Fitch Ratings does not plan to reduce Mexico’s credit rating

Tulum, QR. Fitch Ratings said Thursday that it is not considering reducing Mexico’s sovereign debt rating or moving it from its current investment grade rating – a risk-free instrument for investors – said Gerardo Carrillo, Fitch’s regional director for Latin America for international public finance, when speaking about the country’s outlook a few days before the change of government and after a reform to the Judicial Branch was approved.

Before the end of the year, the rating agency will consider a review of the rating outlook, which is currently “stable,” said the executive, without anticipating the direction of the change they would make.

“The rating outlook is stable. Before a direct downgrade in the rating, what could happen is a positive or negative change in the outlook, but with the current stable outlook we are not seeing a potential downgrade of Mexico’s credit rating,” said the executive while participating in the 18th National Convention of the Association of Multiple Purpose Financial Companies of Mexico (Asofom).

He added that “it is likely that the reforms (of the so-called Plan C) will significantly affect Mexico’s institutional profile, particularly the reform of the judiciary, but it is too early to assess the magnitude of the impact.”

“The reform that is most worrying and that is making the most noise is that of the judiciary. We clearly see that this will have a negative impact on the institutional profile of the country, especially on the vulnerability and autonomy of the judiciary, but it is too early to know the impact,” he insisted.

According to the rating agency, the “potential” risk of the set of reforms that were presented by the executive last February is “undermining the investment and business climate, by affecting the already weak rule of law.”

Sheinbaum inherits a stable economy

Carrillo said that the new administration, which will be headed by Claudia Sheinbaum, will inherit a “stable economy. We assume that a prudent monetary and fiscal policy will be maintained to contain macroeconomic imbalances and that the economy of the Bank of Mexico (BdeM) will continue to be respected.”

However, he said, despite the strength of macroeconomic institutions, weak growth has been a challenge and a constraint on the sovereign rating. Average growth between 2000 and 2023 has been 1.7 percent, while in comparable countries it is 3.6 percent.

“We do not expect a marked improvement in economic activity in the coming years, unless there are economic reforms, such as tax, labor or social security reforms, which would substantially improve productivity,” he added.