Japan Credit Rating agency improved its credit outlook for Mexico

Mexico's credit outlook improved when it was rated from “negative” to “stable” by Japan Credit Rating (JCR). This is based on the argument that Mexico has kept its public finances sound, as well as stabilized its debt trajectory with respect to Gross Domestic Product (GDP).

The decision is also based, in part, on the management of macroeconomic policy and the obtaining of greater public revenues thanks to the “strengthening of tax collection”, according to the document shared by the Ministry of Finance and Public Credit (SHCP).

Similarly, the agency reaffirmed its credit rating of “A-” in foreign currency, that is, four levels above investment grade, and “A+” for the local one. It should be noted that the credit rating granted by various agencies is the result of an analysis of the credit history of a country (in this case Mexico), in order to determine its ability to pay back the capital that was lent to it.

In this sense, the lower the rating, the lower the capacity to pay, which implies the increase in interest that country must cover. While this rating does not imply an absolute indicator, it serves as a tool for investors to decide which countries to invest in and which not.

Likewise. the JCR agency noted that this improvement in the credit perspective, as well as the ratification of sovereign debt, will help Mexico maintain a favorable income to international markets, since it was also mentioned that foreign investment has registered a positive flow, which promotes economic growth by 2022.

The original document highlights the joint public-private infrastructure development plans that the Andrés Manuel López Obrador administration announced in October and November 2020, in order to boost private sector investment in infrastructure.

The plans for the energy sector are designed to strengthen Petroleos Mexicanos (Pemex) and the Federal Electricity Commission (CFE), through the revision of the Electricity Industry Law, to give greater priority to the CFE for power generation.

On the other hand, Mexico's foreign direct investment exceeded $30 billion in 2021, a figure higher than the previous year (but lower than pre-pandemic levels). This was thanks to the growing demand for propulsion components for electric vehicles in the United States.

Finally, the JCR document mentions that Mexico's external debt stood at 36.7% of GDP at the end of 2021, compared to 42.6% obtained a previous year.

It should be recalled that in March 2021, the JCR agency ratified its credit rating for Mexico's foreign currency debt at “A-”, that is, “four steps above investment grade”, while in local currency it was rated “A+”, reported the secretariat headed by Rogelio Ramírez de la O.

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