Ratings agency Standard & Poors has upgraded Argentina to B, the same level as Fitch and now one above Moody’s. The move follows hot on the heels of an upgrade from Fitch.
The sovereign credit rating is still well in junk territory, denoted by the grey shading in the chart, right. The highlighted green line is S&P’s historical rating for Argentina; red is Fitch and blue Moody’s. Click on the graphic to explore the full graphic, in which you can compare countries side by side.
Argentina’s central bank on Thursday relaxed key monetary targets after overshooting annual goals for growth in monetary aggregates, heralding a stance that favours stoking growth over reining in inflation.
It is the first time the central bank has failed to meet the monetary programme since Argentina introduced the method in 2003, and points to a central bank increasingly at the service of a spendthrift government, which ejected the former central bank president earlier this year for refusing to hand over reserves to pay debt.
State spending is growing at more than 30 per cent a year and national, provincial and municipal expenditure adds up to 45 per cent of gross domestic product, says Fausto Spotorno, an analyst at consultancy OJF. Read more on ft.com.
By Jude Webber
Argentina’s government has unveiled stricter controls on dollar purchases in what it says is a crackdown on money laundering and tax evasion. Though people will still be able to buy $2m a month without justifying their purchases, the idea is to eliminate cash transactions and use tax data to scrutinise operations.
Here’s what economist Miguel Kiguel had to say before the measure – which was leaked in the press over the weekend – was formally announced:
In line with … higher demand and with the fear of losing reserves, it has emerged in the local media that the Central Bank is going to announce new regulatory measures for the currency market. We do not believe that these stricter controls will be effective to reduce capital flight but they could be taken as a sign that the government is willing to increase controls to avoid losing reserves. However, it is difficult for these stricter controls to prevent capital flight and it is more likely that they will end up an incentive for the informal market, increasing the spread between the informal and official dollar.
By Jude Webber in Buenos Aires
The gospel according to Argentina goes something like this: thou shalt not default.
According to former central bank chief Martín Redrado, Argentina may be in no position to dish out recommendations to the likes of Greece, but if there is one thing it learned in its 2001 crash – the biggest sovereign default in history on nearly $100bn – it is this: default is not an option.
Argentina knows first-hand the pain involved in bailing on creditors and a disorderly exit to a fixed currency regime. The cost was economic and social chaos and it is still paying the price.
Speaking to Bloomberg Television in London, Mr Redrado said markets remained sceptical about relying on fiscal adjustment and so Greece should reschedule debt in a market-friendly way. He also noted how Latin America had moved from fixed to flexible currency regimes and was now a “beacon of stability and growth” in emerging markets. He said:
Straying from the orthodox path
Some Latin American countries have made some less-than-orthodox decisions during the crisis. What does the IMF have to say about them? For the most part, Nicolás Eyzaguirre, the IMF’s director of the Western Hemisphere department, was, if not supportive, not critical either.
Asked at a presser during the IMF spring meetings about Argentina’s decision to pay back its debt using central bank reserves (a saga which felled one resistant central bank governor), Mr Eyzaguirre responded: “Each country decides on its own sovereignty how it’s going to decide with debt management, so we don’t have an opinion on that.”
He was also emphatic that the Fund had not objected to Brazil’s decision to tax capital inflows. “Our first reaction
From Ft.com
By Jude Webber, Argentina correspondent
Argentina’s Senate on Wednesday confirmed the designation of a pro-government economist as head of the central bank by the slenderest of margins after weeks of legal wrangling sparked by President Cristina Fernández’s move to use some of the institution’s foreign currency reserves to repay debt.
The confirmation of Mercedes Marcó del Pont – by 35 votes to 34 – was a boost for the government days before it hopes to unveil a debt swap designed to mop up $20bn (£13bn, €14.7bn) of debt still unpaid since Argentina’s 2001 default on some $100bn.
The government had hoped to unveil details this week, but the timetable has slipped pending final regulatory approval.
