Moody’s Investors Service sees a more complicated fiscal situation for Mexico compared to last year and even earlier this year as it looks to decide what to do with the nation’s sovereign rating this quarter.
Moody’s has held its Mexico rating at Baa1 with a negative outlook since downgrading the sovereign by one notch in April 2020 — three levels above the investment-grade threshold.
The rating company will likely decide how to “resolve” the negative outlook this quarter, Renzo Merino, Moody’s sovereign analyst for Mexico, said in an interview on Monday, signaling a decision is coming on whether to downgrade or return the rating to stable.
The country’s fiscal picture has been affected by Russia’s invasion of Ukraine and soaring international oil prices, which, while reducing some of the pressure on Mexico to finance state oil company Petroleos Mexicanos’s debt, have also raised the cost of fuel imports and hurt Mexico’s growth outlook, Merino said.
“The picture wasn’t great at the beginning of the year, but it certainly has become more complicated because of recent shocks,” Merino said. “The Russia-Ukraine conflict, and what that has meant for commodity prices and inflationary pressures for Mexico and supply strain constraints for Mexico, have complicated the picture a lot more than what we had anticipated a year ago.”
Merino noted that any decision on the sovereign rating will be made by a committee.
The government of President Andres Manuel Lopez Obrador has pledged to make Mexico self-sufficient in energy in order to keep prices low for ordinary Mexicans. His policy goals have resulted in Mexico using the windfall from higher oil revenue to keep fuel prices low at the pump for consumers.
Source: El Financiero
