BUENOS AIRES, May 12 - Argentina’s perceived sovereign risk has receded to levels not seen since the start of February, reflecting a renewed measure of investor confidence in the government’s ability to service its debt. On Monday, the country risk index tightened to 498 basis points (bps) on JPMorgan’s EMBI Global Diversified Index, a gauge widely used to track investor sentiment on sovereign credit.
The move follows a one-notch upgrade last week from Fitch Ratings to "B-" with a stable outlook. The B rating, Fitch noted, signals that "capacity for continued payment is vulnerable to deterioration," even if it does not imply an imminent default.
Government officials, including Economy Minister Luis Caputo, have said they prefer to see the spread decline further - closer to 250 bps - before attempting to sell new bonds in international markets. For the time being, authorities are prioritizing domestic instruments, which currently offer cheaper financing relative to sovereign debt abroad.
Argentina’s country risk has been on a generally downward path since its spike in September 2025 when it climbed past 1,400 bps amid market jitters following legislative setbacks for President Javier Milei and concern that his fiscal austerity agenda might be at risk. The spread fell below 500 bps earlier this year, then widened above 630 bps as the president’s popularity was dented by corruption scandals. Despite those political headwinds, the administration has registered a fiscal surplus each month since January 2024, a track record officials say has helped restore investor confidence.
"reflects the economic policy of Argentina winning credibility with the passage of time, especially because it has maintained a fiscal balance,"
Those words come from Pablo Guidotti, who served as a vice minister of economy under former President Carlos Menem, and who interprets the fall in spreads as a sign that Argentina’s fiscal stance is being taken seriously by markets.
The question now is timing. Some economists argue the government will wait for a more pronounced drop in the spread before tapping global markets so it can negotiate better pricing and further strengthen its balance sheet. Gustavo Ber, an economist in Buenos Aires, said authorities are likely to hold out for a steeper decline and to accumulate reserves, which would allow them to offer bonds at more competitive rates when they do decide to re-enter international markets.
In the interim, Argentina is concentrating on auctions aimed at domestic investors to meet upcoming maturities. Analysts note that sovereign bonds remain far less attractive than local paper, underscoring that sovereign debt still has room to improve before international issuance becomes compelling.
One potential catalyst for a sustained reduction in country risk is increased foreign investment under the government’s Large Investment Incentive Regime, known as RIGI. The regime supplies tax incentives and a long-term legal framework for projects, which generally must be at least $200 million to qualify. Projects approved so far under RIGI, concentrated in energy and mining, amount to about $28 billion; additional projects under consideration could lift the total investment pipeline to near $100 billion, Economy Minister Luis Caputo said last month.
Last week, Caputo announced a new "Super RIGI" intended to broaden the regime to additional sectors, a move aimed at accelerating investment flows that could help compress sovereign spreads further.
Not all market participants favor waiting. Some economists and investors contend that testing international markets now could itself bolster confidence and expedite a fall in country risk. "It would be appropriate to take advantage of this window and start testing, and many investors want that," Ber said, reflecting a view among some investors that a prompt return would signal strength.
Others caution that the opportunity to access global markets is time-limited because of political volatility ahead of the 2027 presidential elections. Marcelo Garcia, an analyst at consultancy Horizon Engage, warned that as the election draws nearer it will become increasingly difficult to re-enter international markets, leaving the government potentially weaker going into the 2027 campaign season. "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.
Authorities face a trade-off: move now to capitalize on improved sentiment and possibly reinforce the decline in spreads, or wait to accumulate reserves and seek a more favorable pricing environment while relying on domestic financing to cover near-term maturities. Investment under RIGI and the newly announced Super RIGI, along with the continued maintenance of fiscal surpluses, will be key variables policymakers and markets will watch as they weigh the timing and scale of any return to international debt markets.