Moody’s Investors Service late Friday downgraded its rating on Mexico’s sovereign bonds to Baa2, the next-to-last rung of investment grade, saying that the country’s economy will remain “constrained by weak investment prospects” and the “economic scarring” from the pandemic will not reverse. Moreover, Mexico’s fiscal prospects will suffer from the country’s “increased expenditure rigidity” related to supporting state-owned enterprises, particularly Pemex, and higher spending in pensions and flagship projects while “lower financial buffers as fiscal stabilization funds have been virtually depleted,” the debt-rating agency said. “Combined, these elements will restrict the authorities’ ability to manage shocks in the coming years,” Moody’s said. Moody’s also changed its outlook on Mexico to stable from negative. Moody’s had held its Mexico rating at Baa1 since April 2020.
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