A few hours after knowing the fourth Economic Package proposed by the Mexican government in this administration, the sovereign analyst admitted that the country’s public finances seem healthy and congruent with issuers that have a similar rating, such as Cyprus, Croatia, India, or Panama.
Without a strategy that encourages greater economic growth in Mexico, or a tax reform that guarantees recurring public revenues to pay its important obligations, Mexico’s rating is exposed, warned Fitch’s co-sovereign director for Latin America, Charles Seville.
However, he warned that there is also an important distance between the collection of revenues that their rating peers have (countries that have the same sovereign rating, which is “BBB-“), since Mexico has the lowest collection rate among them and between Latin American countries.
During his participation in the 2021 Conference on Global Sovereign Qualification, Seville warned that the budget presented to Congress by the government does not contemplate a tax reform and does not show a strategy to give relief to the rising cost that Pemex represents or to government pensions.
The analyst also showed that Mexico’s weak governance is another vulnerability for its sovereign rating as an issuer, which places it just one level above Investment Grade.
Before her participation, the Sovereign Director for Latin America at Fitch, Shelly Shetty, commented that vaccination against Covid is a determinant of economic growth and the resilience of a country. He presented a graph where Latin American countries such as Uruguay, Chile, and Brazil are the Latin American leaders in the inoculation process against the virus with more than 65% of their population vaccinated with both doses.
While Mexico is among the eight least dynamic in vaccination, with only 29.5% of the population with the complete inoculation scheme.