Trump Threat Hits Mexico Creditworthiness as Fitch Cuts Outlook
Trump Threat Hits Mexico Creditworthiness as Fitch Cuts Outlook
(Bloomberg) -- Mexico’s creditworthiness is officially up for review at all three major credit-rating companies after Fitch Ratings cut its outlook Friday, citing lackluster growth and risks from a Donald Trump presidency.
“Domestic demand and economic growth will suffer from higher economic uncertainty reflecting doubts over possible NAFTA renegotiation,” Fitch analysts wrote in a report.
The announcement caused a temporary blip in the peso, but the reality is that investors have been pricing in a downgrade to the country’s BBB+ rating for years now.
The cost to insure Mexico’s bonds against default, as measured by credit-default swap prices, has surged 11 percent since Trump’s election after he campaigned on promises to tear up the North American Free Trade Agreement and crack down on undocumented immigrants. For the past two years, the protection had already cost more than for similarly rated Peru and even Panama, which is rated one notch below.
--With assistance from Sebastian Boyd
To contact the reporter on this story:
Isabella Cota in Mexico City at icota@bloomberg.net
To contact the editors responsible for this story:
Rita Nazareth at rnazareth@bloomberg.net
Jeremy Herron at jherron8@bloomberg.net