Fitch affirms Mexico at BBB-

Fitch affirmed its long-term foreign- and local- currency issuer default ratings at BBB- with a stable outlook for Mexico.

Mexico's rating is supported by a consistent macroeconomic policy framework, relatively stable and robust external finances, and government debt/GDP projected at levels slightly below the BBB median.

The rating is constrained by relatively weak governance, muted long-term growth performance and the implications for the federal government's own finances from its strategy of alleviating Pemex's tax burden.

The debt of state oil company Pemex is equivalent to 9% of GDP, and Fitch views it as a contingent liability of the sovereign. Fitch assumes government support for Pemex of around 0.5% of GDP per year, on top of recent tax cuts that are likely to be made permanent.

Potential growth is relatively low and once economic slack narrows, prospects depend on how convincingly investment recovers from the Covid-19 shock and the typical contraction observed in the first year of the presidential administration.

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