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Moody's Downgrades Mexico's Outlook

Moody's changes Mexico's credit outlook to negative due to fiscal and institutional concerns, although the rating remains unchanged. The Mexican government counters that this is a premature analysis.

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PoliticsEconomyFinanceLatin AmericaRiskCredit

Moody's RatingsPemexSecretaría De HaciendaMexican Government

Donald TrumpSheinbaum

How did the Mexican government respond to Moody's announcement?: Despite the negative outlook, Moody's affirmed Mexico's Baa2 rating, considering the country's economic strength and potential benefits from nearshoring. The Mexican government countered that the analysis lacked updated information, including the 2025 budget.
What prompted Moody's to change Mexico's credit outlook to negative?: Moody's changed Mexico's credit outlook to negative from stable, citing weakening policy and institutional environment that risks undermining fiscal and economic outcomes. While maintaining the Baa2 rating, the negative outlook suggests a potential downgrade in the next review.
What arguments did the Mexican government use to counter Moody's concerns?: The Mexican government maintains that its debt remains attractive in international markets and possesses fiscal buffers to mitigate adverse global scenarios. They highlight that Mexico still holds investment grade with all eight rating agencies.
What broader economic and political factors influenced Moody's assessment of Mexico?: Moody's decision reflects a confluence of factors, including economic slowdown, market volatility after Trump's win, and the impact of recent constitutional reforms. The agency's assessment underscores the challenges facing the Mexican economy and its fiscal sustainability.
What specific concerns did Moody's raise regarding Mexico's fiscal health and institutional environment?: The downgrade reflects concerns about Mexico's rising fiscal deficit (6% of GDP), constitutional judicial reforms potentially eroding checks and balances, and the risk of Pemex's contingent liabilities impacting government finances.

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