Standard and Poor’s (S&P) Global Ratings on Wednesday revised the outlook on Mexico’s sovereign credit rating to “stable” from “negative,” citing more cautious fiscal and monetary policies, and confirmed its long- and short-term ratings.
The government of President Andrés Manuel López Obrador has imposed a policy of austerity in public spending since it began in December 2018, although it has also allocated significant resources to tackle the millionaire debt of the state oil company Pemex, in the midst of an international economic context complex.
“Despite the pressures on inflation and growth … we expect that the cautious execution of Mexico’s fiscal and monetary policies will continue during the remainder of the government of Andrés Manuel López Obrador and that the net debt ratio of the Government (…) remains stable,” the rating agency said in a statement.
Given the stage of the political cycle – two years before the presidential elections – and the polarization in Congress, S&P assured that it does not expect the approval of constitutional initiatives that put pressure on the business environment.
Accordingly, we have revised the outlook on Mexico’s sovereign ratings to stable from negative, and affirm our ratings.
S&P confirmed its long-term sovereign credit ratings on Mexico in foreign currency at “BBB” and in local currency at “BBB+”, and its short-term global scale ratings at “A-2”.
In a similar move, S&P revised Pemex’s outlook to “stable” from “negative” and affirmed its “BBB” global scale foreign currency and “BBB+” local currency ratings.
Regarding Pemex, the rating agency said that although high crude oil prices are improving Pemex’s credit indicators, the company’s “weak liquidity” continues to affect the evaluation of its profile.
In addition, he pointed out that Pemex’s “stable” outlook reflects the close relationship with the sovereign, something that he estimates will remain unchanged in the coming years, in addition to the fact that the probability that the government will continue to support the state-owned company remains unchanged and it is a key credit factor for Pemex.
At the end of March, Moody’s reported that it saw an improvement in Mexico’s credit rating as unlikely in the near future and warned that the need for recurrent and substantial support to Pemex is eroding the country’s fiscal strength.
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