By Leila Miller and Rodrigo Campos
BUENOS AIRES, May 12 (Reuters) – Argentina’s country risk hit its lowest level since the beginning of February as confidence in the government’s ability to pay back its debt grows, triggering talk about whether it is time for the South American country to return to international capital markets.
On Monday, Argentina’s country risk index, a measure of how confident investors are about sovereign debt payments, tightened to 498 basis points (bps) on JPMorgan’s EMBI Global Diversified Index.
It follows last week’s one-notch credit rating upgrade from Fitch Ratings to “B-” with a stable outlook. The B rating implies that “capacity for continued payment is vulnerable to deterioration,” though not necessarily teetering toward default.
Economy Minister Luis Caputo and other officials have said they want the spread to drop closer to 250 basis points before issuing new international bonds, arguing that for now the country has cheaper options, such as local bonds.
Argentina’s country risk has declined fairly steadily since it surged in Sept. 2025 past 1,400 basis points as legislative defeats for President Javier Milei stoked investor fears that his fiscal austerity program was in jeopardy.
The lower country risk “reflects the economic policy of Argentina winning credibility with the passage of time, especially because it has maintained a fiscal balance,” said Pablo Guidotti, a vice minister of economy under former President Carlos Menem.
The spread dipped under 500 bps earlier this year and gradually widened back above 630 bps as Milei’s popularity was hit by corruption scandals. But Milei, who has made conserving fiscal balance a cornerstone of his administration, has continued to achieve a fiscal surplus every month since January of 2024, bolstering investor confidence.
IS IT TIME?
Gustavo Ber, an economist in Buenos Aires, said that Argentina will likely opt for a steeper drop before it seeks financing on capital markets.
Despite the growing debate and the preference of investors for a return to capital markets, authorities will want more time to build up reserves to sell bonds at more competitive rates, he said.
Argentina is currently focused on auctioning bonds destined for the domestic market to cover debt maturities. The fact that sovereign bonds are much less competitive than local bonds shows that there’s more room for improvement, economists said.
A further drop in country risk will depend on factors such as greater investment in the government’s Large Investment Incentive Regime (RIGI), said Guidotti. The regime gives tax benefits and a long-term legal framework for investments that generally must be at least $200 million.
The projects approved under RIGI, concentrated in energy and mining, total about $28 billion, and other projects under consideration would bring the total investment to near $100 billion, Caputo said last month. Last week, he announced a new “Super RIGI” that would expand the regime to new sectors.
But some economists say that Argentina should tap international markets now — since doing so could portray a confidence that would in turn accelerate the drop in country risk.
“It would be appropriate to take advantage of this window and start testing, and many investors want that,” said Ber.
Marcelo Garcia, an analyst at consultancy Horizon Engage, said that such investors know that time to enter international markets is limited with political volatility expected ahead of the upcoming 2027 presidential elections.
“As the election approaches it’s going to be impossible to do so and then the government would reach 2027 in a weaker position to weather the campaign storm,” he said.
(Reporting by Leila Miller in Buenos Aires and Rodrigo Campos in New York; Editing by Alistair Bell)
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