In early April, Argentina’s financial health showed signs of improvement, with its country risk falling to 1,302 basis points.
This was its best performance since September 2020, when the figure briefly dipped to 1,101 points.
This improvement came shortly after Argentina restructured its debt and JP Morgan adjusted its index to include new Argentine bonds.
Under the leadership of President Javier Milei, Argentina’s bonds have surged, mirroring levels seen right after its debt was restructured.
Experts believe the country’s risk level has more room to decrease, which is crucial to avoid a default in 2025 when debt payments spike.
So far in 2024, the country’s risk has plummeted by 31.7%. Analysts remain positive, with projections suggesting the risk could drop to 1,100 points by mid-year.
Achieving a fiscal surplus could further reduce it to between 800 and 900 points by year-end.
Argentina currently ranks third in Latin America for highest risk, behind Bolivia and Venezuela.
However, it’s performing better than Ecuador and has significantly improved compared to El Salvador.
Observers suggest that sustainable fiscal policies and structural reforms could align Argentina with countries having higher ratings.
This shift could lower bond yields to between 9 and 11% and reduce country risk to between 500 and 700 points, although these are longer-term goals.
Others emphasize the importance of reducing country risk to prevent defaulting on $9.5 billion in bond maturities by 2025.
Strategies like securing short-term debt and exploring bond exchanges could provide interim solutions.
Recovery expected to begin in the second quarter of 2024
Lowering country risk is also crucial for accessing affordable financing rates, which will support Argentina’s economic recovery expected to begin in the second quarter of 2024.
This recovery will likely be driven by the end of a drought and fiscal adjustments.
Investors stand to gain, potentially seeing up to 30% returns as the yield curve normalizes around a 15% yield.
The success of these improvements hinges on the government’s ability to implement sustainable economic reforms.