Rating agencies have a message for Mexico

On Friday, Standard & Poor’s changed the perspective of Mexico's grade, from stable to negative

Rating agencies have a message for Mexico
Pemex, Mexico's oil company - Photo: Juan Carlos Reyes García/EL UNIVERSAL
English 05/03/2019 09:16 Mexico City Editorial Actualizada 09:22
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In regards to the economy, one of the main factors is trust. If there is trust in a country, national and international investors allocate resources for productive ventures; if the future is uncertain, the private sector will wait for better times to venture into business or will focus on investing elsewhere.

There are specialized companies that advise investors on where to invest and measure the risks of allocating money to a company or in a certain country. These companies are called rating agencies, through an analysis, they calculate how trustworthy a company or a country is to face its credit commitments.

In the last months, the Mexican economy and its main state-owned company, Pemex, have been targeted by the rating agencies. On Friday, Standard & Poor’s changed the perspective of Mexico's grade, from stable to negative because of a lower forecast for economic growth and for the change in public policies in the energy sector. Yesterday, the same agency made a similar adjustment to Pemex's grade.

How should this forecast about the economy be taken? Can all the responsibility be attributed to the government?

In regards to Pemex, the current administration inherited the oil company with the largest debt in the world. Last week, EL UNIVERSAL revealed that during Enrique Peña Nieto's administration, Pemex lost MXN $1.2 billion, this number represents 60% of its total debt which is calculated to be around MXN $2 billion. With this scenario, Pemex's revival is a challenge that will hardly be solved during this administration.

In regards to the economy in general, the rating agency only points out the risk factors: a lower forecast for economic growth and doubts about the change of public policies for the energy industry.

The new federal government began by sending messages that generated uncertainty, such as the cancellation of the Texcoco airport, as well as the appointment of a Pemex director that was disapproved by the financial market. But the government has also scored some points by maintaining an economic discipline without risking a deficit and reaffirming the Bank of Mexico's autonomy.

Mexico shouldn't underestimate these opinions. It's clear that the government didn't inherit a prosperous economy but it wasn't beaten either. Nor communicating the plans or taking decisions that generate uncertainty could risk the relatively stable economy that, despite up and downs and evident opportunities to improve, has maintained the country since the beginning of the century. This big is the sign sent out by the agencies.


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