MEXICO CITY — The president of Mexico expressed strong criticism on Friday toward Moody’s ratings agency after it revised the outlook for the Mexican government’s debt to “negative.”
Moody’s attributed the change from a “stable” to a “negative” outlook to recent legislative measures in Mexico that could undermine the judiciary and the system of checks and balances. While affirming Mexico’s overall credit rating at Baa2, the agency highlighted concerns that rising government debt poses a risk to the nation’s fiscal health.
The agency also indicated that the Mexican government may be compelled to allocate additional funds to support the deeply indebted state oil company, Pemex.
President Claudia Sheinbaum articulated that credit rating agencies often exhibit a “bias of origin” against the economic strategies her political party has pursued since the tenure of former President Andrés Manuel López Obrador, who assumed office on December 1, 2018.
“Often, these agencies draft their evaluations based on a specific economic model,” Sheinbaum noted. “Since 2018, our nation’s economic framework has undergone a transformation. Many of these assessments carry this inherent bias.”
Under López Obrador, who has been a mentor to Sheinbaum, the government initiated significant financial transfers to Pemex, embarked on ambitious infrastructure projects, and introduced various cash assistance programs. This led to federal budget deficits approximating 6% of Mexico’s gross domestic product by 2024, a trend anticipated to persist, albeit at slightly reduced levels, in 2025.
Sheinbaum has also built upon López Obrador’s initiative to reform the judiciary, stipulating that all federal judges will be required to run for election in 2025 and 2026. Concerns have surfaced from the United States and certain business factions regarding the potential impact on judicial independence, suggesting that such elections could make judges susceptible to political influences.
Critics further argue that these changes could enable drug trafficking organizations to finance judicial election campaigns, thereby facilitating the selection of candidates who align with their interests.
According to Moody’s assessment, factors including deteriorating debt affordability and stringent government spending create challenges for fiscal consolidation, following a notable widening of the government deficit this year. “This deviates from a historical pattern of maintaining low deficits regardless of economic conditions,” stated the agency.
Moody’s warned that the constitutional reforms could jeopardize the existing checks and balances within Mexico’s judicial framework, potentially undermining both the economic and fiscal stability of the country. The agency emphasized that these changes could significantly alter the operating environment for businesses in Mexico.
As a result of these developments, the value of the Mexican peso has declined, currently trading at around 20.50 to the US dollar.