LatinNews Daily - 18 May 2022

* International credit ratings agency Fitch Ratings has affirmed Mexico’s Long-Term Foreign Currency Issuer Default Rating (IDR) at ‘BBB-’ and maintained the Rating Outlook as stable. According to a statement by Fitch, Mexico’s rating is supported by a prudent macroeconomic policy framework, and stable and robust external finances. Fitch said the rating was constrained by “weak governance, muted long-term growth performance, continued policy intervention affecting investment prospects, and the potential contingent liabilities from [state oil company] Pemex”. Fitch noted that Mexico’s quarterly GDP data was showing gradual recovery, with annual growth reaching 1.6% in Q1 2022. The agency said it expected GDP growth would slow to 2% in 2022 and remain at this level in 2023, with GDP levels not returning to pre-pandemic levels “until 2023, lagging both rating and regional peers.” Significantly, Fitch noted that private investment continues to underperform “as a pattern of political interventions (most recently higher state intervention in the electricity sector) have affected business confidence”. Despite the recent rejection of President Andrés Manuel López Obrador’s electricity reform, Fitch stated it expects private investment in the sector will be dissuaded by regulatory uncertainty, and will remain insufficient.

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