The rating agency Moody’s changed the outlook on Mexico’s sovereign debt from stable to negative, although it maintained its rating at Baa2maintaining its investment grade.
The change responds to fiscal and structural risks that, according to the rating agency, limit the Government’s ability to manage economic challenges, particularly in the context of political reforms.
Regarding the recent constitutional reform of the judiciary, Moody’s warns that this could affect checks and balances in the judicial system, which in turn would impact investor confidence.
The possibility of the institutional environment deteriorating represents an additional risk for the economy, especially in a context of possible revision of the Treaty between Mexico, the United States and Canada (T-MEC) in 2026, which could complicate exports.
He also considered the financial burden of the state-owned Pemex, which faces liquidity difficulties.since Moody’s considered it likely that the Government will absorb part of the oil company’s financial obligations, which would increase the weight of the sovereign debt.
Strengths of our economy
- Despite the complications, MoEL IFNROody’s sees virtues in the Mexican economy to maintain the Baa2 rating.
- First, the diversity of its economy and the potential to attract investments through the relocation of companies, a phenomenon called nearshoring.
- The rating agency also highlighted Mexico’s history of prudent fiscal and monetary policies, which has helped mitigate macroeconomic imbalances.
Voice of the expert
Sergio Negrete, professor of Economics at ITAM
Rating will hit the exchange rate
After Moody’s Ratings changed the credit outlook from “stable” to “negative” for Mexico, due to institutional weakeningSergio Negrete, professor of Economics at the Autonomous Technological Institute of Mexico (ITAM) and author of the book “From AMLO to Sheinbaum”, pointed out that one of the effects could be the exchange rate between the peso and the dollar.
“It may be a temporary impact, the markets do absorb this news and other news will arrive later. In the peso, in the perspectives of investors in Mexican debt, we can no longer measure that alone,” he stated.
He expressed that the “negative” outlook puts the country’s grade at risk and could cause the national economy to lose a credit level. “The destruction of the Judiciary is there, the accumulated deficit is there; Everything Moody’s presents are facts that have been accumulated. If one goes down, it is still in investment grade, that is important. The bad thing is when it falls from investment grade to junk grade, or speculative too. “You can invest, but it would be much riskier.”
CT