S&P downgrades Mexico sovereign note to “BBB” with negative outlook amid coronavirus crisis

MEXICO CITY, Mar 26 (Reuters) – The S&P agency lowered Mexico’s long-term foreign currency credit rating to “BBB” from “BBB +” on Thursday, and maintained its negative outlook, reflecting the possibility that there may be further declines to the sovereign note over the next 12 to 24 months, it said in a statement.

With this deterioration, the debt of the Latin American country is two steps away from the category considered as “garbage” by the markets, at a time marked by the world health contingency of the coronavirus.

“We expect a pronounced blow to the Mexican economy after the combined shocks of COVID-19, in Mexico and the United States, its main trading partner, and lower world oil prices,” the rating agency said.

S&P forecasts that these shocks, although temporary, will worsen the already weak trend in the growth dynamics of the Gross Domestic Product (GDP) for 2020-2023, reflecting, in part, the low confidence of the private sector and the low dynamics of investment.

“The good news is that it keeps us in the investment grade category. Probably tomorrow it will make a similar announcement for Pemex, also cutting its rating to BBB,” said James Salazar, analyst at CI Banco.

The long-term local currency sovereign credit rating was also downgraded to ‘BBB +’ from ‘A-‘, “according to the statement.

The negative outlook, he added, indicates the risks of a reduction in the next 12-24 months as a result of uneven or ineffective execution of policies, a possible weakening of public finances, as well as increasing pressure on state oil company Pemex.

After the downgrade was revealed, the Mexican peso it depreciated 1.61% on Thursday, reaching 23.30 units per dollar, according to data from Refinitiv Eikon.=>

The finance ministry did not immediately respond to a request for comment from Reuters.