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Rising insecurity in Mexico poses significant risks for the oil and lodging industries, and can be a drag on regional economies, creating negative financial spillovers for states and municipalities
March 6th 2019 (8.32mins)
Alonso Sanchez Rosario, Sandra Beltran, Matthew Walter
In this episode of Moody’s Talks, Vice President and Senior Analyst Alonso Sanchez Rosario and AVP-Analyst Sandra Beltran, both in the Corporate Finance Group, and Matthew Walter, an AVP-Analyst in the Sub-Sovereign Group, discuss credit challenges stemming from Mexico’s increasing rates of violence, which have been caused primarily by conflicts among drug trafficking organizations as well as clashes with police and the military. In instances where violence weakens state and municipal economic activity, this can create negative spillovers for public finances such as falling tax revenues. In the corporate sector, increasing insecurity, robbery and travel warnings hurt Mexican companies’ top lines and profitability, and will particularly weaken revenue and margins.
Regional & Local Governments – Mexico Spreading violence exposes more states and municipalities to security related credit risks
While state economies have proven to be somewhat resilient to crime, municipalities that depend on vulnerable industries have experienced economic downturns and declines in tax revenue.