administration seemed bent on avoiding international reserve purchases on the grounds that they believed it would trigger a spike in inflation.  However, in January, the Central Bank adopted a new “monetary scheme” that included reserve accumulation. Since then, the monetary authority has bought over US$800 million. Argentina’s access to international markets has been voided since 2018, after the collapse of then-President Mauricio Macri’s first economic program.  According to Ber’s estimates, Argentina could be “around 100 basis points away” — close to 400 points — from “regaining deeper and more fluid access to financial markets, both local and international.” Bonds saw increases after the country risk’s fall. In the local market, the dollar-denominated sovereign bonds that are rising the most are Global 2035, up 0.7%, followed by Global 2038, also up 0.7%. Global 2041 completes the podium, with a 0.6% improvement.