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Jan 09Jul 09Jan 10Jul 10Jan 11Jul 11Jan 05Sep 05May 06Jan 07Sep 07May 08Jan 09Sep 09May 10Jan 11COUNTRY REPORT: ArgentinaOutlook: NegativeS&P Moody's Rates Policy 3m 5y ($) 10y ($)[30-Sep-2011]Rating (LC) B Stable B3 Stable11.50% N/a 12.56% 13.36%Economy and Market OutlookPolitics is going to play an increasingly important role in the outlook for Argentina in coming monthswith the almost certain re-election of Christina Kirchner. If she is reflected then significant economicreform is extremely unlikely and a continued build of the current problems facing the economy islikely to continue with the added worry of currency depreciation as a tool to boost Argentina'scompetitiveness which continues to be eroded by very high inflation. Capital controls are likely to beincreased to prevent individuals and companies moving money offshore and further state assetseizures are possible. With this backdrop the prospect of seeing the much needed investment inArgentina is close to zero and this will lead to increasing bottlenecks and problems in electricitygeneration. Growth should thus moderate more quickly than currently expected, especially if globalcommodity prices fall further. Fiscal issues could once again start to be problematic in 2012 withmany forecasters expecting a growing fiscal deficit even with optimistic growth forecasts. Offshorerates have leapt higher in recent weeks to over 10% and this is stabilising the currency versus theUS dollar. If the global outlook remains uncertain however we would now class the risk of a sharpdepreciation in the currency as high once the election is over. We remain negative on the outlook.5.95.44.94.43.9USD/ARSEUR/ARS1412108Headline Inflation y/y %3.462.942010 2011 (f) 2012 (f)Real Growth (%) 9.2 8.0 4.6CPI (%)* 10.9 11.0 11.0Current account (% GDP) 0.8 -0.3 -0.9Fiscal balance (% GDP) -1.6 -2.0 -1.9Government Debt (% GDP) 47.8 40.7 36.7Daily volumesSpot FXUSD500mPoliticsPresident: Christina KirchnerElections: October 2011Polls now suggest that Kirchner is almostcertain to be re-elected at the comingOctober election after a 50% vote in theAugust primary elections. If re-elected sheis now expected to push for constitutionalreforms that would remove the current 2term limit on election and allow her to standagain in the 2015 election.FX Reserves*End of Year45.77bnSource: IMF, S&P, Bloomberg, Barclays47Confidential – not for redistribution. This material must be read in in conjunction with the “Important Information” statement provided on the last herein. page.