When Javier Milei took office as president of Argentina in December 2023, skepticism around the country’s policy direction was widespread. Argentina was facing chronic fiscal deficits, triple-digit inflation, a weakening currency and limited reserve buffers. Less than three years later, the credit story has changed meaningfully.
On July 21, 2026, Moody’s upgraded Argentina’s long-term local and foreign currency issuer ratings to B3 from Caa1 and revised the outlook to Positive from Stable. This brings Moody’s broadly in line with Fitch and S&P, which upgraded Argentina to B- in May and June, respectively. The rating actions reflect what markets had already begun to recognize: Argentina is no longer the same credit it was at the start of the Milei administration.
The market response to Moody’s upgrade was positive but measured, with bonds trading up roughly 0.25 points on the announcement. The larger move came after S&P’s upgrade last month, when bonds rallied approximately two points, suggesting much of the improvement had already been priced in.
Reform Progress and Medium-Term Growth Drivers
We view the upgrade as a positive development from a financing perspective. Argentina’s spreads and yields remain attractive, in our view, supported by continued progress on structural reforms, improving external accounts and a more credible fiscal framework.
The country also benefits from several medium-term growth drivers. Vaca Muerta oil and gas development, significant mining potential and favorable agricultural conditions should help broaden Argentina’s export base over time. That is important because Argentina’s long-term credit improvement depends not only on fiscal discipline, but also on its ability to generate more stable sources of hard currency.
The Macro Scorecard
- Fiscal: Argentina targets a primary surplus of 1.5% of gross domestic product (GDP) in 2026—its third consecutive year of fiscal consolidation—with the International Monetary Fund (IMF) projecting a gradual improvement toward ~2.25% of GDP over the medium term.
- Growth: GDP is recovering, with Bloomberg consensus at 3.0% for 2026 and the World Bank projecting a stronger 4.7%, following a 4.5% rebound in 2025.
- Inflation: Declining steadily, with the most recent monthly print coming in below 2% month-over-month—a remarkable turnaround from triple-digit annualized rates at the start of the Milei administration.
- Trade: The trade balance has shifted from a deficit of approximately US$7 billion in late 2023 to a record annualized surplus of ~US$22.5 billion as of June 2026, driven by agricultural exports and Argentina's emergence as a net oil exporter.
- Reserves: Continued accumulation reinforces macro stability and reduces one of the key structural vulnerabilities the IMF has flagged throughout the program.
Financing Strategy and Multilateral Support
We had expected some form of liability management and an eventual return to the eurobond market. However, the ministry of finance has remained disciplined in not accessing markets at yields it views as unattractive.
In the meantime, Argentina has continued to meet coupon and maturity payments while building international reserves, which remains one of the key vulnerabilities the IMF has highlighted. Recent multilateral support is important in that context.
The World Bank’s US$2 billion loan and guarantee facility, alongside broader support from the IMF, Inter-American Development Bank and CAF Development Bank of Latin America and the Caribbean, provides a credible backstop for Argentina’s eventual market re-entry.
Election Risk Remains on the Horizon
The October 2027 presidential election is a risk we will monitor closely. President Milei’s approval ratings have come under pressure, reflecting political noise and an uneven labor-market recovery. That said, the base case among many market participants remains that continued disinflation, growth recovery and fiscal discipline should support policy continuity.
The key tail risk is a Peronist opposition victory, most likely led by Buenos Aires Governor Axel Kicillof, which would raise questions around reform momentum and market access. Regardless of the outcome, Argentina’s starting point entering the next election cycle is materially stronger than four years ago.
Bottom Line
We remain constructive on Argentina. The Moody’s upgrade is an important milestone, but more importantly, it reflects a genuine improvement in fiscal discipline, external accounts, reserve accumulation and the country’s broader financing framework.
Argentina remains a core overweight across firm-wide strategies. We continue to like the carry through year-end 2026, while remaining prepared to manage exposure actively around market re-entry and election-related volatility as 2027 approaches.