Introduction to the Rating Agencies’ Perspectives
The global rating agencies Fitch, Moody’s, and S&P have all highlighted that the renegotiation of the trade agreement with the United States and Canada is a positive factor for Mexico’s credit rating. They see potential benefits but warn of risks due to trade uncertainty with the U.S.
Fitch’s Perspective
Shelly Shetty, Fitch’s Director of Sovereigns for Latin America, emphasized that nearshoring remains a medium-term opportunity for Mexico, contingent on the renewal of its trade agreement with the U.S.
During Fitch’s annual conference on Mexico in June, Shetty explained that the country retains advantages such as its proximity to the U.S. and a strong manufacturing base.
Currently, Mexico holds a sovereign rating at the lowest investment-grade level in Fitch’s assessment, “BBB-/Stable Outlook.”
Moody’s Perspective
Renzo Merino, Moody’s Senior Analyst for Mexico, explained in a podcast that external uncertainty driving U.S. trade policy poses risks to Mexico’s economic growth for over a year.
“These external risk factors are crucial to what could potentially lead to a possible downgrade in credit rating,” Merino stated.
Moody’s assigns Mexico a sovereign rating of “Baa2/Negative Outlook,” placing it among the three ratings at risk of being downgraded.
S&P’s Perspective
Joydeep Mukherji, S&P’s Director of Sovereign Ratings for Latin America, believes that reshoring has the potential to positively impact Mexico’s economic growth, facilitating a future rating improvement.
Clemente Ruíz Durán, a UNAM professor and researcher, criticized the tariff attacks to gain advantages, describing it as a senseless trade war.
Key Questions and Answers
- What is nearshoring and why is it important for Mexico? Nearshoring refers to the practice of relocating business processes to companies in nearby countries, such as Mexico. It is crucial for Mexico because it offers a competitive advantage in terms of proximity to the U.S. market, skilled labor, and lower operational costs.
- What are the current credit ratings for Mexico by different agencies?
- Fitch: BBB-/Stable Outlook
- Moody’s: Baa2/Negative Outlook
- S&P: Not explicitly mentioned in the text, but its perspective supports a positive outlook for Mexico’s credit rating due to nearshoring and T-MEC renegotiation.
- What risks do the rating agencies see for Mexico’s credit rating? The primary risks come from external uncertainties, particularly the U.S. trade policy, which could negatively impact Mexico’s economic growth and potentially lead to a downgrade in credit ratings.
