Mexico's investment grade rating ratified by three rating agencies

08/05/2021

The Ministry of Finance informed that Mexico's rating in the agencies HR; Kroll Bond Rating and DBRS Morningstar was ratified above investment grade and that two of them confirmed the Negative outlook. According to a press release, the Mexican agency HR confirmed Mexico's rating at "BBB+" with a Negative outlook, three levels above investment grade.

Meanwhile, the U.S. firm KrollBond Rating Agency (KBRA) confirmed Mexico's rating at "BBB" with a Negative outlook, which indicates two levels above investment grade. Meanwhile, the Canadian DBRS Morningstar ratified Mexico's rating at "BBB" and changed the outlook, which for one year remained Negative, to Stable.

The agencies referred to by the Treasury are part of the seven rating agencies supervised by the National Banking and Securities Commission (CNBV) within the framework of the Securities Market Law and the General Law of Commercial Companies. Its opinion on Mexico's payment capacity is in line with that ratified by Moody's, which last week confirmed Mexico's sovereign rating at "Baa1" with a Negative outlook, the highest for Mexico among the three agencies that cover the broadest spectrum of countries.

In order for Mexico to have access to the international market, it must be rated by at least two agencies, as required by international market regulations, and it is the debt issuer, in this case Mexico, who must contract the rating agencies' services. There are 50 credit rating agencies in the world and the three that dominate the market for having the largest number of rated countries are Standard & Poor's (128); Fitch (125) and Moody's (109 countries).

Prior to the Treasury's announcement, Credit Suisse and Buendía & Márquez released the results of their monthly investor survey. In the April exercise, 52% of those consulted considered that it is feasible that Mexico will lose its investment grade in two rating agencies during the administration of Andrés Manuel López Obrador. This is the lowest proportion collected by the monthly investor survey since June 2020, when 78% of those interviewed foresaw that Mexico would be downgraded to speculative grade issuers.

The survey, conducted between April 20 and 30, shows that investors based in Mexico are the least optimistic about the rating, with 56% considering it likely to lose investment grade. This proportion contrasts with 44% of investors who operate from outside the country and have the same sentiment.

In the same survey, economists, investors and the general population were asked about their outlook for the Mexican economy towards 2022. Of the economists, 50% believe that the business climate will remain unchanged; 44% believe it will improve and 6% say it will get worse.

In the eyes of investors, 62% believe that the economy will improve in a year's time; 22% that it will get worse and 15% that it will remain unchanged. Among the population, 34% believe that the economy will improve in one year; 32% that it will get worse and 32% that it will remain unchanged.