Moody’s downgrades Mexican government debt

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MEXICO CITY (AP) — Moody’s Investors Service lowered Mexico’s public debt from Baa1 to Baa2 on Friday, citing concerns about debt servicing costs and Mexico’s support for the state-owned oil company. Baa2 is still a notch above the lowest investment grade rating, Baa3.

Moody’s said in a statement that “Mexico’s debt affordability remains consistently lower than that of similarly rated peers and is likely to deteriorate further given the higher interest rate environment.” Domestic inflation in Mexico…

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MEXICO CITY (AP) — Moody’s Investors Service lowered Mexico’s public debt from Baa1 to Baa2 on Friday, citing concerns about debt servicing costs and Mexico’s support for the state-owned oil company. Baa2 is still a notch above the lowest investment grade rating, Baa3.

Moody’s said in a statement that “Mexico’s debt affordability remains consistently lower than that of similarly rated peers and is likely to deteriorate further given the higher interest rate environment.” Mexico’s domestic inflation is currently close to 8%.

He also said that “Mexico’s fiscal outlook will be negatively affected by…increased spending rigidity related to recurring support to state-owned enterprises, particularly Pemex, increased pension spending, and capital spending earmarked for flagship projects” .

The central policy of President Andrés Manuel López Obrador is to build oil refining capacities and railway lines. He also pledged to bail out the heavily indebted state-owned Petroleos Mexicanos.

Moody’s said it expects the Mexican economy “to remain constrained by weak investment prospects and heightened structural rigidities.” The economic scarring that occurred during the pandemic will not be reversed, and as a result there will be a persistent gap between the pre-pandemic trend level for GDP and the current estimates for 2022-24.

Mexico’s Treasury Department said that “despite Moody’s sovereign debt downgrade, Mexico’s public debt maintains a strong position in international markets and has sufficient financial buffers to weather global risk scenarios.”

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