Weaker public finances combined with the risk of extraordinary support for Pemex and CFE could downgrade Mexico’s ratings from S&P over the next two years.
If Claudia Sheinbaum’s government does not promptly reduce the high fiscal deficit, the public debt and interest burden could be higher than expected, the agency considered when exposing what would be a negative scenario for the country and its notes.
He added that unexpected events that weaken investor and investment perception, such as setbacks in the relationship with the United States, or negative economic consequences derived from judicial reform, could weaken macroeconomic stability and also lead to a downgrade of the rating.
The firm confirmed this Friday Mexico’s sovereign notes in foreign currency and local currency, and also maintained its stable outlook.
Lee: S&P confirms Mexico ratings and maintains stable outlook
The agency retained its long-term foreign currency rating of ‘BBB’, and its long-term local currency rating of ‘BBB+’, it announced in a press release.
He based his decision on the fact that the Sheinbaum government has committed to reducing the fiscal deficit, stabilizing public finances and the level of debt.
In addition, he anticipated that possible disputes between Mexico and the United States over trade, migration and other issues will likely be managed in a pragmatic way that sustains economic stability.
In its positive scenario, S&P said it could raise the ratings in the next two years if effective political and economic management, including attracting more foreign investment due to nearshoring, boosts investment and increases the weak GDP per capita growth rate. .
Lee: Moody’s deteriorates Mexico’s rating outlook; judicial reform among the reasons
He added that the implementation of steps to boost budget flexibility, reconstitute fiscal buffers and expand the non-oil tax base to mitigate the potential contingent liabilities that Pemex and CFE represent in the energy sector, could improve the country’s credit quality.
Reforms may weaken investor confidence
S&P noted that the constitutional reforms introduced by the government of Andrés Manuel López Obrador, including the reform of the judicial system and the “reduction of the autonomy of various regulatory bodies” have generated much controversy.
It considered that other reforms that include measures to affect or abolish regulatory agencies, including those dealing with competition, access to information and energy policies, and the transfer of their functions to the government, could weaken the effectiveness of those regulators. .
He said the long-term implications of these changes are unclear, but they risk weakening investor confidence and potentially the transparency and predictability of government policies.
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