Argentina’s debt rate cut

For a second time since August this year, Standard & Poor’s (S&P) has cut Argentina’s debt ratings following increased concern that the financial crisis will affect their commodity exports and result in defaulted payments.

The foreign debt rating has been lowered to B- from B and comparatively it is six grades lower than Lebanon for investment.

Many analysts have described it as a financial disaster as bonds have fallen during the month and with falling commodity prices as predicted, as well as tax revenue being down, the President has made moves to nationalise pension funds.

On Friday, the Argentine peso was down by 0.9 percent and was trading at 3.3865 against the dollar, and with a 7.5 percent drop last month (which is the biggest monthly drop since 2002), many Argentineans are now actively ‘seeking refuge’ in the American dollar to protect themselves against hyper inflation.

Since the country’s last default, it has not been able to access international debt hence the reason why President Cristina Fernandez de Kirchner is having to put together such emergency and unorthodox plans in order to make the necessary payments.

Financial flexibility in the country is extremely limited and that was, in part, what prompted S&P to move, as well as increased political tension which is further threatening stability.

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