Argentina’s sovereign debt rating is unlikely to be raised in the “short term,” said Gabriel Torres, an analyst at Moody’s Investors Service.
Doubts about the accuracy of Argentina’s official statistics, including inflation and economic growth, are an obstacle to the country achieving a better rating, Torres said today at a seminar in Buenos Aires.
“If there’s something that would sum up the problem we have in raising the rating for Argentina, it’s the fact that there’s no confidence in the official numbers,” Torres said. “That’s something that doesn’t happen in other countries.”
Moody’s has a B3 rating on Argentine foreign debt, six levels below investment grade. The company hasn’t changed Argentina’s rating since 2005, when the country reached an initial restructuring settlement following the 2001 default on $95 billion of bonds.
Economists and politicians including Vice President Julio Cobos and former Economy Minister Roberto Lavagna began to question official statistics in early 2007, when then-President Nestor Kirchner made personnel changes at the national statistics institute. Kirchner said the changes were made to “improve operations,” and the government has denied its data are inaccurate.
South America’s second-biggest economy has expanded an average of 8.5 percent from 2003 to 2008 and grew 0.9 percent last year, amid a global financial crisis that hurt the country’s exports. The central bank says the economy will expand 9.5 percent this year, the most since 1992, fueled by a record soybean crop, strong industrial production and domestic consumption.
While Argentina’s statistics agency reported that consumer prices rose in August 11.1 percent from a year earlier, former Deputy Economy Minister Orlando Ferreres said real inflation is running at 25 percent. The country reported 0.9 percent economic growth in 2009, while Ferreres said there was a contraction.
“If you look at Argentine numbers, even with the doubts about them, the country’s credit rating could be higher,” Torres said. “Argentina doesn’t have structural problems that limit the country to the current credit rating. There are political decisions that can be resolved.”
Torres said that the existence of defaulted bonds that weren’t exchanged for other debt in a June swap presents a legal problem for the South American country if it wants to tap international credit markets.
In June, President Cristina Fernandez de Kirchner restructured $12.2 billion in bonds that were held out of a 2005 exchange. Fernandez said in a speech in Germany yesterday that Argentina seeks to restructure its defaulted debt with the Paris Club group of creditor nations.
The cost of protecting Argentine debt against non-payment for five years with credit-default swaps has dropped 180 basis points this year to 736 yesterday, according to data compiled by CMA Data Vision. Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to debt accords.
Last month, Argentina’s credit rating was raised by Standard & Poor’s, which said the country’s “strong” economic expansion is helping it make debt payments.
S&P raised the foreign and local debt ratings one level to B, in line with Bolivia and Honduras and five steps below investment grade. The increase matches a move made by Fitch Ratings in July.
The South American country has blocked the International Monetary Fund since 2006 from making a so-called Article IV consultation, a review of economic policies and data that every member of the organization submits to on an annual basis. The country has taken that stance since former President Kirchner paid off about $9.5 billion in debt to the lender in early 2006.
“When you join the IMF, one of the things you agree to is to do this, it’s one of the rules of the game,” Torres said. Without the Article IV reviews, “there’s no control” on the economy, he said.
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