(May 13): S&P Global Ratings revised Mexico’s credit outlook to negative from stable, citing persistently weak fiscal results, rising debt levels and weak economic growth.
The company changed the outlook while affirming Mexico’s rating at BBB, two notches above junk and on par with Indonesia and Greece.
Mexico is inching closer to losing its coveted investment-grade rating. S&P’s score is in line with Moody’s Ratings, which also assigns the nation a negative outlook. In the meantime, Fitch Ratings has the country just one level above junk with a stable outlook. A cut to junk by two of the three major firms would force some money managers to sell government bonds.
“The negative outlook reflects the risk of very slow fiscal consolidation largely due to low economic growth resulting in a faster-than-expected buildup in government debt levels and higher interest burden,” S&P said in a report.
Mexico President Claudia Sheinbaum has engineered a bailout package for the nation’s state-owned driller, Petroleos Mexicanos. Expected continued support for the company “would continue to aggravate Mexico’s fiscal rigidities", S&P said.
Uncertainty around this year’s review of the USMCA trade agreement is also weighing on investor sentiment.
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