The rating agency Fitch Ratings confirmed the credit rating of Mexico in BBB + with stable outlook but warned that of winning Andrés Manuel López Obrador in the presidential elections on July 1, there is the potential risk of a slower implementation of reforms, particularly in the energy sector.
“Mexico’s ratings are supported by the country’s economic diversity and good behavior in terms of fiscal discipline that have anchored the macroeconomic stability of the country,” Fitch said in its report.
According to the rating agency the results of the upcoming presidential elections may present some risks for the country. “Under an administration led by the leftist candidate, Andrés Manuel López Obrador (AMLO), risks can not be ruled out regarding the slower implementation of reforms (especially in the energy sector), the reorientation of the economic policy towards greater state intervention and high fiscal expenditures. ”
As a result the volatility of the financial market could intensify before the elections of July 1 or later and represent another wind against growth and investment, explains Fitch.
“However, institutional checks and balances, a probable divided Congress and constitutional safeguards on some of the structural reforms could prevent a quick and marked departure under that administration,” he explains.
For the agency, the country’s strengths have leveled the restrictions of the qualification which incl they have moderate economic growth and structural weakness in their public finances, low oil revenues, as well as a low penetration of credit and weakness in their institutions, marked by a high incidence of crimes related to drug trafficking and corruption.
Fitch added that the Mexican economy has been resilient to multiple shocks in recent years, as the real Gross Domestic Product (GDP) expanded 2 percent in 2017, but growth expectations remain moderate , with a forecast of 2.4 percent in 2018 and 2019.
The agency believes that increased US demand, rising oil prices, increased oil production and continued implementation of structural reforms can support growth , although uncertainty persists related to the renegotiation process of the North American Free Trade Agreement ( NAFTA ) and the upcoming elections, which may continue to overshadow growth and investment.