Strengths
- International capital markets activity is expected to keep growing in 2017, signifying a continued demand for Argentine credit
- The inflow of USD deposits on the back of the tax amnesty has created an ample supply of cheap dollar liquidity in the local markets
- Argentine corporates remain relatively deleveraged compared to their EM and DM counterparts
- A number of important regulatory reforms, such as the PPP law, have already been passed and their implementation is expected to bring results in 2017
Weaknesses
- The tenors available to Argentine borrowers and issuers remain short, within the up to 5 years range, preventing long-term investment and CAPEX increases
- The peso bond and loan markets are more expensive than hard currency, creating a lack of depth in the local market
- The non-investment credit rating of the sovereign is creating a glass window for top-tier Argentine names, hindering their access to better rates and terms
Opportunities
- The new capital market law is expected to remove a number of restrictions affecting companies’ room for manoeuvre and significantly deepen Argentina’s capital markets
- The government’s commitment to renewable and conventional energy is expected to bring the development of long-term capital-intensive energy projects to the fore in 2017
- Argentina's vast infrastructure requirements offer an array of investment opportunities with the sector expected to lead the economy out of recession
Threats
- The mid-term elections in October are expected to be too close for comfort, presenting a threat to the government’s market-friendly economic agenda
- The economy has performed worse than expected recently, creating a threat to the sustainability of the reform process
- An increase in US interest rates and investment could affect Argentine issuers by increasing the costs of accessing the international bond markets
