The rating agencies want to see Mexico as a banana country, says Padierna

Mexico's economy faces a scenario with downside risks in 2019, largely due to an adverse external environment that could lead to lower global expansion, the Invex Financial Group estimated on Wednesday.

Mexican economy risks and growth outlook
Mexican economy risks and growth outlook

The vice president of the Chamber of Deputies, Dolores Padierna, said on Wednesday that the rating agencies "take care of the interests of the owners of the capital."

She assured that the observations of the agencies like Standard & Poor's are due to the fact that they want to see Mexico as a "banana country".

In addition, the legislator criticized the methodologies to evaluate "create them themselves."

"Nobody knows them, they are not public, they are not auditable, they are not subject to scrutiny, so we do not know if the methodology they use is correct or not, what we can say is that sometimes in their predictions they are wrong," she said.

Padierna Luna said that the rating agencies have enormous factual power, so she called on the authorities to "deal with" them and improve communication, so that they make an objective and responsible analysis, and make them see that there is no risk whatsoever in our economic environment, on the contrary.

"Wanting to take the opinion of the rating agencies to evaluate an administration that takes three months, it is too early to evaluate," she said.

The deputy asked the rating agencies to act prudently and not give biased opinions about the economic policies implemented by the Andrés López Obrador government since they can generate crises.

She also considered that it is too early for this administration to give spectacular results.

Dolores Padierna suggested to Finance Secretary Carlos Urzúa to "deal" with the three US rating agencies and talk more with them to explain the business plan of Petróleos Mexicanos (Pemex), the energy policy strategy and the National Development Plan.

"I would make the suggestion to the Secretary of the Treasury to talk more with the three US rating agencies that are there so that he can explain the entire Pemex business plan, the strategy and the national plan, which will be overwhelming," she asserted.

She said that the evaluation of the rating agencies are pressure to affect the cash flows available to the government, "because all this moves at the interest rate."

The notes that have been given are the response to the cancellation of the Texcoco airport, which would have meant the delivery of 100,000 million pesos each year.

The international rating agencies did not like that the oil rounds and the electricity auctions have been suspended, if they continue, "then Pemex and the Federal Electricity Commission (CFE) would have disappeared".

Pemex and the CFE have sufficient capital flow to pay their debt and before they had less, but before they evaluated them positively and now they change their perspectives from stable to negative.

The legislator of Morena said that there are three documents that will soon be announced and although so far only some measures have been taken, there is a business plan of the companies.

She said that the Chamber of Deputies decided that Pemex's law, which was a very light measure, will not be voted on, and that they hope that the good signals that have been sent will be understood.

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Mexican economy faces downside risks in 2019: Invex

Mexico's economy faces a scenario with downside risks in 2019, largely due to an adverse external environment that could lead to lower global expansion, the Invex Financial Group estimated on Wednesday.

In the central scenario, Mexico's gross domestic product (GDP) could grow 2.1 percent in 2019, the same pace as in the last two years, according to Invex estimates.

"We believe that the balance of risks is biased towards a deterioration in the outlook for growth and inflation due to external and internal factors," the private institution said in a special report.

"The global context will be volatile and the accumulation of commercial and geopolitical tensions suggests lower growth," he added.

On the external side, Invex cited an eventual deterioration of global commercial relations in the face of an increase in protectionism and geopolitical friction in Europe, together with a monetary policy with little room for adjustment.

This, he said, could trigger a slower than expected global growth slowdown.

In terms of internal factors, the private bank cited the reversal of some policies by the new government of Mexico in terms of investment and spending, which could accentuate the loss of confidence in the country.

This could also inject additional pressure on local financial variables, he added.

However, on the positive side, Invex considered that Mexico could benefit from solid growth in the United States, its main business partner, and a more moderate monetary normalization process by the main central banks.

"In addition, the social policies of the new administration could foster growth and offset fears of a deterioration in public finances," he said.

From December 1, Mexico went from being governed by the centre-right of the Institutional Revolutionary Party (PRI) to the left, with President Andrés Manuel López Obrador, of the National Regeneration Movement (Morena).

According to the new government's estimates, the Mexican economy could grow 2.3 percent in 2018, and between 1.5 and 2.5 percent in 2019.