Moody’s Ratings on Thursday downgraded its Mexico outlook from stable to negative, but maintained the country’s long term ratings at the second lowest investment grade level.
The New York-based credit rating agency said that its change in the outlook on the Mexican government’s ratings was “driven by our view of a weakening in the policymaking and institutional settings that risks undermining fiscal and economic outcomes.”
“Deteriorating debt affordability and further government spending rigidity make fiscal consolidation challenging, following this year’s widening in the government deficit — a deviation from a longstanding track record of low deficits regardless of economic pressures,” Moody’s said in a statement.
The rating agency also raised concerns about the recently-enacted judicial reform, saying that it “risks eroding checks and balances of the country’s judiciary system, with potential negative impact to Mexico’s economic and fiscal strength.”
“Finally, we consider there is an increased likelihood that contingent liabilities stemming from Petróleos Mexicanos (Pemex, B3 negative) could materialize onto the government’s balance sheet, while at the same time not restoring long-term debt sustainability for Pemex and therefore maintaining fiscal risks for the government,” Moody’s added.
The agency also raised concerns about the 2026 review of the United States-Mexico-Canada Agreement, saying that the Mexican economy could suffer “if modifications to the agreement’s rule of origins, labor specifications and other U.S. trade policies towards Mexico changed in a way that durably limit the country’s exports.”
With regard to its decision to reaffirm Mexico’s Baa2 rating, Moody’s said that the country’s economic strength is “comparatively high on account of the diversified economy,” which is “able to recover from large shocks.”
“… The ongoing shifts in global supply chains and geopolitical tensions between the U.S. and China have improved the prospects that Mexico will benefit from the nearshoring process,” the agency said.
“Over the past two years, there have been large investment announcements that, depending on implementation, have the potential to boost the Mexican economy’s growth performance in years to come.”
However, Moody’s also said that Mexico has had “relatively subdued long-term growth of about 2% for the past three decades” and that its expectation is that a similar trend will continue.
The rating agency said that an upgrade to Mexico’s sovereign ratings is unlikely given the current negative outlook but added that the outlook could return to stable “if we were to assess that the authorities’ fiscal consolidation efforts are likely to contribute to a rapid stabilization of the debt burden.”
It said that “a continued deviation from a track record of prudent fiscal policy management that undermines the effectiveness and credibility of macroeconomic policymaking would lead to downward rating pressure.”
A single-notch downgrade in Mexico’s long term ratings to Baa3 would put the country’s debt just above junk level.
Moody’s downgrade of its outlook for Mexico came a day before Finance Minister Rogelio Ramírez de la O submitted the federal government’s 2025 budget proposal to the lower house of Congress.
Finance Ministry hits back at Moody’s
The federal Finance Ministry (SHCP) said in a statement on Thursday that it was “important to mention” that Moody’s, when making its decision to downgrade its outlook for Mexico, did not have information about the 2025 budget, “the fiscal policy proposed for next year” or the Mexican government’s economic projections.
“This situation suggests that the analysis and perspective of Moody’s could have benefited from a more detailed and up-to-date evaluation,” the SHCP said.
“… The debt of the government of Mexico maintains solid attractiveness in international markets, demonstrating a resilient profile in the face of economic fluctuations and financial volatility,” the ministry said.
“In addition, Mexico has the necessary fiscal buffers to mitigate possible adverse scenarios in the global environment,” the SHCP said, adding that it is committed to “prudent” economic management that “reinforces the strength of public finances and the sustainability of debt.”
Among the economic projections included in the federal government’s budget proposal — as outlined in another SHCP statement issued on Friday — are the following:
- 2-3% growth in 2025, “supported by a solid labor market, robust private consumption and elevated levels of public and private investment.”
- A budget deficit of 3.2% of GDP in 2025, down from 5% this year.
- Public debt of 51.4% of GDP in 2025, contingent on a budget deficit of 3.2% of GDP and described by the SHCP as “a sustainable level” of debt.
Ramírez de la O said Friday that the SHCP anticipates the government will receive 8 trillion pesos (US $393.2 billion) in revenue in 2025, mostly from tax collection.
In its Friday statement, the Finance Ministry reiterated its commitment to “responsible fiscal management that maintains a moderate deficit and stable debt.”
The SHCP also said that the government’s budget proposal “emphasizes the application of the criteria of austerity, efficiency and transparency in public spending.”
“We’re planning solid investment in infrastructure projects that will immediately drive economic growth and generate long-term benefits. In addition, resources will be allocated to broaden the coverage of welfare programs, guaranteeing respect for constitutional rights and improving the quality of life of the [Mexican] population,” it said.
Mexico News Daily
Moody’s actions/proclamations are IMHO very highly biased and I wish the best to the new Sheinbaum administration in proving them wrong!
I think that they are worse than merely “biased”.
AMLO’s legacy of feeding the “black hole” PEMEX, (while the rest of the world goes green) , the grossly over priced train to no where and the final touch “opening up States to vote in to place Narco Judges” was brutal for poor Claudia to contend with (The Cartels are more powerful then ever, “hugging” them did not work! – Now add the nightmare reality of Trump chopping at exports if even a nail of Chinese product in them – and just 100% tarrifs on anything he feels like and worst of all running Mexicans home scared with deportation attacks that will disrupt the $6B in monthly remitences coming from them and man is Mexico in for a bad time! L
Voted-in Narco judges to replace the appointed Narco judges or would you have us believe that appointees are free of narco corruption?
