JCR Upgrades Mexico’s Credit Rating; NuBank ExpandsBy Emilio Aristegui | Wed, 04/13/2022 - 10:00
This week, a Japanese credit rating agency upgraded Mexico’s score after reevaluating the latter’s country fiscal policies. However, the country has fallen behind on R&D investment, warns Pragmatec.
Meanwhile, Brazilian fintech Nubank aims to expand its financial services in Mexico and Colombia.
Japan’s Credit Rating Agency improved Mexico’s credit rating from Negative to Stable, a move that the Mexican Ministry of Finance and Public Credit (SHCP) attributed to improvement of exports and the adequate management of public finances. “The ratings are supported by the country’s solid export-oriented industrial base, flexible and agile monetary and exchange rate policies and resilience to external shocks. On the other hand, they are constrained by the country’s oil industry that needs modernization and the uncertainty of the government’s economic policies,” explained the Japan Credit Rating Agency in a report.
Guanajuato is improving its fiscal processes, updating the regulatory framework in its tax code and standardizing it with the current federal tax code. This task has been challenging because legacy systems complicate the detection of illegal activities due to their inability to cross-reference information with different databases, explained Héctor Cobo, VP Mexico, Caribbean and Central America, SAS. Patterns of behavior are complex and increase the rates of false positives when inaccurate. Cobo also explains that it can take up to three years to discover that a taxpayer reported misinformation.
Companies in Mexico are facing a complex financial decision, said Jorge de Lara, Vice President and General Manager for GCS LATAM, American Express Mexico and Latin America. American Express’ Global Business Spend Indicator (GBSI) indicates that 45 percent of Mexican companies expect to invest more money in technology, while 50.2 percent of businesses seek to increase productivity and 49.8 percent aim to improve the quality of their products.
Brazilian fintech NuBank obtained a US$650 million credit line to further its growth in Mexico and Colombia. The company aims to expand operations in both countries while strengthening its presence in both markets. The funds will be directed primarily from Morgan Stanley, Citi, Goldman Sachs and HSBC, which are underwriters of NuBank’s Dec. 2021 IPO, when the company raised approximately US$2.8 billion.
“According to data from the OECD, nowadays Mexico invests in research and development at the same percentage of GDP as it did 20 years ago (3 percent), showing its highest level in 2010 (4.9 percent). Investment in R&D comes primarily from public financing, at about 60-70 percent; private funding is about 20 percent,” said Victor Sánchez, President, Red OTT Mexico (Pragmatec). Sánchez explained that innovation practices have paved the way for leading countries and Mexico has the potential to generate more and better cases of innovation.