EM LATAM CREDIT: “Fitch Affirms Mexico at 'BBB-'; Outlook Stable” – FitchRatings
United Mexican States (MEX; Baa2neg /BBB /BBB-)
Supportive for spreads
• Fitch expects a weaker economic environment in Mexico influenced by heightened U.S. trade protectionism, especially in the auto sector which is one of Mexico’s top exports.
• The rating agency likes Mexico’s macroeconomic policy structure, strong external financial position (USD237bn int’l reserves) and diversified economy but notes large contingent liabilities (Pemex) and doubts about governance.
• Fitch expects real GDP to be -.4% this year, down from +1.5% in 2024. The IMF estimate last updated January 2025 was for +1.4%. The Mexico finance ministry updated its projections a few weeks ago to a range of 1.5-2.3% which was revised lower from a previous 2-3%.
• The rating agency notes gross debt/GDP of 50.9% in 2024 up from 45.5% in 2023 and expected to rise to 54.3% in 2025. It doesn’t include state owned enterprises Pemex and CFE. The number may rise further in the next few years but still consistent with the 58% ‘BBB’ median according to Fitch.
• MEX 2037 USD bonds issued at T+230bps January 2025 were last quoted T+260bps, 25 bps wider from March 2025 month end.
• An interesting coincidence, or not, is one of the lesser-known rating agencies R&I (Rating & Investment), owned by Japanese media company Nikkei, also affirmed Mexico’s credit rating today. Maybe some Samurai bonds are coming our way?
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