Argentina and the Dominican Republic were both rewarded upgrades this week for restructuring their debt.
Moody's brought Argentina up to B3 from Caa1, in line with S&P's B- rating and in recognition that, albeit in a highly contentious manner, Argentina had reduced its debt burden, its debt service cashflows and the portion of foreign currency denominated debt to overall debt.
The Dominican Republic's voluntary, market-friendly debt restructuring prompted an upgrade to B from SD, the highest-ever rating jump granted by S&P to a country emerging from an SD rating.
Unlike Argentina, the Dominican Republic never defaulted on its debt payments.
Instead it followed Uruguay's lead and appealed to holders of its two outstanding eurobonds to exchange them for longer-dated deals with the same coupons as the exchanged bonds, in order to avoid default.
The S&P rating for the Caribbean country now stands one notch above both Moody's and Fitch at B3 and B-.
Although still concerned with the risks posed by large quasi-fiscal losses at the central bank, S&P noted the good general economic environment following the debt restructuring.
Analysts were also positive about the Dominican Republic's outlook. "We would not expect any further rating actions in the short term, but we continue to believe that positive momentum is in the Dominican Republic's favour," said Ben Ramsey, analyst at JP Morgan in New York.
The Moody's upgrade of Argentina on the other hand was seen as more of a standard catch-up to S&P's removal of Argentina from SD to B- when its debt restructuring was completed.
Unlike the Dominican Republic, a continuing positive momentum for Argentina's economy was less certain.
"Like Moody's we agree that the extraordinary real GDP growth and fiscal performance seen in Argentina in the past two years should not be used as a guide for the country's future performance," said Pablo Morra, senior analyst at Goldman Sachs in New York.
"In the last two years they have had extraordinary revenues due to high commodity prices, and that is not likely to be there going forward," said Morra.
Economic indicators are expected to steadily weaken if tax and spending reforms aren't introduced to keep the primary surplus high. Morra forecasts that the Federal government primary surplus will slip slightly to 3%-3.5% of GDP this year.
The IMF is urging Argentina to maintain a fiscal surplus of at least 4% to ensure it can maintain access to its domestic bond market and cover its still sizeable funding requirements.
Argentina issued debt in the local markets for the first time this year since defaulting on its debt in 2001 and is relying on that market access to help it meet an estimated $3.3bn financial gap for the rest of this year and another $4.5bn in 2006.
"The concern is what will happen if the fiscal situation deteriorates," said Morra. "If they maintain the surplus at way above 3% of GDP they may be able to finance everything in the domestic market, but if there are signs that the fiscal situation weakens, then they are at risk of entering a vicious cycle where interest rates increase, leading to a further deterioration of fiscal accounts."