S&P cuts Mexico's credit outlook to 'Negative'

S&P Global Ratings has lowered Mexico's credit outlook to 'Negative' from 'Stable', citing persistent poor fiscal performance, rising debt levels, and a slowing economy. The agency affirmed the country's 'BBB' rating, which is two notches above speculative grade, or junk. S&P's current rating aligns with that of Moody's, while Fitch maintains a 'Stable' outlook one level above junk. If two of the three major credit rating agencies were to downgrade Mexico to speculative grade, some fund managers would be forced to sell the country's government bonds. S&P stated that the negative outlook reflects the risk of extremely slow fiscal consolidation, as sluggish economic growth could lead to a faster-than-expected increase in government debt and a heavier interest burden. The agency also noted that continued government support for state-owned oil company Pemex under President Sheinbaum would further increase the rigidity of Mexico's fiscal structure. Additionally, uncertainty surrounding this year's scheduled review of the U.S.-Mexico-Canada Agreement (USMCA) is weighing on investor sentiment.