Moody's says to review Argentina credit outlook

By Daniel Bases

NEW YORK, Aug 7 (Reuters) - Moody's Investors Service expects to review its positive outlook for Argentina's very low sovereign credit rating in coming weeks, citing a contentious political atmosphere and ramifications of rising inflation.

Moody's sovereign credit analyst Gabriel Torres told Reuters on Wednesday that politics is the biggest factor holding back Argentina's credit rating.

"We think it is about time we review it to reassess where Argentina stands," said Torres.

If the review ends without any change Moody's is unlikely to comment, he said.

"I would just be telling the world we are comfortable with a positive outlook. Right now, the way I'm signaling it is by telling you we are not fully comfortable so we want to review it," he said.

A four-month strike by Argentine farmers over soy export taxes ended acrimoniously in July when senators rejected the measure.

But the stinging defeat for President Cristina Fernandez's new administration does not appear to have softened her stance.

She said recently that her only mistake was to underestimate the opposition to her plan and that if given the chance she would not have changed her actions.

In addition she defended government inflation statistics, widely discredited, which put the consumer price index up about 9 percent a year versus private estimates of 20 percent or more.

LOW RATING

Moody's rates Argentina at 'B3', six notches below investment grade and is unlikely to downgrade it because it is already "practically at the lowest possible rating," Torres said.

The positive outlook was put in place roughly one year ago. Typically a change in outlook translates into a rating action within 18-24 months, but there is no hard time limit.

The next rating down is "Caa", which he said is reserved for countries in or very very close to default, and that is not the case for Argentina.

Argentina is the world's largest exporter of soyoil and soymeal and recent record high prices have contributed to budget surpluses. But increases in spending have begun to outpace revenue growth, and the economy is seen cooling after five straight years of at least 8.5 percent annual growth.

Standard & Poor's rates Argentina four notches below investment grade at "B+" with a negative outlook put in place in the spring. Fitch Ratings has a restricted default rating on the sovereign and a local currency rating of "B".  Continued...