MercoPress. South Atlantic News Agency

Fitch warns Argentina on ‘inconsistent policies’ that spur inflation and volatility

The country remains blocked from international credit markets since 2001

Argentina’s sovereign rating is “heavily constrained by inconsistent” policies that have accelerated inflation and economic volatility, Fitch Ratings said three days before presidential elections.

Growth in Argentina will be “weighed down” by a slower global expansion, increasing risk aversion and a weakening Brazilian Real Fitch said in a report released Thursday. The ratings company upgraded Argentina’s long-term foreign currency rating to B, with a stable outlook, in July last year, citing the nation’s second debt restructuring since a 2001 default on 95 billion dollars of bonds.

“Sovereigns in the ‘B’ category tend to be more vulnerable to challenging external environments given their weak policy frameworks” Fitch said. “These could lead to unorthodox policy choices that would exacerbate their economic situation.”

Under President Cristina Fernandez, Argentina nationalized the 24 billion dollars pension fund industry and tapped central bank reserves to pay debt and control a weakening of the peso.

The government has remained blocked from international credit markets since its 2001 default and has about 9 billion collars outstanding to the Paris Club group of creditor nations. Annual inflation economists estimate at 24% is “one of the biggest” issues facing Argentina, Fitch said.

“The deceleration in global growth, the fall in commodity prices, higher risk aversion and the real depreciation will pose challenges” for Cristina Fernandez’s government after the election, Fitch said.

“It’s not clear if the next administration will address some of the inconsistencies in the policy mix that will allow a soft-landing for the economy.”

A credit rating of B from Fitch puts Argentina in the same category as Ukraine and Cameroon.

Argentina’s economy will expand 4.5% in 2012, Fitch said, less than the average 5.6% annual rate since Cristina Fernandez, took office in 2007. She is expected to win a second four year term next Sunday.