Macro Analysis /
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Mexico: S&P affirms Mexico ‘BBB’ rating, upgrading the outlook to stable

  • S&P Global Ratings ratified today Mexico’s sovereign long-term foreign currency credit rating at ‘BBB’

  • They upgraded the outlook from negative to stable, expecting a cautious execution of fiscal and monetary policies

  • The decision gives us more confidence that the country will remain as ‘investment grade’ in the short- and mid-term

Alejandro Padilla Santana
Alejandro Padilla Santana

Executive Director of Economic Research and Financial Markets Strategy

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Leslie Thalia Orozco Velez
Manuel Jimenez Zaldivar
Francisco Jose Flores Serrano
Juan Carlos Alderete Macal
Banorte
6 July 2022
Published byBanorte
  • S&P Global Ratings ratified today Mexico’s sovereign long-term foreign currency credit rating at ‘BBB’, upgrading the outlook from negative to stable 

  • The main drivers include the agency’s view that Mexico’s cautious fiscal and monetary execution will continue, resulting in a stable net government debt ratio in coming years 

  • On the contrary, the rating is limited by challenges related to contingent liabilities of Pemex and CFE, as well more modest GDP relative to peers 

  • With this, Moody’s is the only agency with a negative outlook, from which we expect an update soon. The decision gives us more confidence that the country will remain as ‘investment grade’ in the short- and mid-term

S&P Global Ratings changes Mexico’s outlook to stable. Today, the agency affirmed the long-term sovereign rating in foreign- and local-currency at 'BBB' and 'BBB+' respectively. More positively though, they changed the outlook from negative to stable, after reaffirming the former back in December 2021. The adjustment is explained by the expectation that a careful execution of monetary and fiscal policies will continue, achieving stability in net public debt around 47% of GDP in coming years. They added as a strength the possibility of higher investment due to nearshoring and lower uncertainty in the energy front. On this, the statement highlighted pragmatic dialogue between the government and US businesses to generate investments and bilateral financing in the sector. They also estimate slightly higher deficits (2.9% of GDP in 2022-2025) due to gasoline subsidies, but a constant control on spending will continue, even with social programs and flagship investments. Among the risks, the agency keeps noting contingent liabilities from Pemex and CFE –with a nearly certain probability of additional, extraordinary support– and the lag in the economic recovery, especially on low private investment. All in all, the decision reinforces our conviction that Mexico will maintain its investment-grade status in the short- and medium-term. We now expect Moody’s update, currently with a rating of ‘Baa1’ and a negative outlook.