Mexico, June 05, 2019 -- Moody's de México, S.A. de C.V.
(Moody's) has today affirmed the Aaa.mx Mexican National Scale
Issuer Rating of the Government of Mexico, and in a related action
Moody's Investors Serivce affirmed the Global Scale Rating of A3 while
changing the outlook on that rating to negative from stable.
Affirmations:
..Issuer: Mexico, Government of
.... Issuer Rating, Affirmed Aaa.mx
The A3/Aaa.mx rating affirmation balances the country's large and
diversified economy, its high fiscal strength and low susceptibility
to event risk, against ongoing challenges related to weak growth
rates, weaker-than-peers institutional strength and
a large informal sector.
RATINGS RATIONALE
RATIONALE FOR AFFIRMING THE RATINGS AT A3/Aaa.mx
The rating affirmation reflects Mexico's large and diversified economy,
which is the second largest (after China) among 'A' category
peers, its lack of major macroeconomic imbalances, and its
high fiscal strength, which is broadly aligned with 'A'-rated
peers. Weak growth rates and weaker-than-peers'
institutional strength remain credit challenges. Mexico's
track record of prudent macroeconomic policymaking has enabled it to face
shocks over the past decade, including the oil price shock and trade
agreement renegotiations with the US, while anchoring domestic and
foreign investor confidence.
Moreover, the A3/Aaa.mx rating is also supported by a healthy
banking system and an improved government revenue structure that has curtailed
its dependence on oil income as a result of the steady increase in tax
revenues due to the 2014 tax reform.
WHAT COULD CHANGE THE RATING UP
Although an upgrade of the A3 rating is unlikely in the near future,
a return to a stable outlook could result from regained confidence in
the government's ability to lay out and implement predictable policies.
Much higher and sustained growth, combined with a material strengthening
of the government's balance sheet could over time lead to an upgrade
of Mexico's rating.
WHAT COULD CHANGE THE RATING DOWN
Further evidence that medium-term growth is in decline, whether
as a result of policies that actively undermine growth or because of continued
policy unpredictability, would put downward pressure on the A3/Aaa.mx
ratings. Increasing fiscal deficits that cause the debt trajectory
to shift upward, whether due to financial support to PEMEX or for
any other reason, could also lead to a downgrade. The horizon
over which these trends might materialize is uncertain. While policy
action or inaction could lead Moody's to conclude that these risks
will crystallize, a period of up to 18 months may be needed to assess
the credit consequences of the uncertainties and tensions inherent in
government policy and their interaction with investor sentiment.
The principal methodology used in this rating was Sovereign Bond Ratings
published in November 2018. Please see the Rating Methodologies
page on www.moodys.com.mx for a copy of this methodology.
The period of time covered in the financial information used to determine
Government of Mexico's rating is between 31 December 2015 and 31 December
2018 (source: Haver analytics, Ministry of Finance,
Central Bank and INEGI)
Moody's National Scale Credit Ratings (NSRs) are intended as relative
measures of creditworthiness among debt issues and issuers within a country,
enabling market participants to better differentiate relative risks.
NSRs differ from Moody's global scale credit ratings in that they are
not globally comparable with the full universe of Moody's rated entities,
but only with NSRs for other rated debt issues and issuers within the
same country. NSRs are designated by a ".nn"
country modifier signifying the relevant country, as in ".za"
for South Africa. For further information on Moody's approach to
national scale credit ratings, please refer to Moody's Credit rating
Methodology published in May 2016 entitled "Mapping National Scale Ratings
from Global Scale Ratings". While NSRs have no inherent absolute
meaning in terms of default risk or expected loss, a historical
probability of default consistent with a given NSR can be inferred from
the GSR to which it maps back at that particular point in time.
For information on the historical default rates associated with different
global scale rating categories over different investment horizons,
please see http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1174796.
REGULATORY DISCLOSURES
Information sources used to prepare the rating are the following:
parties involved in the ratings, parties not involved in the ratings,
and public information.
The rating has been disclosed to the rated entity prior to public dissemination.
A general listing of the sources of information used in the rating process,
and the structure and voting process for the rating committees responsible
for the assignment and monitoring of ratings can be found in the Disclosure
tab in www.moodys.com.mx.
The date of the last Credit Rating Action was 27 April 2017.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.mx.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
This credit rating is subject to upgrade or downgrade based on future
changes in the financial condition of the Issuer/Security, and said
modifications will be made without Moody's de México S.A.
de C.V accepting any liability as a result.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's considers the quality of information available on the rated entity,
obligation or credit satisfactory for the purposes of issuing a rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a rating is of sufficient quality and from sources Moody's
considers to be reliable including, when appropriate, independent
third-party sources. However, Moody's is not an auditor
and cannot in every instance independently verify or validate information
received in the rating process.
Please see Moody's Rating Symbols and Definitions on www.moodys.com.mx
for further information on the meaning of each rating category and the
definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com.mx
for the last rating action and the rating history. The date on
which some ratings were first released goes back to a time before Moody's
ratings were fully digitized and accurate data may not be available.
Consequently, Moody's provides a date that it believes is the most
reliable and accurate based on the information that is available to it.
Please see our website www.moodys.com.mx for further
information.
Please see www.moodys.com.mx for any updates on changes
to the lead rating analyst and to the Moody's legal entity that has issued
the rating.
The ratings issued by Moody's de Mexico are opinions regarding the credit
quality of securities and/or their issuers and not a recommendation to
invest in any such security and/or issuer.
Please see the ratings tab on the issuer/entity page on www.moodys.com.mx
for additional regulatory disclosures for each credit rating.
Jaime Reusche
VP - Senior Credit Officer
Sovereign Risk Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Yves Lemay
MD - Sovereign Risk
Sovereign Risk Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's de Mexico S.A. de C.V
Ave. Paseo de las Palmas
No. 405 - 502
Col. Lomas de Chapultepec
Mexico, DF 11000
Mexico
JOURNALISTS: 1 888 779 5833
Client Service: 1 212 553 1653
