More bad news from the rating agencies: Moody’s revises outlook of Argentine provinces and municipalities from “stable” to “negative”
Post date : 08.08.2014 4:11 pm
Argentina’s decision to default is starting to catch up with the country. S&P declared the country to be in default last week. Yesterday Fitch downgraded Argentina’s financial institutions. Now Moody’s has followed promptly with a press release announcing it was downgrading the outlook for Argentina’s provinces and municipalities.
Moody’s gave the following rationale for the decision: “Argentina´s default could increase pressure on the country´s operating environment through its official foreign exchange reserves amid continued economic stagnation. Argentina is mired in stagflation with a GDP that declined 0.2% year-over-year during the first quarter and high inflation of over 30%, driven in good part by continued currency depreciation. The default is likely to exacerbate the economic contraction, increase pressure on the exchange rate, and push inflation even higher.”
This latest ratings downgrade will only make borrowing conditions more difficult and more expensive for the country. Countless articles have been published discussing Argentina’s struggling economy and the picture only looks to be getting bleaker. Instead of focusing on resolving its debt crisis, Argentina is now attempting to take its issues with its creditors to The Hague.
The Economist just published an article today discussing how the government is to blame for Argentina’s struggling economy.
“In 11 years in power the Kirchners have preferred nationalism and confrontation to pragmatism and professional competence, while focusing relentlessly on the short term…Even before the default, the economy was set to contract by about 1.5% this year. Businesses are laying off workers, or cancelling overtime. The current account and the public finances are both in deficit. Inflation is at 39%, according to Elypsis, a consultancy. On the black market a dollar costs nearly 50% more than it does at the official exchange rate.”
The Economist concludes that “the uncertainty Ms. Fernandez has unleashed will curb investment…a better–advised and more pragmatic president would find it fairly easy to the put the economy back on track and win foreign investment…next year’s election is likely to produce this outcome.”
Let’s hope the Argentine people don’t have to wait until the end of 2015 for the government to put the country on the right track.