Photo: Fitch Ratings

By KELIN DILLON

On Tuesday, Aug. 20, the Big Three credit rating agency Fitch Ratings Inc. released an analysis warning about potential aspects that could negatively affect Mexico’s rating under President-elect Claudia Sheinbaum’s upcoming administration.

“The fiscal strategy and governance reforms of the Sheinbaum government will be key factors for Mexico’s rating,” said Fitch’s report.

According to the credit rating agency, Mexico’s climbing debt – which could surpass 51 percent of the country’s gross domestic product – will be a major player in determining its rating and may make “consolidation a key challenge.”

With this in mind, Fitch analyzed that it “foresees a gradual increase in debt/GDP greater than 51 percent due to higher primary deficits, high borrowing costs, and moderate GDP growth averaging 2 percent in 2024-2026.”

Sheinbaum previously promised to reduce Mexico’s fiscal deficit to 3.5 percent beginning in 2025; however, it currently sits at 5.9 percent due to debts brought on by some of current Mexican President Andrés Manuel López Obrador’s (AMLO) various controversial infrastructure projects.

“The president-elect has indicated that she will prioritize deficit reduction in line with stabilizing the debt-to-GDP trajectory over the coming years, but the political appetite for revenue-boosting reforms is unclear,” added the Fitch document, explicitly pointing to state-owned oil company Petróleos Mexicanos as one of Mexico’s primary fiscal burdens.

Likewise, continued Fitch, the contentious reforms proposed by AMLO to alter the Judicial Power of the Federation (PJF) could alter Mexico’s investment viability.

“We believe that the proposed reforms would negatively affect Mexico’s overall institutional profile, but the severity of their impact may become clearer once they are approved and implemented,” concluded the rating agency.