S&P Revises Argentina’s Sovereign Debt Rating Outlook to Negative

April 24, 2012

Standard & Poor’s revised its outlook on Argentina’s sovereign debt rating to negative from stable on Monday, citing policies that include a government push to seize control of energy company YPF from Spain’s Repsol.

President Cristina Fernandez announced the YPF takeover last week, drawing swift retaliation from Spain and criticism from other key trade partners tired of her government’s unorthodox import curbs.

S&P reaffirmed Argentina’s highly speculative ‘B’ rating and said its negative outlook indicates at least a one-in-three chance of a downgrade this year or next.

“The negative outlook revision stems from policies enacted since the October 2011 presidential elections that we believe could over time increase the risk of a deterioration in the country’s macroeconomic framework, put pressure on its external liquidity, and weaken Argentina’s medium-term growth prospects,” the rating agency said in a statement.

Fernandez, a combative member of Argentina’s dominant Peronist party, won a landslide re-election in October, vowing to intensify the state-centric policies that please her supporters but irk Wall Street and some business leaders.

Earlier this year, her administration imposed tough new import restrictions in a bid to bolster the trade surplus, triggering criticism from 40 countries at the World Trade Organization last month.

S&P said Fernandez’s move to expropriate a 51-percent controlling stake in YPF was taken “abruptly and unilaterally,” and said it underscored “the weakening system of checks and balances.”

The YPF takeover bill is expected to win easy approval in Congress, which Fernandez’s allies control. The upper house is due to debate the bill on Wednesday.

Argentina, Latin America’s No. 3 economy, has yet to return to global credit markets a decade after it staged the biggest sovereign debt default in history.

 

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