MEXICO CITY (AP) — Mexico’s president lashed out Friday at Moody’s ratings service, after it downgraded the Mexican government’s debt outlook to “negative.”
Moody’s said it had downgraded the government’s debt outlook from “stable” to “negative” because newly approved laws in Mexico could weaken the judiciary branch and checks and balances. It reaffirmed Mexico’s Baa2 overall credit rating, but said increased government debt represented a risk for Mexico.
It also mentioned the possibility that the government will have to transfer more money to shore up the highly indebted state-owned oil company, Pemex.
“Deteriorating debt affordability and further government spending rigidity make fiscal consolidation challenging, following this year’s widening in the government deficit,” Moody’s wrote, “a deviation from a longstanding track record of low deficits regardless of economic pressures.”
President Claudia Sheinbaum said that ratings agencies often have a “bias of origin” against the economic policies her party adopted under former President Andrés Manuel López Obrador, who took office on Dec. 1, 2018.
“Many times these ratings agencies are aimed at issuing evaluations starting from an economic model,” Sheinbaum said. “Starting in 2018, the economic model in our country changed. Many times these ratings have this bias of origin.”
Under López Obrador, who was Sheinbaum’s political mentor, the government began transferring large amounts of money to the state-run oil company, started large building projects and implemented cash handout programs. That led to federal budget deficits of about 6% of Mexico’s gross domestic product in 2024.
Sheinbaum ruled out enacting new taxes next year and said she would rely on increasing tax collection from existing sources. But in the 2025 federal budget submitted by her administration to Congress on Friday, it was clear that sizeable budget deficits would continue for some time.
Mexico’s treasury department said it would aim to reduce the deficit to 3.2% of GDP in 2025, but it was unclear if it could achieve that: López Obrador left behind a lot of unfinished train and oil refinery projects, and Sheinbaum has expanded benefit programs for the elderly.
“The government will only gradually narrow the deficit in coming years,” Moody’s wrote.
The 2025 budget says Mexico’s outstanding federal debts would finish 2025 at around 51.4% of GDP. But that doesn’t include a lot of government oil company and pensions debts. It also predicted the economy would grow by between 2 and 3% in 2025, something analysts say is optimistic, given that Mexico’s GDP grew by only 1.5% in the third quarter of 2024.