Fitch Rates Mexico's EUR750MM Issue 'BBB-'.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. , the international rating agency, has assigned a rating of 'BBB-' to the EUR EUR In currencies, this is the abbreviation for the Euro. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 750 million of 10-year Eurobonds issued today by the government of Mexico. The Rating Outlook is Stable. The proceeds of this issue will go toward pre-financing the amortization of international bonds in 2006. Mexico's ratings are supported by the reduction in its external debt burden, the country's prudent policy framework and liability management, and the continued integration of the country with the U.S. The ratings remain constrained con·strain tr.v. con·strained, con·strain·ing, con·strains 1. To compel by physical, moral, or circumstantial force; oblige: felt constrained to object. See Synonyms at force. 2. by the structural weaknesses in public finances, slow progress on structural reforms, and weak social indicators. After growing at over 4% in 2004, the Mexican economy is expected to decelerate de·cel·er·ate v. de·cel·er·at·ed, de·cel·er·at·ing, de·cel·er·ates v.tr. 1. To decrease the velocity of. 2. to 3-3.5% in 2005. Higher exports, investment, and continued strength in private consumption will support overall GDP GDP (guanosine diphosphate): see guanine. growth. However, the recovery will remain largely dependent on the U.S. performance and could be vulnerable to the rising domestic interest rates. On the external front, exports have continued to perform well in the first four months of 2005, growing by 11%, while imports have grown even stronger at 13%, reflecting the strength of domestic demand. As such, both trade and current account deficits are likely to deteriorate in 2005. However, steady inflow of foreign direct investment should provide ready financing for the current account deficit. Mexico's public finances continue to benefit from high oil prices, and the government should be able to meet its fiscal targets for 2005. Steady liability management has deepened the domestic capital markets and has increased the average maturity of public sector domestic debt and increased the proportion of domestic debt issued on fixed interest rates. However, net public sector external debt as a percentage of broad exports has not declined significantly since 2002 due to the increasing level of Pidiregas (projects with deferred budgetary impact) related borrowing. The authorities have not been able to pass a significant tax reform that would help in alleviating the structural weaknesses in public finances. Thus, public finances remain heavily dependent on oil revenues and non-oil intake remains quite low. Moreover, unlike other investment grade oil exporters, Mexico is not using the opportunity presented by higher oil prices to build resources in the Oil Stabilization Fund Stabilization fund may refer to:
Despite the rebound in the economy, Fitch believes that Mexico needs to implement structural reforms in order to increase its potential growth rate and address issues related to its lagging Lagging Strategy used by a firm to stall payments, normally in response to exchange rate projections. competitiveness. Reforms in the labor market labor market A place where labor is exchanged for wages; an LM is defined by geography, education and technical expertise, occupation, licensure or certification requirements, and job experience and electricity sectors, and further improvements in the regulatory and business environment should help Mexico regain some share of its export markets and attract higher foreign direct investment flows. At the same time, fiscal reform aimed at improving the tax-to-GDP ratio needs to be pursued. However, with the early start of the electoral cycle, the authorities are unlikely to be able to push through significant reforms in the above-mentioned areas. Fitch's rating definitions are available on the agency's free of charge web site, www.fitchratings.com. Published ratings, criteria and methodologies and relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from this site, at all times. This document will remain on the free site for seven days. |
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