This article first appeared on GuruFocus.
Moody’s Ratings (NYSE:MCO) has upgraded Argentina’s sovereign credit score to B3 from Caa1 with a positive outlook, giving the country its third major rating increase in less than three months and providing further support for President Javier Milei’s economic reform program. Although Argentina remains deep in speculative-grade territory, Moody’s move means all three leading credit-rating agencies now place the country above the highly distressed category. Moody’s analysts said Argentina’s default risk has declined materially as macroeconomic stabilization has moved beyond the initial adjustment stage and developed into a more durable improvement in credit fundamentals. The agency also pointed to stronger exports, rising foreign direct investment in the energy and mining sectors, better access to external financing, and signs of improving governance.
The Moody’s decision follows Fitch Ratings’ upgrade of Argentina to B1 in May and S&P Global Ratings’ similar action in June, with the agencies highlighting Milei’s progress in restoring fiscal accounts and reducing inflation from triple-digit levels. Argentina’s sovereign bond spread over comparable U.S. debt has narrowed to nearly 400 basis points, the lowest level in eight years, as investors appear increasingly willing to reconsider the country’s risk profile. The upgrades could also broaden the group of investors allowed to own Argentine debt, since additional moves away from distressed ratings typically expand the number of institutional mandates permitted to hold the bonds. Argentina’s government believes borrowing costs still do not fully reflect its improving fiscal and external position and has argued that spreads should be closer to the 250-to-300-basis-point range.
Milei’s government has maintained fiscal surpluses while using local-law dollar debt, repo agreements with international banks, and multilateral-backed financing to meet outstanding obligations. Argentina’s central bank also purchased more than $10 billion in foreign currency during the first half of 2026, meeting the government’s reserve-accumulation target with the International Monetary Fund, while officials gradually eased some capital controls and advanced reforms to normalize the monetary and exchange-rate system. Moody’s positive outlook suggests Argentina could receive further upgrades if structural improvements in external finances continue alongside macroeconomic stabilization. However, the agency warned that risks remain ahead of the 2027 presidential election, although it said the range of possible policy outcomes has narrowed compared with earlier election cycles, potentially improving the chances of policy continuity.
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