Argentina Is So Vulnerable?

Ultimately, the task of risk rating is not something that I admire call. Sincerely add little to the analysis and that is a matter of concern because in recent times have failed to fulfill the function for those actually on the market. When the crisis hit, the risk rating remained in the eye of the storm who were unable to detect high risk of financial assets that they themselves rated AAA. This made them lose the little credibility and prestige they had left. Such is the deterioration of the risk rating for the European Commission (EC) recently proposed a reform to the same, considering it a series of measures aimed at ensuring the independence of these companies with respect to financial institutions that evaluate, with the aim of enhancing the credibility of their analysis and avoid bias that could result in new episodes of crisis product from the wall of a higher level of risk in relation to desirable. But beyond the many criticisms that we can make these companies, they are still alive and analyzing the quality of both corporate and sovereign financial assets.

And yesterday, Moody's, the risk rating, according to the Argentine site "The Nation?, Has traditionally been tough on Argentina, considered the country has a high probability of incurring default, although probably the same does not happen immediately. At least that's what it says Gabriel Torres, vice president and analyst at the firm, responsible for reporting. After the statement by Moody's, the Argentine site "The Nation?, Consulted Erich Arispe, principal analyst at Fitch Ratings in the country who also recognized a higher risk of default by Argentina and was blunt in stating:" We have always been of the opinion that the model was launched in 2003 was not sustainable over time and would be more vulnerable in a less positive international environment?.

Is it so vulnerable to engage in Argentina as a new default? Beyond the criticism that could be the role of rating agencies in recent times, in this case, for Argentina, I see how very successful Moody's analysis. Why Argentina is so vulnerable? For Torres, weak institutions, lack of funding sources and unpredictability, Argentina has a high vulnerability. The situation is so worrisome that Torres, the country is a default shock. And this shock is not as unlikely as it claims, a further drop in prices commodites or a sharp slowdown in the economy that takes into recession, complicate the country's financing needs and thus, their default risk would increase considerably. Argentina is today a very difficult situation. And what's worse is that this situation is almost full, self-generated. Argentina is paying the risk of default again, all provocations carried out to the market. This has sought to control inflation by fixing prices in almost no time was kept under control, have sought to boost investment, the same that drove their sudden and unexpected changes in their rules and macroeconomic instability with self-inflicted, first, by the uncontrolled inflation.

The above mentioned imbalances, we must add the wear and tear on both the fiscal and external, although the indicators say otherwise. For the fiscal accounts, while tax revenues continue to rise, linked to the consumption components are weakened day by day. While the external sector, the high dependence on agricultural commodities and deterioration of the global economy will suffer Argentina. Observed deterioration in Argentina's economy, we must add what is happening in the currency market and the financial system, where the Central Bank of Argentina, fighting only to maintain the exchange rate and keep them from leaving deposits system. To achieve both objectives, in addition to imposing new restrictions on the acquisition of foreign currency, Argentina's monetary authority should validate that higher interest rates. Tensions in the Argentine financial market, resulted in severe restrictions on credit for consumption (even though consumption had already been weakening which calmed the demand for financing) and for investment. In short, Argentina's economic stage is flooded with stress and crises.

The country is at its most vulnerable stage of this new post convertibility. The country is crying out fundamental solutions and not mere patches that end up creating new problems. Will the Argentine government to react in time? We will meet again tomorrow, Horacio Pozzo