Wednesday, February 5, 2014
PRI reforms earn Mexico yet another credit rating boost
For the second time in just over six weeks, a major international bond rater and investment house has upgraded Mexico's sovereign credit rating as a result of the recent enactment of constitutional reforms governing the structure and operations of national oil giant Petróleos Mexicanos (PEMEX).
Moody's Investor Services today upgraded Mexican sovereign debt from Baa1 - described as "medium grade, with some speculative elements and moderate credit risk" - to A3, which the company calls "upper-medium grade with low credit risk."
On Dec. 21 Standard & Poor's similarly boosted Mexican bonds and debt instruments, rating them BBB+ under its own evaluation system. Mexico's sovereign credit rating upgraded on PEMEX reform news.
The net result for Mexico is that the nation will be able to borrow money more cheaply at home and abroad to finance long term infrastructure development and other projects, by paying a lower rate of interest to bond purchasers and foreign and domestic investors.
PEMEX was established 76 years ago, when president Lázaro Cárdenas nationalized the Mexican petroleum industry on March 18, 1938, expelling foreign oil companies from the country and seizing their assets. Until sweeping constitutional reforms were signed into law by Institutional Revolutionary Party president Enrique Peña Nieto on Dec. 20, 2013 the chronically cash starved company could not accept private capital investment, nor could foreign enterprises participate in its petroleum exploration and production operations. Now all that has changed. PEMEX reforms are the law.
"Our decision to upgrade Mexican sovereign debt was based on the nation's structural reforms last year, which will strengthen its potential for economic growth and its fiscal position," said a Moody's press release. Praising the current PRI government, the company added, "The principal reason that we have upgraded Mexico's credit rating is that the administration's reforms have had, in our opinion, an important positive impact on the nation's international credit profile."
Mexico's chief finance minister, Luis Videgaray, agreed, noting that Moody's action would in turn have a positive psychological impact on how the country is viewed by the world investment community.
Moody's said that it expects foreign investment in Mexico to increase as a direct result (Mexican energy reforms will lure in $10 billion dollars in immediate investment, official says).
Moody's sovereign debt upgrade announcement occurred on the same day that a former two time presidential candidate asked Mexico's attorney general to indict president Peña Nieto for high treason due to his aggressive promotion of the PEMEX reforms. On Constitution Day, far Left pol files criminal complaint against Enrique Peña Nieto for treason.
May 1, 2014 - Fitch Ratings today upgraded Mexican sovereign debt to BBB+, with a Stable outlook
Dec. 11, 2013 - Mexico's PEMEX enters the 21st century, as senators open the door to foreign expertise and private capital
Nov. 26 - Mexico's economic woes take a toll on Yucatán business
Oct. 8 - Wal-Mart sales in free fall a good barometer of a Mexican economy on the skids
Sept. 27 - Credit Suisse: storms will further reduce Mexican growth
Sept. 18 - Mexico is in full recession, say business executives
Aug. 31 - Bank of America Merrill Lynch: Mexico in huge economic hole; looming "risk of recession"
Aug. 21 - Sluggish Mexican economy worries foreign investment experts
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at 11:13 PM