BUENOS AIRES: Ratings agencies Fitch and Standard & Poor’s downgraded Argentina’s sovereign debt rating, flagging higher chances of a default in the wake of a shock primary election result that plunged the country into its latest economic crisis.
Argentine markets were in free-fall for most of the week after Sunday’s vote when center-left presidential candidate Alberto Fernandez trounced center-right President Mauricio Macri. The scale of Fernandez’s victory suggested he could win the October ballot in the first round, potentially putting an end to free-market economic reforms and an IMF-backed austerity plan.
The downgrades cap a tough week in which the peso lost nearly 20% of its value, forcing the central bank to eat into its reserves with dollar auctions. Fitch downgraded Argentina’s sovereign debt rating from ‘B’ to ‘CCC,’ while S&P lowered its rating to ‘B-‘ from ‘B.’
“The downgrade of Argentina’s ratings reflects elevated policy uncertainty following the primary elections, a severe tightening of financing conditions, and an expected deterioration in the macroeconomic environment that increase the likelihood of a sovereign default or restructuring of some kind,” Fitch said.