By RICARDO CASTILLO
Is the Damocles sword a mythical tale? Surely not for Mexican President Andrés Manuel López Obrador (AMLO), who now sees it swinging over his political neck like a pendulum in the form of international rating agencies Fitch, Moody’s and S&P.
The awesome rating threesome has lashed out against Mexico, putting the nation’s economy not on a downward slide but certainly on a warning to investors about future potential weakness. In the eyes of many Mexicans – since S&P included 77 companies, both private and public – this “negative” warning has the stench of politics, not finance.
AMLO finally responded to the agencies on Tuesday, March 5, with a special delivery message to S&P, whose reactions to The president’s administration has been virulent, to put it mildly.
“The only thing I can say, in a respectful manner, to the rating agencies is that during the entire period during which corruption prevailed in Pemex (Petróleos Mexicanos) and the Federal Electricity Commission (CFE), they kept mum. They gave an A+ grade to that. They rated (the country) with excellence.”
AMLO called Pemex and the CFE “the most sacked companies in the world,” and said that the rating agencies said nothing while they witnessed the theft going on, “particularly last year.”
“They are now punishing the nation for the neoliberal policy applied in the past 36 years, which was a total failure, particularly last year, when we didn’t have anything to do with the government. Now we are paying for the broken dishes.”
AMLO said he was not taking a defensive stance with the agencies, especially regarding the results S&P came up with. “I have respect for their results,” he said. But he did assure them – as he did in mid-February – that his administration is out to salvage Pemex and the CFE. “They will be rescued,” he said.
The president did request, however, that the agencies have patience, saying that “little by little, it will be understood that Pemex and the CFE are truly productive companies. They will surge with efficiency and honesty.”
Surely, AMLO has to play the role of the measured politician in order not to offend the “fraternal” trio, but the wide scope of the ratings Standard and Poor’s had by reaching out to a myriad of Mexican companies — including cell phone giant America Móvil, Coca Cola Femsa (Latin America’s largest bottling company) and the Liverpool luxury department store chain — raised a lot of eyebrows in Mexico.
Also included were 77 financial institutions, with Citibanamex at the fore of the list of banks in a negative situation. Citibanamex, by the way, is a branch of Citi, a company definitely not on S&P’s negative radar.
At this point, the constant harassment by the Three Biggies put Mexican companies like Pemex and the CFE in the sights of investors as easy targets. But spreading out the downgrade into the rest of the economy – Coca Cola Femsa? Gimme a break – sounds suspicious and more than one analyst in Mexico suspects that there’s more than just economics behind the ratings.
Is someone pushing behind the rating companies to destabilize the Mexican economy? It is a very serious question because, ideologically, AMLO – and his 53 percent of the total vote – issued a clear call for a change of course in the way the Mexican economy had been steered by seven past presidents into the neoliberal economic course, which included the privatization of state-owned companies like Pemex and the CFE.
One thing is certain: There will be no privatization under AMLO. Under former President Enrique Peña Nieto, with the help of the conservative National Action Party (PAN) and the leftist Democratic Revolutionary Party (PRD), some degree of privatization managed to pass through the Mexican Congress.
This 2013 Energy Reform sent Peña Nieto’s popularity reeling and forced AMLO’s split with the PRD, which had postulated him twice for president. In the end, the reform led to the demise of the once-almighty Institutional Revolutionary Party (PRI), whose revolutionary ideals – according to hard core members – Peña Nieto stabbed in the back. In five years, the Energy Reform provoked the surge of AMLO’s National Regeneration Movement (Morena), a party founded in 2014 and which, in its short life span, managed to reach a point where it now controls the Mexican government, with scant opposition.
The suspicion now is that the Dynamic Trio of rating agencies is responding to political anti-AMLO pressure, something that is not a far-fetched suspicion since they have been known to do similar things in the past.
Back in 2010, the U.S. Congress investigated the Big Three and showed that Moody’s analysts had been coerced by their immediate superior to issue high ratings to bad debts which in the end brought about the infamous 2007 mortgage crisis that rattled the world and caused the Mexican economy to perform during 2009 at under 6 percent of its Gross Domestic Product.
The question being asked in Mexico today – remember 2009? – is who rates the rating companies? The answer is that, in spite of the U.S. mortgage crisis, the U.S. Congress never came up with a watchdog institution to keep tabs on these agencies.
Given this background – and S&P’s negative attitude toward Mexico – there is growing mistrust of the ratings being issued because some of them make no sense at all.
That, of course, makes the recent course of the agencies’ downgrading Mexico as a whole smell fishy as hell.
Again, who rates the rating companies? Can they be trusted? Or should we take it that in some ratings – understandably, Pemex and CFE – they are right, but that they are wrong in many others?
The scent of putrid doubt permeates Mexico’s financial air as the ratings Damocles sword pendulums over AMLO’s government.