The big three credit ratings agencies have drawn attention to corruption and the lack of rule of law in Mexico for years despite a claim by President López Obrador to the contrary.
Following Fitch’s downgrading of the state oil company’s credit rating to just above junk status last week, López Obrador accused rating agencies of hypocrisy, declaring that they had effectively endorsed corruption committed during the administrations of past governments and not recognized his commitment and actions to combat it.
“They maintained a complicit silence,” he said, referring to what he described as “the looting” of Pemex under successive past governments.
However, a survey of past views proffered by Standard & Poor’s (S & P), Moody’s and Fitch with respect to Mexico showed that they have spoken out about corruption.
The survey, conducted by the newspaper El Economista, revealed that the forthright opinions date back several years and, in one case, to 2007.
Standard & Poor’s touched on the issue of corruption in a December 2007 report entitled Creating the New Rules of the Game in Mexico, the newspaper said.
In 2016, the same agency said in another analysis that political reasons were a bigger barrier to growth in Mexico than economic ones, and in 2017 it said that corruption could affect the sovereign credit ratings of Latin American countries in general.
“For many years, we have pointed out the corruption problem . . . as an intrinsic factor in Mexico’s rating,” said S & P sovereign risk analyst Joydeep Mukherji.
“Since I started analyzing Mexico, when [former president Vicente] Fox was in power, we started talking about the structural and institutional weakness that prevails in the country. We always highlighted corruption and the shortcomings of institutions,” he added.
Mukherji also said that corruption and limited respect for the rule of law have been factors in Mexico’s weaker than expected economic growth in recent years.
Moody’s signaling of corruption in Mexico goes back to 2010, El Economista said.
That year, the company’s associate managing director for the Americas, Mauro Leos, warned that corruption was a factor that holds back the competitiveness of Mexico and Mexican companies and also impacts negatively on economic growth.
In 2014, when Moody’s upgraded Mexico’s long-term credit rating to A3 – four notches above minimum investment grade – following the approval of structural reforms implemented by the past federal government, it explicitly said that the probability of a further upgrade was very low because Mexico’s “institutional strength/framework” hadn’t improved.
The company’s credit rating of Pemex is currently on a par with that of Fitch at just above junk status while its rating for Mexico is BBB+.
Fitch, meanwhile, has constantly warned that prevailing corruption is a factor that hinders Mexico’s economic potential, El Economista said, including that of state-run companies such as Pemex.
“Yes, the agency has made observations about corruption, violence and insecurity as well as Mexico’s institutional weakness; considerations that are reflected in the sovereign rating ceiling [it has hit],” said Shelly Shetty, the company’s head of sovereign ratings for Latin America
Those three factors – corruption, violence and insecurity – “have for years limited the possibility of Mexico’s sovereign rating going above” its current BBB+ rating, she said.
Analysts from all three credit agencies said that while they have denounced corruption and the lack of the rule of law in Mexico, it is not their job to do so.
“. . . We analyze the capacity [of a country or company] to pay debt based on its financial state,” said Moody’s senior analyst Nymia Almeida.
She added that corporate governance is an important consideration for ratings agencies because “the more robust corporate governance is, the less risk there is of fraud and corruption.”
Source: El Economista (sp)
