Argentina’s bond prices have dropped, showing that investors expect a major debt restructuring soon.
Even big financial firms foresee Argentina’s risk of not paying its debts.
The American company Moody’s mentioned in a report that economic issues in Argentina might lead to a credit event by 2024-2025.
The report highlights the upcoming vote as critical. Argentinians will have to choose between two tough paths.
They can support Milei’s big fiscal adjustments or Massa’s unorthodox policies that could worsen economic issues.
On credit, Moody’s thinks the longer Argentina’s problems stay unresolved, the harder they’ll be to fix.
But, Milei’s strong measures could address these imbalances and reduce economic distortions.
This approach would need big economic changes and might reduce domestic demand quickly.
If Milei wins, it will be crucial to see if he can apply these policies with limited political support in Congress.
Both paths, Moody’s says, increase the chance of a credit event due to Argentina’s low foreign currency reserves and a shrinking economy.
Argentina has many global and European bonds worth $67.6 billion due between 2024 and 2046.
Moody’s notes that Argentina has often faced tough economic times but rarely has it seen such large imbalances.
One big issue is the official exchange rate control, which causes price issues and lags behind the market rate.
Instead of helping, this situation fuels inflation and raises inflation expectations.
Lastly, Moody’s report also points out that non-financial companies might have credit troubles by 2024.
They face risks because of the economic downturn, high inflation, currency devaluation, and tough financial conditions.
Most companies also have credit risk due to external refinancing risks and exchange rate swings, as Argentina has limited access to international capital markets and strict capital controls.
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This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error · Editorial responsibility: Matthias Camenzind, Editor-in-Chief