S&P downgrades Argentina outlook to negative

Rating Agency Standard and Poor’s (S&P) downgraded Argentina’s economic and financial outlook to “negative,” after the expropriation of YPF, which endangers the “B” rating the country has for its sovereign debt.

“In our view, the recent government policies could increase risks to Argentina's macroeconomic framework, squeeze its external liquidity, and hinder medium-term growth prospects,” the agency stated in a communiqué.

That is the reason why it “revised the outlook on the Republic of Argentina to negative from stable,” it continued.

Standard & Poor’s added that “the negative outlook revision stems from policies enacted since the October 2011 presidential elections.”

“These include rising restrictions to international trade and recent steps to nationalize the hydrocarbon company Yacimientos Petroliferos Fiscales (YPF). We believe that these actions could exacerbate the existing weaknesses in Argentina's economy, including high inflation (which has appreciated the real exchange rate) and increasingly rigid government expenditure, and result in a worse investment climate,” it continued.