Mexico will lose investment grade if it repeats deficit, they warn

Expert sees high pressure to replicate a fiscal imbalance in 2025 as in 2024

The country will be condemned to lose the investment grade if a deficit the size of 2024 is proposed again for 2025, warned the partner at Miranda Ratings Advisory, Víctor Manuel Herrera.

From his point of view, the next Secretary of the Treasury must be a person who can move in international markets in order to explain the situation.

We will not lose the level of investment in the short term with the size of the deficit that the Congress of the Union approved for 2024, “but it is a sign that things are not going in the right direction,” he said in an interview with EL UNIVERSAL.

It remains to be seen if it is as the government says, it will be a one-time situation, he said.

“If it becomes recurrent, twice, it is most likely that our rating will be lowered, and we are even on the path to losing the investment grade,” he warned.

They are looking at that for the medium term, for the next government, said the former director of the Standard & Poor’s rating agency.

Herrera referred to the fiscal deficit equivalent to 5.4% of the Gross Domestic Product (GDP) that was approved for next year, the size of which, the Ministry of Finance assured, will be one-time because it is necessary to not leave any work pending the following government year.

In the context of the IMEF Annual Convention, Herrera highlighted that by exceeding 5%, the deficit reminds us of what happened to Brazil and Colombia.

It is already very difficult to make an adjustment of two points of the GDP because there are other needs, he pointed out, mentioning that there is a population without access to health that the government will have to attend to, which implies greater spending.

“The pressure to repeat a deficit the size of 2024 is going to be very high,” he stated.

Although what was approved has not yet happened, we must see the budget that the new government will present for 2025.

Having a “surprise” deficit of that size, there will be a negative reaction if it happens, but if it is repeated it will be even stronger, he warned.

If the trend indicates that there will be a continuous deterioration, the most likely thing is that the rating will be lowered, he clarified.

We must prevent what happened in Colombia from happening in Mexico, said the sovereign risk ratings expert.

The chief economist of Banco Base, Gabriela Siller, agreed that the budget deficit for 2024 is not anything, as it would be the largest since 1988.

“This is something very negative and represents a risk for the credit rating of Mexico’s sovereign debt,” she said.

Source: El Universal