Moody's lowers Mexico's outlook to negative due to institutional weakness

Moody's Ratings lowered Mexico's outlook from stable to negative on Thursday. The major credit rating agency cited institutional and policy weakness that could undermine the economy, as well as government finances.

Moody's cited the growing government expenditure, including a larger fiscal deficit, and the recent constitutional overhaul of the judiciary, which risks "eroding the checks and balances."

Moody's said that the reform of the judiciary could be a threat to the economy and fiscal strength. In a press release, the company also mentioned "contingent liability" arising from Pemex, a heavily indebted oil company owned by the state. This could complicate government's financial statements.

The credit rating agency, in its mixed assessment of Mexico's economy, described it as benefiting from macroeconomic stability pursued and maintained by the central banks, also confirmed Mexico's sovereign debt rating at Baa2.

It argued that these ratings benefitted from "robust economies which will continue to be supported through the diversification of the economy as well as the potential benefits of nearshoring." Reporting by David Alire Garcia, Editing by Aida Pelaez-Fernandez & Anthony Esposito

(source: Reuters)