Mexico Credit Rating Verdict From Moody’s Expected by June End
Summarize this article with:
Article content(Bloomberg) — Mexico’s investment-grade credit rating faces a key decision by the end of June, when Moody’s Ratings is expected to resolve the negative outlook it assigned the nation in late 2024.Sign In or Create an AccountEmail AddressContinueor View more offersArticle contentIt usually takes 12 to 18 months to resolve outlooks, according to Renzo Merino, a senior credit officer in the sovereign risk group at the ratings firm, meaning an update is imminent. While there are several issues at play, from the US–Mexico–Canada Agreement renegotiations to the impacts of the Middle East war, the country’s fiscal standing is the main point of concern.Article contentWe apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.Article contentArticle contentThe Latin American nation is rated Baa2 — two notches above junk — and a downgrade would mean higher interest rates on new debt, with the risk of spurring capital outflows. According to Merino, a multi-notch downgrade into high-yield is a “very low probability.”Article contentTop StoriesGet the latest headlines, breaking news and columns.There was an error, please provide a valid email address.Sign UpBy signing up you consent to receive the above newsletter from Postmedia Network Inc.Thanks for signing up!A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Article content“We still see Mexico with a credit profile aligned with a rating in the Baa category, the question we’re going to resolve at the next meeting is whether it is a Baa2 or Baa3,” Merino said. Mexico’s credit profile remains stronger than that of some countries rated Baa3, he added.Article contentMoody’s is seeking clarity from authorities on how the Middle East conflict could affect a budget plan presented in early April, in which the government forecast a narrower deficit next year. It is also watching for progress on a strategic overhaul of state-owned oil company Petroleos Mexicanos, which aims to make the behemoth financially self-sufficient by 2027, as well as any updates on an upcoming review of the USMCA trade pact, he said.Article contentIn February, Merino and other Moody’s analysts wrote that Pemex might need additional support from the government amid forecasts that operating losses will continue. Such support, combined with weaker growth, could slow fiscal consolidation, pressure debt metrics and weigh further on the sovereign’s credit profile, the credit grader said.Article contentA significant increase in Mexico’s deficit in 2024 led to a rapid rise in the country’s debt-to-GDP ratio, eroding its financial buffer. Article contentMoody’s revised its outlook on the Latin American country to negative from stable in November 2024, citing constitutional changes that overhauled Mexico’s judicial system — which critics say eroded checks and balances — and presented a risk to the economy. The firm also flagged deteriorating debt affordability and government spending rigidity as challenges to fiscal consolidation.Article contentTrending Posthaste: Deficits are climbing across Canada, but this province is awash in red ink News Carney launches $25-billion sovereign wealth fund that will allow Canadians to share in profits Economy Subscriber only. How a collapsing rental market is costing some homeowners more than they bargained for Subscriber only Real Estate Real Brokerage to buy Re/Max in widening industry consolidation Real Estate Energy giant Shell to buy Canada's ARC Resources for $22 billion Oil & Gas Share this article in your social networkCommentsYou must be logged in to join the discussion or read more comments.Create an AccountSign in Join the Conversation Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information. Posthaste: Deficits are climbing across Canada, but this province is awash in red ink News Carney launches $25-billion sovereign wealth fund that will allow Canadians to share in profits Economy Subscriber only. How a collapsing rental market is costing some homeowners more than they bargained for Subscriber only Real Estate Real Brokerage to buy Re/Max in widening industry consolidation Real Estate Energy giant Shell to buy Canada's ARC Resources for $22 billion Oil & Gas