UPDATE 1-Argentina says S&P ratings cut a mistaken decision

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BUENOS AIRES, Oct 31 (Reuters) - Argentina's economy and financial position are solid and a debt ratings downgrade by Standard & Poor's on Friday was "another mistaken decision," a source at the Argentine Economy Ministry said on Friday.

Argentina's economy has robust fundamentals after years of strong economic growth and fiscal surpluses, the source said in a statement provided on condition of anonymity.

"The Argentine Republic's financial position continues and will remain solid and capable of complying with all obligations with its creditors during 2009, independent of market conditions," the source said.

S&P downgraded Argentina's foreign-currency rating to "B-" from "B" on Friday. It maintained a stable outlook on the rating, which now stands six notches into junk territory.

S&P cited concerns about the deteriorating economic and political environment and fiscal pressures as Argentina's debt obligations for next year rise to more than $20 billion at a time when it is shut out of international credit markets.

"The 2009 financial program sets out financing needs that can be entirely covered with public intra-sector financing," the source said.

Argentina is not facing any financing issues and has a solid budget plan for 2009 based on estimates of 4 percent growth in gross domestic product and a primary budget surplus of 3.27 percent of GDP, the source said.

The source said that Standard & Poor's credibility was "fatally wounded" by its failure to predict the subprime lending crisis in the United States.

"On what authority can they suggest that Argentina is doing poorly or badly when they gave their highest ratings to assets that later turned out to be toxic and set off a global financial crisis?" the source said.

Argentina's gross domestic product has expanded at an average rate of more than 8 percent a year in recent years and investment has increased at a rate of 25.4 percent, the source said.

The financial system is solid and liquid, and the trade balance has been higher than $10 billion a year in recent years and become more diversified in terms of countries that Argentina sends exports to, the source said.

Government income has grown at an annual average of 32 percent over the last six years, while spending has grown at 29 percent, the source said.

Much of Argentina's debt is in local currency, and debt payments currently represent less than 10 percent of government income, the source said.

The source said that even if government income is reduced due to lower exports of commodities, that will be compensated by lower subsidies to farmers. (Editing by Leslie Adler)