Ms Marcó del Pont, a Yale-trained development economist who favours making the central bank a catalyst for growth and jobs, rather than just guardian of monetary stability, was installed by Ms Fernández in February after she fired predecessor Martín Redrado, who had opposed the use of reserves.
By Jude Webber, Argentina correspondent
After weeks of legal wrangling, Argentina’s government is free – at least for now – to start using a chunk of central bank reserves to pay debt after judges overturned the suspension of a controversial emergency decree issued by President Cristina Fernández earlier this month.
Tuesday’s rulings are not yet the end of a three-month saga over the government’s attempt to tap reserves, however. The move snowballed into an unprecedented political crisis and sparked the exit earlier this year of the central bank governor.
Opposition parties will seek to overturn the emergency decree in Congress on Wednesday, but they are not certain of being able to muster the votes necessary in the Senate to strike it down. Read more
A night for critics of central bank politicisation
If ever there was a night to give fodder to critics of central bank politicisation, it was last evening.
South Korea maintained its interest rate at 2 per cent, after pressure from the government on outgoing central bank president Lee Seong-tae.
Then the Argentine Senate failed to achieve quorum today to debate the appointment of the new president of the Bank of Argentina.
From Jude Webber on ft.com:
An Argentine senate committee on Wednesday voted against the nomination of central bank governor Mercedes Marcó del Pont, raising the prospect that the country could be looking for a second new bank chief in as many months.
The vote came as opposition parties in Argentina, which seized control of the Senate on Wednesday, stepped up their fight against two decrees issued this week by Cristina Fernández, the president, authorising the use of central bank funds to pay off debt.
The government admits that Ms Marcó del Pont, designated as central bank governor last month, has transferred the reserves and it has already started using them.
But the move still has to be ratified by the Senate and many in the opposition, incensed by what they see as Ms Fernández’s bid to outmanoeuvre Congress, say they will not back her. That could force the president to name a second new central bank governor in as many months.(emphasis ours)
By Jude Webber in Argentina
After more than two months of legal and congressional battling, Argentine President Cristina Fernández on Monday unveiled a new bid to tap central bank reserves to pay off debts.
In a surprise move at the opening of a new session of Congress after the southern hemisphere summer recess, the president scrapped the controversial decree she issued in December ordering the central bank to transfer some $6.5bn in reserves to a planned government debt-repayment fund.
Returning lawmakers were to have debated the validity of the decree, and the government looked set to lose, sparking speculation the government would seek to present a law to tap the reserves. It says using the funds exceeding the monetary base is logical and a cheap option for a country which still owes some creditors nearly a decade after its default on $100bn. Read more
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Chris Giles has been the economics editor of the Financial Times since 2004. Based in London, he writes about international economic trends and the British economy. Before reporting economics for the Financial Times, he wrote editorials for the paper, reported for the BBC, worked as a regulator of the broadcasting industry and undertook research for the Institute for Fiscal Studies. RSS
Ralph Atkins, Frankfurt bureau chief, has been writing about European economics and politics for the Financial Times for more than 20 years following an economics degree from Cambridge. He has been watching the European Central Bank and eurozone economies since 2004. He has previously worked in London, Bonn, Berlin, Jerusalem and Brussels. RSS
Robin Harding is the FT's US economics editor, based in Washington. Prior to this, he was based in Tokyo, covering the Bank of Japan and Japan's technology sector, and in London as an economics leader writer. Robin studied economics at Cambridge and has a masters in economics from Hitotsubashi University, where he was a Monbusho scholar. Before joining the FT, Robin worked in asset management and banking. RSS
Claire Jones is Money Supply economics team writer, based in London. Before joining the Financial Times, she was the editor of the Central Banking journal and CentralBanking.com. Claire studied philosophy and economics at the London School of Economics. RSS
James Politi is US economics and trade correspondent for the Financial Times, based in Washington DC. He joined the Washington bureau in January 2008 following four and a half years as US deals correspondent covering M&A and private equity. James Politi joined the FT in London in 2000 with an MSc at the London School of Economics, and undergraduate degrees from Georgetown University and the University of Florence. RSS
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