MercoPress. South Atlantic News Agency

S&P raises Argentina’s long term credit rating based on an improving economy

The Argentine economy is forecasted to expand 7% this year and 4.5% in 2011

Standard & Poor's raised on Monday its long-term foreign currency credit rating on Argentina by one notch, to B from B-minus, citing declining debt levels and an improving economy in 2010.

However the rating remains mired deep within speculative territory but maintains a stable outlook, S&P said in a statement.

“The combination of a strong economic recovery in 2010 supported by favourable external conditions that are expected to persist over the medium term should ease rollover risk,” the statement said.

“Despite the prevalence of a confrontational political and economical approach that has increased polarization, we expect GDP to increase by 7% in 2010 and 4.5% in 2011,” S&P said.

The government “has been able to reduce debt levels in terms of GDP and improve its debt maturity profile in recent years” added S&P.

Moody's Investors Service rates Argentina one notch lower, at B3, while S&P new rating is now equal to that of Fitch Ratings.

The extra yield investors demand to hold Argentine dollar bonds instead of U.S. Treasuries tumbled 39 basis points, or 0.39 percentage point, the biggest drop since May, to 670 today, according to JPMorgan Chase & Co.

S&P and Fitch rate Argentine foreign debt one level above the equivalent B3 rating that Moody’s Investors Service assigns to the securities. Moody’s hasn’t changed the rating since 2005, when the country reached an initial restructuring settlement following the 2001 default on 95 billion US dollars of bonds.