S&P rates Oaxaca mxBBB

Standard & Poor's said it assigned a national-scale rating of mxBBB to the State of Oaxaca, United Mexican States.

The outlook is positive.

The agency said it expects Oaxaca to strengthen its financial flexibility during fiscal 2008 thanks to additional fiscal resources expected in the upcoming years and an improvement in its debt profile. The rating could be upgraded to mxBBB+ if the state continues its adequate budgetary performance, registers surpluses of about 10% of operating revenue, continues to strengthen its administrative practices and maintains adequate liquidity levels, S&P said.

However, given the state's economic and demographic conditions, the agency said Oaxaca currently has limited financial flexibility. The state's discretionary revenue remains below the 7.4% of operating revenue average of the Mexican states rated by S&P, and more than 50% of capital expenditure has been financed by federal transfers and, recently, with debt.

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