In a move that was long anticipated by investors, Fitch Ratings downgraded Mexico on Monday to BBB—only two grades above non-investment grade, or junk status. The change by Fitch has been attributed to falling oil production and declining tax revenues due to this year’s expected 7 percent contraction of GDP. Moody’s Investors Service, another major ratings agency, said last week that a downgrade of Mexico’s credit rating may come “at some point” but that it will not be lowered “for now.”
Mexican Finance Minister Agustin Carstens, who had sought to avoid the downgrade, indicated prior to the move that “a downgrade would not be good, but it would not be disastrous either.” According to Mr. Carstens, Mexico will secure as much as 75 percent of its $8 billion international financing needs next year through multilateral organizations such as the World Bank, thereby eliminating much of the country’s need to finance its debt on international capital markets.
