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LatinNews Regional Monitor: Mexico - 07 June 2019
In brief: Mexico
*In a double blow for Mexico, credit ratings agency Fitch has downgraded Mexico's Long-Term Foreign Currency and Local Currency Issuer Default Ratings (IDRs) to 'BBB' from 'BBB+' while another credit ratings agency, Moody’s Investors Service, lowered its outlook on Mexico's rating from 'stable' to 'negative'. Fitch said the downgrade of Mexico's IDRs reflects a “combination of the increased risk to the sovereign's public finances from [Mexico’s state-run oil company] Pemex's deteriorating credit profile together with ongoing weakness in the macroeconomic outlook, which is exacerbated by external threats from trade tensions, some domestic policy uncertainty and ongoing fiscal constraints”. Meanwhile Moody’s echoes these concerns, stating that Mexico’s “policy framework is weakening in two key respects, with potential negative implications for growth and debt. First, unpredictable policymaking is undermining investor confidence and medium-term economic prospects. Second, lower growth, together with changes to energy policy and the role of Pemex, introduce risks to Mexico's medium-term fiscal outlook, notwithstanding the government's near-term commitment to prudent fiscal policy”. Moody’s also highlights US President Donald Trump’s threats to impose tariffs on Mexican imports from 10 June (starting at 5% and rising by a further 5% per month up to a potential 25%) to “compel it to stop the flow of migrants across its territory into the US, amid a pattern of trade uncertainty”.
