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LatinNews Regional Monitor: Mexico - 20 April 2020

In brief: Moody’s downgrades Mexico and Pemex

* International credit ratings agency Moody’s Investors Service has lowered Mexico’s long-term foreign-currency and local-currency issuer ratings to 'Baa1' from 'A3', with a 'negative' outlook. Moody’s also downgraded the state-owned oil company Pemex’s senior unsecured ratings on the company’s existing notes, as well as the ratings based on Pemex’s guarantee, to 'Ba2' from 'Baa3', with a 'negative' outlook. As regards the first point, Moody’s cites three factors as the basis for its decision: 1) Mexico's medium term economic growth prospects have materially weakened (Moody’s forecasts a “strong economic contraction”); 2) “The continued deterioration in Pemex’s financial and operational standing is eroding the sovereign’s fiscal strength, which is already pressured by slower revenue growth due to a weaker economy”; and 3) “Weakened policymaking and institutional capacity”. On 17 April another credit ratings agency, Fitch, also announced it was downgrading the international foreign-and local-currency long term ratings for Pemex and state-owned electric utility Comision Federal de Electricidad (CFE) after downgrading Mexico’s sovereign rating last week. Fitch's new rating for Pemex is now ‘CCC-’ and the CFE’s ‘BB’.

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