Argentina Watch: Pension reform bill advances, Moody's upgrades debt rating

A pension reform bill has advanced in Argentina's congress.

The draft legislation, along with a fiscal responsibility bill and a fiscal accord bill, was approved by senators and now goes to the lower house.

Senators gave the pension bill the green light after the government agreed to change a formula used to calculate the size of state pension increases.

As part of the revisions, the quarterly increases will be based on a combination of inflation (70%) and the Ripte index (30%), which measures variations in the average salary of workers with permanent contracts, state news agency Télam reported.

Also under the bill, private sector workers can voluntarily postpone their retirement to 70 years of age. The draft legislation also guarantees, for people who have completed 30 years in employment and meet contribution requirements, a minimum pension equivalent to 82% of the minimum salary.

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Moody's has joined S&P in revising up Argentina's debt rating.

Moody's raised the country's local and foreign currency issuer and senior unsecured ratings to 'B2' from 'B3' and assigned them a stable outlook.

The agency cited the likelihood the reform push of business-friendly President Mauricio Macri will continue and, in turn, keep the country's growth engine running.

Moody's said: "Economic growth appears to be more sustainable than prior consumption-led booms, as reforms continue to be implemented. After years of stop-and-go economic growth Argentina is poised to grow two years in a row in 2017-18, the first time since 2011. We expect the economy will grow 3% this year and 3.5% in 2018, after contracting 2.3% in 2016. The improvement is the result of a combination of factors, including increased business and consumer confidence and higher investment rates."

In terms of so-called credit challenges, Moody's cited the country's high fiscal deficits and reliance on external financing, which "increases its vulnerability to external event risk."

On November 7, Fitch affirmed Argentina's 'B' rating and revised up the outlook to positive from stable.

In congress, the government is working to overhaul the country's tax, pension and labor laws, among others.