Fitch slashes Mexico's outlook to negative
A review of the foreign and local currency grade of BBB+ for Mexico has resulted in a downgrade for the perspective to negative from stable, Fitch Ratings said on Wednesday and cited "scope for policy uncertainty and deterioration under the incoming administration" of Andres Manuel Lopez Obrador, who is due to take office in a month. Contingent liabilities from oil monopoly Petroleo Mexicano, or Pemex, were also highlighted together with "persistent economic underperformance relative to peers."
In the report elaborating the decision on the outlook, the agency expressed concern for the country's fiscal stance and the path of ongoing reforms, namely in the energy sector. Another risk is the possibility investment and growth would be scaled back, like with the new airport in capital Mexico City, it said and added that a surge in expenditure planned for Pemex may strain government finances.
Obrador got "a strong mandate to tackle corruption," pointing to "a significant shift in policy priorities and a different style of governing," the credit appraiser explained. Some of the proposals by his Morena platform, such as for increases in welfare and pensions, "may be difficult to accommodate within the budget framework," it said. The effect of the United States – Mexico – Canada Agreement (USMCA) was assessed as positive in general.