Reform of the Judiciary is harmful

MEXICO CITY.- The reform of the judiciary and other initiatives proposed by Morena in it Congress could negatively affect the sovereign rating of Claudia Sheinbaumpresident-elect, warns the agency Fitch Ratings.

“The fiscal strategy and governance reforms of the Sheinbaum government will be key factors for Mexico’s rating.”

This is what she says in her most recent report, “Agenda, challenges and opportunities of the president-elect of Mexico, Sheinbaum.”

Warning of risks in the face of reform of the judiciary

The Fitch rating agency warned that Sheinbaum will face a growing debt above 51% of the Gross domestic product (PIB).

In addition to the reforms proposed in the Legislature, Mexico could have a negative rating.

“We believe that the proposed reforms would negatively affect Mexico’s overall institutional profile, but the severity of their impact may become clearer once they are approved and implemented,” he said.

With Sheinbaum’s victory, Fitch anticipated a broad continuity of macroeconomic policy, including fiscal and monetary policy, it notes. The Financier.

However, it expects debt relative to GDP to grow this year.

Mexico’s debt increases

The predictions are for “a gradual increase in debt/GDP above 51 percent due to higher primary deficits, high borrowing costs, and moderate GDP growth averaging 2 percent in 2024-2026.”

For her part, Sheinbaum promised to reduce the fiscal deficit to 3.5 percent starting in 2025, but “the political appetite for reforms that boost revenue is unclear,” says Fitch.

Fitch also considered that fiscal savings from temporary items will be insufficient for the deficit to “return to line with historical averages.”

Effects of the US elections

Regarding external indicators, Fitch highlighted the elections of USA next November.

The US election period is a source of economic uncertainty for Mexico, although the relocation of companies or ‘nearshoring‘ represent an improvement in medium-term growth prospects.

Weak governance indicators limit Mexico’s sovereign rating and are “only partially offset by a track record of prudent, credible and consistent macroeconomic policy.”

Pemex, a fiscal burden

The Fitch rating agency considered that the state-owned company Mexican Petroleum (Pemex) remains a fiscal burden.

This is because in 2025 it would still require government support to meet its debt obligations.

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