Japan Credit Rating Agency (JCR) has reaffirmed Mexico's long-term foreign currency debt rating at A-, four levels above investment grade, and its local currency debt at A+. The rating agency lauded Mexico's fiscal prudence and macroeconomic stability, but acknowledged the risk that uncertainty and lack of infrastructure could bring +.
There are no anticipated changes in the near future for Mexico's grade. JCR highlighted Mexico as the second-largest economy in Latin America, with a GDP of US$1.41 trillion, and the second largest in terms of population, with 129 million inhabitants. The agency commended Mexico's disciplined fiscal metrics, driven by enhanced tax collection. This has facilitated the alignment of public balances with estimations and maintained public debt relative to GDP on a stable path below 50%.
Highlighting Mexico's macroeconomic stability, exchange rate flexibility and monetary policy, JCR underscored the country's resilience in the face of external shocks, as Mexico boasts substantial reserves amounting to US$204 billion to meet short-term commitments. Additionally, the nation holds a Flexible Credit Line of US$48 billion, alongside a healthy and well-capitalized banking sector.
JCR emphasized Mexico's projected economic growth for 2023, underpinned by robust manufacturing exports and increased foreign direct investment due to nearshoring. These factors, coupled with expanding public investment, are set to propel short- and medium-term economic growth. Additionally, the agency spotlighted the administration's foremost goal of enhancing the welfare of vulnerable groups. This policy has led to a reduction in poverty rates between 2018 and 2022, as evidenced by recent data from Coneval.
However, JCR also addressed the limitations the country is encountering regarding Mexico's constrained oil industry, coupled with uncertainties surrounding federal economic policies. “While the stabilization of crude oil prices is expected to reduce financial support for retail prices of gasoline, the need for modernization investment to improve the productivity and facility utilization rate by PEMEX, lingers. JCR will closely watch crude oil production and developments of crude oil processing capacity,” reads the report. Moreover, JCR acknowledged a solid export infrastructure led by the automotive and appliance industries.