Abolition of NAFTA Could Change Mexico’s Credit Rating According to Standard & Poor’s

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Abolition of NAFTA Could Change Mexico’s Credit Rating According to Standard & Poor’s

Santard & Poor's

Santard & Poor's

If the North American Free Trade Agreement (NAFTA) is canceled or dismantled, the rating agency Standard and Poors (S&P) and its Global Ratings service would re-analyze the credit note placed by the agency on Mexico’s sovereign debt, the bonds of the Mexican State.

If the treaty were to be dismantled materially, was what the agency said in a statement to the press; however, S&P explained that this is not its baseline scenario. The bonds have a rating of BBB+ with a very stable projection of experts.

For the agency, the modernization of NAFTA, which is 23 years old, will mean the preservation of trade and investment flows between the country and the United States.

Mexico is now in the centre of attention of S&P

Mexico is now in the centre of attention of S&P

If so, there will be no material impact on the variables that have been monitored. According to the comments of regional sovereign debt expert Joydeep Mukherji, if they are wrong about it and NAFTA is completely dismantled materially, they will rethink the situation. This was said by the expert in a statement he gave to the economic and financial press during this week.

Brazil Is Targeted for S&P

Brazil, the region’s largest economy along with Mexico, has also been the subject of remarks by the agency. This is a country that has an evaluation of BB with a negative outlook regarding the visions that S&P has.

Mukherji noted that S&P wants to see how the Brazilian economy solves the problems before the elections that will happen in the country next year, being these a key to the reform of the pensions.

He also explained that the approval of the reform would give the next government a little breathing room, this is necessary to be able to implement whatever reform they can to restore a balance to the fiscal accounts. He pointed out that if this happens in this way, the rating that was given by the agency could be stabilized, otherwise it could go down further.

On the other hand, the Agency pointed out that if you downgrade the rating of the neighboring country, Colombia, who currently has a BBB rating with a negative outlook, would be because of the deterioration of the profile of the country’s finances.

Mexico Grows Despite Everything

According to the Mexican statistical authority known as the IGAE, Mexico GDP grew 0.80% in August compared to September: highlighting engines of growth sectors such as trade and services, with an advance of 0.10% in the period in question.

In August, on the other hand, industrial production gained 0.30%; however, the primary sector fell by 1.0%.

All this, in seasonally adjusted terms: i.e., without regard to shocks in demand seasonal. Interanually, the GDP of Mexico grew 2.30% in August. Trade influenced with an interanual performance of 4.0%.

Also interanually, both primary and secondary GDP fell 4.1 percent and 0.5 percent, respectively, according to INEGI.

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