BUENOS AIRES, (Reuters) – Argentina’s country risk index plunged yesterday to its lowest level since July 2019 as markets showed confidence in its public debt performance, fiscal surplus, inflation curbs and government dollar buybacks under libertarian President Javier Milei.
The JPMorgan risk benchmark, which shows the yield spread on bonds versus comparable U.S. debt, fell to 772 basis points at 2000 GMT, after breaking the barrier of 800 basis points at market close on Wednesday.
The sharp fall in Argentina’s country risk, a measure of investment exposure, is crucial to the country’s access to international credit. This comes as the country prepares to renegotiate a massive $44-billion loan agreement with the International Monetary Fund, due in December.
A year ago, in the final months of the center-left Peronist government of Alberto Fernandez, the country risk was around 2,500 points.
The index has been trending downward since Milei took office in December 2023, bringing tough austerity measures and pro-market reforms that have helped reverse an entrenched fiscal deficit and improve the state’s finances.
Milei’s cost-cutting agenda has pushed up poverty and hurt economic growth even as it results in record bond parities, highs in the Buenos Aires Stock Exchange and recovering central-bank reserves.
“Things are coming along better than we expected,” economist Miguel Kiguel, director of Econviews, said in a radio interview. “From a financial point of view, it is a time of euphoria, with very low country risk, with a very stable dollar … (but) we must know that policies that are working well can go off track at some point.”
The market rally is a welcome backdrop for Milei as he prepares to meet U.S. President-elect Donald Trump in Florida on Thursday.
Milei’s good realationship with Trump is likely to help the government reach a good trade deal with the U.S., local investment firm Wise Capital said.
The risk index drop comes a day after official data showed annual inflation falling below 200% in October for the first time in close to a year.
“We are exterminating inflation,” Milei said at a public event on Wednesday night, although consumers still feel stretched by one of the highest inflation rates in the world.