Well, a funny thing happened on the road to a new presidential term. Yes, Moody’s, the investment firm, dropped some bad news about the Mexican situation.
This is a summary from Kelin Dillon in Mexico City:
Big three credit rating agency Moody’s has revised its growth forecast for Mexico for the near future, lowering it to 1.5 percent for the current year and predicting a decline in dynamism for 2025 from 1.5 percent to 1.3 percent.
Moody’s predicted slowdown in Mexico is expected to accompany similar trends in Latin America, particularly in Brazil and Argentina.
“There will be a slowdown in Mexico, driven in part by high interest rates, and a rebound in smaller economies,” read Moody’s report. “Growth will also slow in Argentina due to austerity measures aimed at correcting long-standing fiscal and external imbalances. Likewise, Brazil will experience a slowdown as high interest rates weigh on economic activity. However, growth has been stronger than expected, and ongoing structural reforms could boost it further.”
In its recent economic outlook update, the rating agency — which downgraded Mexico’s credit rating from stable to negative just last week — noted that a gradual stabilization in global and local macroeconomic conditions could support the credit quality of governments, companies, and financial institutions in emerging markets by 2025.
So maybe things will improve next year but for now it’s thumbs down.
The official reason for the downgrade is increases in government spending creating a fiscal deficit. Or as my Mexican friend said: former President Andres Lopez Obrador bought every point in approval rates by handing out “pesos.” It certainly helped current President Claudia Sheinbaum run for election with a happy days are here again message.
The other reason, and the governing party is in the middle of this mess, is the overhaul of how judges are selected. From now on, the judges will be elected by the people — the ones who get benefits from the federal government. The investors and business class are not pleased with the risk of doing away with the checks and balances that come with an independent judiciary.
For most of my Mexican contacts, it’s the concerns about the judiciary driving concerns about investing in Mexico. There are also concerns with PEMEX, the oil monopoly, and the company’s massive debt. Why would an oil company have such massive liabilities? Well, it’s what happens when an oil company is nothing but a source of finance for every social program conceived by politicians.
So Moody is singing the blues in Mexico and it’s not the famous rock group.
Last, but not least, this situation south of the border will strengthen Trump’s hand because any slowdown in exports to U.S. will be devastating to Mexico.
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Image: Moody’s
This article was originally published at www.americanthinker.com