Good analysis on the corruption of the economy due to the mafias and narcotics. The mafia cause fear in the Mexican population and the government is not effective in dealing with them. One sees the mafia violently striking out, but not the government in reaction of the mass murders which always seen to leave innocent Mexicans as collateral damage.
President Sheinbaum and the finance minister have to keep “bending the truth” about the status of the country and the economy to make the Sheinbaum government look like there is no “worry”. There is plenty of worry that is not going away smply because with PEMEX dragging, he economy down with the oil company “high indebted” condition plus the Mayan Train operation. I agree with Eric Martin analyzes of the country because “things are going to get worse in 2025. Don’t blame the US nor Trump for what is happening with the economy because all of this economic mess is the result of Lopez Obrador “doings”.
I do worry, regardless of cause, as I watch the peso continue to plummet. My Spanish teacher 50 years removed from México feels that the country is going communist and recently pointed out the giveaway to Cuba. The elected judiciary is a strawman at best.
You want to downgrade a government based on policy considerations and imperiling checks and balances? Sorry, Washington, yer going down. You have a high court that created an imperial president that would have the founding fathers spinning in their graves. You have a lying felon and a coterie of scumbags waiting to get rich off the public trough (Musk already has) and public policies that will destroy individual rights, separation of church and state and, o yes – the planet.
China will gladly invest where the declining power won’t but Mexico doesn’t really need them. Because near shoring by Western investors leaves Mexico in charge of it’s future, not Moody’s. And it just bugs them because they can’t manipulate the market and stop a country bent on making its people’s lives better. The US ought to try it.
Is it “Moody’s” or “PMS’s”? Or maybe R.F.K. was sourced? Moody’s has no semblance of competence to assess any judiciary in the U.M.S. let alone the U.S.A. If it was “driven by our view of a weakening in the policymaking and institutional settings that risks undermining fiscal and economic outcomes”, why no mention of the malignancy of cartel fascism? Are the cartels good for Wall Street? And what of Moody’s, when making its decision to downgrade its outlook for Mexico, not have having information about the 2025 budget? On cross examination PMS will be prescribed Midol.
The Moody’s whose M3 Subprime Model triggered the global financial crisis of 2007, causing millions of people to loose their life savings, companies to close, and industrial nations like the U.S. to panic and weep? The Moody’s that had to pay the US Government, along with 21 states and the District of Columbia $864 million (a slap on the wrist) in 2017 to settle charges related to this?
The Moody’s who claims their assessments are just “opinions” and that’s it
The Moody’s that makes unsolicited assessments with “negative outlooks” if a company chooses a competitor to do it’s rating, effectively blackmailing them into using its services or getting downgraded?
It just seems suspect that Mexico’s rating is lowered the week during trump’s strangly disturbing post-election behavior. But who knows the overall affect of the Beaver Supermoon on US presidents and financial folks.
So I’d take this Moody report with tons of salt preferably from the San Felipe Salt Company.
Salud!
Do not assume that Trump-Rubio will be able to bully or intimidate the Mexican or other sovereign countries targeted for for concessions — such as contributing to the bipartisan Washington asphyxiation of Cuba — to US policy goals.
People attacking Moody’s here for stating the obvious, the outlook is anything but stable. Indeed, Moody’s is a bit late to the game. The foreign currency market has been showing signals for awhile and the near-shoring movement is slow to stagnate. The external environment is doing Mexico no favors and they shouldn’t expect the incoming US administration to be anything but belligerent.
Well said, concise and spot on. Kind of a rarity in this forum.
What I’m happy to see is that Moody’s report is responded to by Mexico with facts and reason. Moody’s declares high risks and Mexico responds with credible plans that may work (but need to be given time to be realized). This is how credible countries and business work when they work well. At least we are done with the shouting and ‘blow hard’ bravado of the last President. Compare this kind of logical response to what you will see in the US over the next many years and we will all agree this country, no matter how difficult the circumstance are, will have a better chance to get through it well. There are risks and opportunities. The current administration must live with additional risks that came from the last administration. Corrections may be necessary but today they begin with their own good plan and we will all give them time to see if it works or they have to do more to correct it. Moody’s will follow along and adjust as reality plays out in places no one today can control entirely.
Who does Moody’s write for,simply billionaire plutocrats! This does not mean their analysis is wrong. Pemex seems to be a liability sucking up government revenues. Go green, all that sun which is free energy, sell stock in Pemex. and ascertain its true value.Reform some of AMLO’s old age foolisness.
Will you please open a BlueSky acct? It can be run alongside your Twitter/X acct. A lot of trade/finance people are departing X (including myself) and it would be wonderful to see your voice on BlueSky. Please alert when you create an acct?
Trump and Musk have a history of breaking things. The new NAFTA (aka USMCA) agreement is a positive thing for all three countries. The potential for harm to Mexico is high with Trump deporting migrants, imposing tariffs and Musk designing “cost cutting” measures. I hope we expats can continue to be seen as a net plus for Mexico and remain welcome here.