Fitch says US support helped Argentina ward off ratings downgrade

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By Rodrigo Campos

NEW YORK (Reuters) – U.S. support for Argentina’s markets has prevented a downgrade of the South American country’s credit rating, but the country needs a broader plan to rebuild foreign exchange reserves in order to earn an upgrade, Fitch Ratings said on Wednesday.

“The U.S. backstop is something that has helped Argentina ward off a ratings downgrade, the risks of which would have risen if the central bank had kept bleeding international reserves to defend the FX regime,” Todd Martinez, co-head of the Americas for Fitch Ratings’ sovereigns group, said in an email to Reuters. 

Argentina’s central bank said this week it signed a $20 billion exchange-rate stabilization agreement with the U.S. Treasury Department, part of a U.S. plan to support President Javier Milei’s reform policies ahead of key midterm elections this weekend. The bank said on Tuesday it sold $45.5 million from its reserves to support the exchange rate.

U.S. Treasury Secretary Scott Bessent has said there is work being done on a $20 billion bank facility that could be used to purchase Argentina’s bonds.

Martinez said such lifelines “aren’t sufficient to deliver a ratings upgrade unless they are part of a broader plan to enable a government to build up its own FX buffers, so that it will not need another lifeline down the road.”

Argentina’s international dollar bonds fell on Wednesday by around a cent each, while the peso strengthened marginally after setting a record closing low on Tuesday.

Financial markets initially took the U.S. support as a bullish signal but have been volatile ahead of midterm elections this Sunday as Milei’s party seeks to strengthen its minority position in the legislature.

(Reporting by Rodrigo Campos in New York, editing by Libby George and Nia Williams)