For the first time in five years investment bank JP Morgan country risk list rates Argentina below Brazil with 393 base points compared to South America’s leading economy 406 base points.
Apparently the renewed international interest in emerging countries financial assets has attracted many investors to Argentina, with a 21 base points drop in just a week.
The country risk is equivalent to the additional interest points a government must offer to pay compared to a US Treasury bond with similar maturing period.
This means foreign investors are attracted if Argentina offers four points above US Treasury bonds, plus issuing under international jurisdiction.
The hurricane Katrina disaster, plus prospects of higher oil prices and last week’s meeting of US Federal Reserve chairman Alan Greenspan with President Bush top financial aides, apparently requesting a review of the Fed’s gradual interest increases policy, made investors look for more lucrative emerging markets assets.
Another country benefiting from this market trend was Mexico whose country risk rating was the lowest ever, 144 base points. Besides, Brazil’s volatility because of the ongoing political crisis helped make Mexico more attractive.
Mercopress – www.mercopress.com