The Mexican government faces a one-in-three chance of having its credit rating downgraded over the coming year, as public finances struggle with mounting liabilities and slowing growth, rating agency Standard & Poor’s said on Friday.
The New York-based agency maintained the government’s investment grade status at BBB+, but lowered its outlook from stable to negative in a new warning to President Andres Manuel Lopez Obrador’s three-month-old government.
In a statement, S&P emphasized that Lopez Obrador’s plans to reduce the private sector’s role in the Mexican energy sector while boosting spending on cash-strapped national oil company Pemex raised concerns for government finances.
“The new strategy for the energy sector places an added burden on the already highly indebted government-owned energy company Petroleos Mexicanos,” S&P said in the statement, referring to Pemex’s official name.
“The combination of Pemex’s weak financial profile and a more active role in the energy sector could raise the risk of higher contingent liabilities for the sovereign,” it added.
The peso currency, which has reacted negatively to recent downgrades, ceased trading for the weekend before S&P published their latest guidance on Mexico.
Pemex has faced mounting scrutiny from investors since its credit rating was cut two notches by Fitch Ratings in late January, putting it just one level above junk status.
The company’s crude production has fallen for 14 consecutive years, and is expected to dip again this year to settle below 1.8 million barrels per day for the first time in decades.
The production slide has weighed on the government’s fiscal health as it implicitly guarantees Pemex finances.
“The negative outlook indicates an at least one-in-three possibility of a downgrade over the coming year,” S&P said.
Pemex’s credit woes could extend to the government, requiring it to fund more rescue packages for the company and significantly raising borrowing costs.
The Mexican government relies on Pemex to provide around 15 percent of total tax revenue while the company struggles under the weight of nearly $106 billion in debt, the highest of any national oil company in Latin America.
Pemex has nearly $70 billion in unfunded pension liabilities.
S&P also flagged what it described as Mexico’s “poorer-than-expected” economic growth and more centralization of decision-making under Lopez Obrador, arguing that it could weaken the macroeconomic stability of Latin America’s no. 2 economy.
Reporting by Nishara Karuvalli Pathikkal in Bangalore and Mexico City Newsroom; Writing by David Alire Garcia; editing by Grant McCool
Trending News on PVDN
Popocatépetl Volcano Exhibits Increased Activity; Yellow Phase 3 Alert Continues PUERTO VALLARTA (PVDN) - In the past 24 hours, heightened activity was recorded from Mexico's Popocatépetl volcano, with an alarming 315 exhalations detected, accompanied by water vapor, other volcanic gases, and ash, according to the Scientific Advisory Committee (CCA) of the National Civil Protection System (SINAPROC). Monitoring systems in place around the active stratovolcano also…
‘Kingdoms of Mexico’ Distinction Launches to Boost Tourist Destinations With European Influences Puerto Vallarta (PVDN) - Miguel Torruco Marqués, the head of the Ministry of Tourism (Sectur), introduced the new 'Kingdoms of Mexico' distinction, a major initiative designed to enhance the appeal of Mexico's tourist communities on an international level. The announcement came during a presentation attended by the governors of Tlaxcala, Lorena Cuéllar Cisneros; Baja California,…
Shocking Case of Animal Abuse in Mexico: Man Throws Dog into Boiling Fry Oil PUERTO VALLARTA (PVDN) - A disturbing incident of animal abuse has sent shockwaves throughout Mexico, as a man allegedly threw a dog into a pot of boiling oil, resulting in the animal's tragic death. Authorities have detained the suspect for the assault on the dog and have issued an additional arrest warrant on charges of…
Popocatépetl Volcano Resumes Activity; Authorities Maintain Alert Status PUERTO VALLARTA (PVDN) - After a period of relative calm last week, Mexico's Popocatépetl volcano resumed minor activity on Friday night and through Saturday night, as reported by the National Civil Protection Coordination (CNPC). This comes following significant explosions last weekend that put nearby communities on high alert. The resumed activity was characterized by minor…
Puerto Vallarta Set to Celebrate 105th Anniversary as Municipality and 55th as a City with Grand Festivities PUERTO VALLARTA - The coastal paradise of Puerto Vallarta is poised to celebrate two landmark anniversaries: the 105th anniversary of its recognition as a municipality and the 55th anniversary of its elevation to city status, with a grand commemoration on May 31, 2023. The celebrations have been meticulously planned by the municipal government led by…
Two More Puerto Vallarta Beaches Are Awarded Blue Flags Puerto Vallarta (PVDN) - In the upcoming 2023-2024 season, Puerto Vallarta is set to host six beaches awarded with the Blue Flag accreditation, an esteemed international recognition for high environmental and quality standards. The Blue Flag committee has reconfirmed the status for four previously certified beaches while conferring this prestigious title to two new beaches…
45 Bags of Human Remains Discovered in Jalisco PUERTO VALLARTA (PVDN) - A chilling discovery of 45 bags filled with human remains in a deep ravine in the El Mirador del Bosque neighborhood of Zapopan has escalated the search for seven missing youths last seen at a local call center. The Jalisco Attorney General's Office confirmed late Wednesday that the gruesome discovery was…
SEAPAL Vallarta Launches New Vallarta II Tank to Reinforce Drinking Water Supply PUERTO VALLARTA (PVDN) - SEAPAL Vallarta, the local water management authority, announced the successful integration and activation of the new Vallarta II Tank to its drinking water distribution system on Tuesday, May 30. This strategic addition is expected to enhance the availability of water in Vallarta homes, a pressing issue in the wake of the…
LGBTIQ+ Community Member Disappears At Puerto Vallarta Pride PUERTO VALLARTA - A member of the local LGBTIQ+ community has gone missing under mysterious circumstances, inciting deep concern within the community and calls for immediate action from local authorities. Rubén Michel Castro Guizar, 32, a deaf individual, was last seen on the night of Thursday, May 25th, attending the Vallarta Pride march. His disappearance…
Investigation Continues Following Discovery of Skeletal Remains in Puerto Vallarta PUERTO VALLARTA (PVDN) – The mystery surrounding the discovery of skeletal remains in a rural area of Puerto Vallarta is yet to be resolved, according to State Prosecutor Luis Joaquín Méndez Ruiz. On his visit to Puerto Vallarta to participate in the Navy Day celebrations, the state prosecutor insisted the discovery is not a clandestine…
