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LatinNews Daily - 24 August 2021

In brief: Moody’s warns of mounting financial pressure on Mexican states

* The international credit ratings agency Moody’s Investors Service has released a report warning of increased “financial pressure” on Mexican states that are rated 'Baa1' (moderate credit risk) with a 'negative' outlook, due to expenses related to the coronavirus (Covid-19) pandemic. According to the report, this has “increased financial pressure at a time when many local and regional governments were also facing declining or stagnant revenues”. The report notes that these states increased their unallocated public health spending by up to 15% in 2020 via non earmarked transfers that “far exceeded the 3.2% average growth in total operating spending”. Moody’s added that “some states had a much larger increase in unallocated public health spending, and, in some cases, it was more than double that of the previous year, reflecting pressure to respond to the pandemic at the regional level”. The report notes that states’ public health expenses, combined with the extension of subsidies and tax benefits to stimulate regional economies, became a key driver in the widening federal fiscal deficit of 2020. It warns that although many states have planned to cut their health expenses in 2021, the emergence of new Covid-19 strains and varying state-level vaccination rates might force some to again increase health spending.

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