Country Risk: Javier Milei‘s Daring Dance with Financial Markets
Well, well, well—prepare for a financial rollercoaster, folks! Javier Milei, the liberty-loving, freedom-fighting president of Argentina, is keeping a close eye on that elusive beast known as “country risk.” If you’re wondering if it’s anything like waiting for a bus in the rain, you’re not far off. Country risk is that delightful high-stakes game where the stakes are your fiscal wellness, and last August, things were looking more like a disaster movie than a financial strategy!
Country Risk: Now at 1,100—Would You Loan Us a Dollar?
Take a seat: Argentina’s country risk is bouncing around at a whopping 1,109 basis points! Oh, how lovely—this number was reduced by just 17 units! I mean, how about a round of applause for that remarkable achievement? If you’re wondering what that means in less complicated terms— Argentina’s trying to borrow money, but they have to pay a staggering interest rate of 15% on top of everything else. Meanwhile, the good ol’ ten-year Treasury bonds are lounging around with a leisurely 4.1% rate. Talk about living in a different economic universe!
As they say in finance, “a riskier country pays more”—it’s a statement so obvious it could be on a t-shirt worn by your dad on vacation! But hold onto your wallets; while Argentina tries to look cute with its minuscule reduction in risk, it’s still nearly tripling the Latin American average. Is that a record? Because if it is, they should probably put a safety pin on that trophy!
Now, the local market didn’t have a lot of movement recently, almost like it was on a coffee break. However, abroad, sovereign debt bonds rallied with a shiny average recovery of 1%. Is this a sign of hope or just a really well-timed sneeze? Only time will tell!
Expectation in Argentina: Is There a Plan or Just Wishful Thinking?
With all this chaos, the national government is scurrying around trying to arrange some alternative financing. They’re throwing out a Repo plan that might see between US$3,000 and US$3,500 million to keep capital payments for January 2025 safe. Because erring on the side of caution has never been their strong suit, right? And by the way, did you know Argentina currently holds the fourth highest country risk in all of Latin America? Who knew it was a competition? At least they’ve managed to drop two notches in just a year—talk about taking tiny baby steps toward progress!
For the curious, Argentina is presently trailing behind the heavyweights: Venezuela with a jaw-dropping 20,253 basis points, Bolivia at 2030 bps, and Ecuador at 1165 bps. But let’s not stop there—check out the neighbors! Brazil is at a cozy 198 basis points, and even Peru and Paraguay are chilling at 153 and 152, respectively. Oh, Chile is flexing with its 113 bps, and don’t even get me started on Uruguay sitting pretty at 88 points. I mean, some countries really know how to throw a party without blowing the budget, don’t they?
So here we are, in a situation so familiar yet novel—country risk values are now at levels we haven’t seen since the infamous debt exchange of September 2020. Back then, the index took a nosedive from 2,147 to 1,104 in a day. It’s almost like that classic scene in the movies where everything collapses, and then they make a triumphant comeback—if only financial markets could manage their drama a bit better!
In conclusion, as Milei’s administration continues its never-ending quest to return to the international credit markets, we watch with popcorn in hand, ready for whatever comes next. Will Argentina get back on solid financial ground? Or will they be forever chasing a mirage? One thing’s for sure—this economic saga is just warming up, and the theatrics are bound to continue!
country risk
Javier Milei’s administration is closely monitoring the decline in country risk.
The libertarian administration closely observes this indicator, which is key for it to return to international credit markets. However, nothing guarantees a trend: in August, Argentina’s country risk had skyrocketed.
Country risk at 1,100: is it enough for credit?
The indicator lost 17 units and stood at 1,109 basis points (-1.51%). That is to say, as ten-year Treasury bonds are currently trading at a rate of 4.1%, to finance itself Argentina has to pay an annual interest rate of 15%.
As its name indicates, When a country is riskier, it must pay a higher rate when seeking financing in the market.
But some analysts point out that There is still a long way to go to reach “reasonable” levels in terms of country risk: at the moment the index almost triples the Latin American average.
Although the local market had no movements this Friday, sovereign debt bonds operating abroad did quote, which had a recovery of 1% on average.
This had a direct impact on country risk, an index prepared by JP Morgan and which measures the difference paid by US Treasury bonds (considered the safest assets in the world) compared to the rest of the countries.
Expectation in Argentina
The national government is trying to close some alternative form of financing and advanced a Repo for between US$3,000 and US$3,500 million to guarantee capital payments for January 2025.
Argentina has the fourth highest index in all of Latin America, although in the last year it managed to drop two notches.
Ahead are Venezuela (with a country risk of 20,253 basis points), Bolivia (2030 bps) and Ecuador (1165 bps).
In contrast, the Latin American average is 427 basis points, and even neighboring countries are much lower.
For example, in Brazil the indicator is located at 198 basis points, in Peru it is 153 basis points, in Paraguay it is 152 basis points, Chile follows with 113 basis points and the best positioned is Uruguay, with 88 points.
In any case, currently the country risk reaches values that have not been observed since the debt exchange of September 2020. At that time it collapsed by half: it went from 2,147 to 1,104 basis points in just one day.
