Argentina's score decline in the Euromoney Country Risk survey continues, perpetuating a long term trend that has seen the country plunge to 36.1 points - down 1.9 since Q1 2012 and 6.9 points compared to a year ago. The points-gap between Argentina and Venezuela, the riskiest of Latin Americas major economies according to ECR experts, was 3.6 at the beginning of 2012, but has since narrowed to just 0.8.
With its descent to 100 in the global rankings, Argentina has dropped into the lowest of ECRs five tier system.
All aspects of the ECRs country risk profile have deteriorated since Q1 2012, including contributors scores for the political, economic and structural risk indicators. The only exception was Argentinas already low score in ECRs credit rating indicator, which remained constant.
Argentina has seen large declines in its scores for the economic-GNP outlook, bank and currency stability, and government finances since this time last year.
Real GDP growth of 4.2% is predicted for 2012 by the International Monetary Fund (IMF), less than half the pace of last year, but official data cannot be trusted. An investigation by the IMF, noted in its latest, April 2012, World Economic Outlook (page 65) indicates that, based on surveys and anecdotal evidence, the economy is weaker, and inflation higher, than the official statistics claim.
Moreover, the risks of non-payment/non-repatriation, information access/transparency, the countrys institutions and its regulatory/policy environment have all deteriorated to alarmingly low levels.
And no wonder. As reported widely, including in Latin Finance (Argentina Going South), the governments pursuit of nationalisation (through oil company YPF) and other unorthodox policies including raising tariffs, rationing foreign currency to protect against capital flight, failing to settle outstanding debts and restricting dollar-denominated property purchases - have increased the risk of expropriation, weakened investor confidence and exacerbated the uncertainty that is weighing on the peso.
As Richard Segal, Director of Emerging Markets at Jefferies states,
With Buenos Aires running out of money, the (risk) outlook has been bleak for some time, but particularly in the aftermath of YPF.