Bloomberg reported on the 13th (local time) that credit rating agency S&P has downgraded Argentina’s credit rating from “CCC—” to “Selective Default or SD.”
The downgrade was attributed to President Javier Milei, known as “Argentina’s Donald Trump,” ordering a bond swap. The Argentine government previously implemented a policy to exchange peso-denominated bonds worth $65 billion (approximately 86 trillion won) due this year for new bonds maturing in 2025-2028. Bondholders who held about 77% of the bonds agreed.
Previous governments have also conducted similar debt swaps. However, under the Milei administration, the scale has increased to record levels. This decision reflects the authorities’ intention to curb inflation and accumulate foreign currency reserves.
However, S&P stated that “the non-performing loan swap is as good as default” and pointed out that “the long-term rating trajectory depends on the new government’s ability to stabilize.”
In Argentina, the central bank implemented drastic policies, such as reducing the benchmark interest rate by 30 percentage points once a day before Milei took office. However, there is still a lot of volatility related to debt and inflation.
The Consumer Price Index (CPI), released the previous day, was mixed. It rose 13.2% compared to the previous month, falling below experts’ forecast of 15%, but compared to the same month last year, it recorded a 33-year high at 276.2%. Bloomberg explained, “Inflation has been falling since its peak in December last year, but the pace of moderation will decrease as Milei abolishes state government subsidies for energy and transportation.”
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