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Brazil & Southern Cone - August 2019


Moody’s warnings: On 24 July, credit ratings agency Moody’s Investors Service warned of Argentina’s “weak economy”, citing increasing uncertainty around the government’s ability to continue to implement structural reforms and to sustain its commitment to addressing fundamental macroeconomic imbalances in the period following the national elections on 27 October. According to Moody’s senior vice president, Gersan Zurita, “rising risk of policy reversal could threaten market access”, which would place “significant pressure on the government’s liquidity position and increase the possibility of a debt restructuring in the next two or three years”. While Moody’s highlights that the policies implemented by the government led by President Mauricio Macri to deal with the recent “macroeconomic turmoil” have been successful, it states that the Argentine economy is likely to contract by a further 1.5% in 2019, after a 2.5% contraction in 2018. Among the sectors of the economy at risk, the report highlights that some regional and local governments will be hit by weaker tax collection and a higher level of spending and exposure to foreign currency debt.  Likewise, companies will be exposed to the weakening of the economy, as well as to the uncertainty about future government policies. This warning came after Moody’s changed its outlook on the Argentine government from ‘stable’ to ‘negative’ on 12 July.

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