The ability of the new Mexican government to lower the fiscal deficit, which in 2024 will be around 6 percent of the gross domestic product (GDP), is limited by an increasingly rigid expense structure and a narrow revenue base
Moody’s said this Thursday, announcing a change of stable
a negative
in the perspective of the country’s sovereign debt rating.
The change in perspective – which does not affect the level of investment – is also due to the fact that, according to the rating agency, the reform of the Judicial Branch has the potential to substantially alter
checks and balances, as well as the business environment in Mexico.
In response, the Ministry of Finance stated that the rating agency made its assessment without having the elements of the expenditure budget and fiscal policy for 2025, which will be presented this Friday to Congress.
“This situation suggests that Moody’s analysis and perspective could have benefited from a more detailed and updated evaluation,” the Treasury said.
At the time of its advice, the agency did not have information on the 2025 budget, the proposed fiscal policy for next year or the projections that the Ministry of Finance will deliver to the Congress of the Union.
he added.
The rating agency, for its part, explained that the change in perspective is due to a weakening of the institutional and policy-making framework that could undermine fiscal and economic results.
Deteriorating debt affordability and greater rigidity in public spending make fiscal consolidation difficult, following a rise in the public deficit this year, a departure from a history of low deficits regardless of economic pressures.
He added that Mexico’s constitutional reform could weaken the checks and balances of the judicial system, with a possible negative impact on the country’s economic and fiscal strength.
Growth potential
In turn, he reported that there is a greater probability that the contingent liabilities derived from Petróleos Mexicanos – which have a negative outlook – will materialize on the government’s balance sheet and, at the same time, will not restore the sustainability of Pemex’s long-term debt. and, therefore, maintain fiscal risks for the government.
Regarding the affirmation of the sovereign risk rating, Moody’s noted that it reflects that Mexico’s credit profile continues to benefit from solid economic strength.
Moderate macroeconomic imbalances, thanks to a history of relatively prudent fiscal and monetary policies, support the rating.
For its part, the Ministry of Finance mentioned that the arrival of new investments in the country, motivated by the relocation of companies, offer significant potential for economic growth and reflect Mexico’s strategic position in the global trade panorama.
He highlighted that the debt of the Mexican government maintains a solid attractiveness in international markets, demonstrating a resilient profile in the face of economic fluctuations and financial volatility.
Additionally, Mexico has the necessary fiscal buffers to mitigate possible adverse scenarios in the global environment, reaffirming the Treasury’s commitment to prudent management that reinforces the strength of public finances and debt sustainability.
held.
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#Moodys #rating #negative #affect #investment #grade
–
**How might the interplay between Mexico’s judicial reforms and investor confidence influence the effectiveness of any government strategies aimed at mitigating the negative impact of Moody’s downgrade?**
## World Today News Exclusive Interview: Moody’s Downgrade and Mexico’s Fiscal Future
**Introduction:**
Welcome to World Today News. Today, we’re diving deep into Moody’s recent decision to revise Mexico’s sovereign debt rating outlook to negative. Joining us to dissect this complex issue are two distinguished voices: [ **Guest 1 Name & Title**] and [ **Guest 2 Name & Title** ].
**Section 1: Understanding the Downgrade**
* **(To Guest 1)** Moody’s cited “an increasingly rigid expense structure and a narrow revenue base” as contributing factors to their decision. Could you elaborate on what this means in practical terms for the Mexican economy?
* **(To Guest 2)** Do you agree with Moody’s assessment? What other factors, if any, do you believe might have played a role in this downgrade?
**Section 2: The Impact of Judicial Reforms**
* **(To Guest 1)** Moody’s expressed concern that the reform of the Judicial Branch could “substantially alter checks and balances” and negatively impact the business environment. How significant is this concern, and what are the potential ramifications for both domestic and foreign investment?
* **(To Guest 2)** The Mexican Ministry of Finance countered that Moody’s lacked complete information regarding the 2025 budget and fiscal policy. How crucial is this information in forming an accurate assessment of Mexico’s economic outlook?
**Section 3: Debt Sustainability and Economic Growth**
* **(To Guest 1)** Moody’s highlighted the potential for contingent liabilities from Pemex to materialize on the government’s balance sheet. What are the implications of this for Mexico’s public debt and overall fiscal health?
* **(To Guest 2)** The Ministry of Finance emphasized Mexico’s economic strengths, including growing investment and a resilient debt profile. How can Mexico leverage these strengths to navigate the challenges posed by the downgrade and foster sustainable economic growth?
**Section 4: Looking Ahead**
* **(To Both Guests)** What key steps can the Mexican government take to address Moody’s concerns and restore investor confidence? What role can international organizations and partners play in supporting Mexico’s economic recovery?
* **(Final Question to Both Guests)** What is your outlook for Mexico’s economy in the coming months and years? What are the biggest opportunities and challenges that lie ahead?
**Closing:**
Thank you to both of our guests for sharing their insights and perspectives on this important issue. This is a developing story, and World Today News will continue to provide updates as they emerge.
**Note:** This interview structure is designed to encourage a nuanced discussion, allowing both guests to present their viewpoints and analyze the complex factors influencing Mexico’s economic outlook. The open-ended questions aim to elicit thoughtful responses and provide a comprehensive understanding of the situation. Remember to adjust the questioning to fit the specific expertise and opinions of your chosen guests.
