The global credit risk rating agency Standards & Poor’s ruled out this Tuesday an affectation in the sovereign note of Mexico in case the 3% growth expectation for the economy projected by the federal government in the 2023 economic package is not met.
Lisa M. Schineller, sovereign analyst for Mexico at Standard & Poor’s, explained that there is a lower forecast horizon for the economy for Mexico and the United States, but “this should not have an impact on Mexico’s rating.”
This is related to different strengths such as moderate government debt -excluding financing from Pemex and CFE-, comparatively low fiscal deficits, and policies to improve debt management with the aim of improving the credit profile. Likewise, the diversification in its economic activities such as exports and manufacturing, explained the analyst in the webinar Update of the sovereigns of Latin America: Mexico and Central America.
According to Schineller’s statement, the rating agency expects a cautious macroeconomic policy, credible monetary and exchange management by the Mexican administration despite the risk of a recession in the United States, higher inflation and world market volatility.
“A recession in the US is not going to change our opinion, a recession per se does not have to have an impact on the rating because we also assume previous measures,” said the specialist.
Investment benefits
He stressed that the recomposition in Congress will no longer allow major constitutional reforms to be launched, which represents a favorable outlook for business investment.
The specialist explained that despite the fact that Mexico has implemented measures to increase tax collection, there is still a great deal of room to grow the source of public income from paying taxes, which is still very low.
“We do not expect that, in terms of change, it will significantly close the loopholes or the tax on local governments, but there is an important effort to reduce evasion, there is room to grow here, the revenue base in the future is a revenue base down and limited by buffers (funds),” Schineller said.
Among the factors that may affect the rating, he highlighted the unexpected setbacks in the macroeconomic management of the discussions with the partners of the Agreement between Mexico, the United States and Canada (TMEC) on the resilience of the supply chain or commercial links.
In addition to a weaker fiscal trajectory that increases the risks associated with supporting Pemex and CFE.
Last July, the rating agency raised Mexico’s credit outlook from negative to stable, recognizing the application of more cautious fiscal and monetary policies.
