-- [B] S&P says without IMF aid, Argentina could have a single-B rating -- --S&P says Argentina downgrade based on fiscal deterioration --IMF won't change Argentina's political economy, says S&P By Felix Salmon, BridgeNews New York--Nov. 14--Argentina might have been downgraded to a single-B rating by international ratings agency Standard & Poor's Corp. without the multilateral aid package currently being put together by the IMF, Bruno Boccara, Standard & Poor's director and primary analyst for Argentina said Tuesday. * * * "Without the IMF, we might have been looking at a B story, whether B+, B- or B," Boccara told BridgeNews following news the agency had downgraded Argentina's foreign currency obligations to BB- from BB (Story .21013). Boccara said S&P's decision reflected the country's difficulties in achieving fiscal balance. Boccara, while welcoming the International Monetary Fund (IMF's) efforts to help out Argentina, said that even with IMF aid, fiscal pressures remain. "The IMF's not going to change fundamentally the political economy environment," he said. Boccara said that S&P had gone "against the market" in September, when it affirmed the country's outlook at stable with a BB rating. He said that the affirmation "was under the understanding that fiscal adjustment would be undertaken," and that "on this front, we were wrong." "Under a currency board arrangement, a country needs to maintain a fiscal surplus," said Boccara, but the Argentine government now projects reaching fiscal balance in 2005 rather than 2003, as previously predicted. "We're talking delayed fiscal adjustment," Boccara said. Boccara also said he was worried about the political situation in Argentina. Former vice-president Carlos Alvarez, a key member of the governing Alliance coalition, sparked something of a political crisis when he resigned at the beginning of October. "The manner in which the present administration is responding to the crisis may not always be adequate," said Boccara. Boccara also dismissed suggestions that market instability, which has severely curtailed Argentina's access to capital markets, was responsible for the downgrade. "With the fiscal numbers as we see them, we would still have downgraded" without any spread widening, he said. "It's really a fiscal story." Tuesday's downgrade brings Argentina's rating to one notch above Brazil, which is rated at B+ with a positive outlook; an upgrade to Brazil's rating would give the two countries an identical rating. "Those two stories are driven by their own internal dynamics," said Boccara. "They're independent events." Boccara also dismissed as a "technicality" the fact that S&P had downgraded Argentina's local-currency rating by two notches, more than the degree by which the foreign-currency rating was downgraded. "In no way is it a signal that we are changing our view as to the sustainability of convertibility," he said. "No one is going to force them out of the peg." End (Back) to felixsalmon.com