Fitch Report: Deteriorating Economic and Credit Outlook for Mexico

NEW YORK--(Business Wire)--
Mexico's weak macroeconomic outlook and rising fiscal pressures in the context
of its modest fiscal and external cushions are weighing on the sovereign
creditworthiness, according to a report published today by Fitch Ratings. Fitch
has forecasted a 5.5% contraction of Mexico's real GDP in 2009 followed by a
modest recovery in 2010.

Fitch revised its Outlook on Mexico's long-term foreign and local currency
ratings (rated 'BBB+'/'A-' by Fitch) to Negative from Stable in November 2008,
reflecting the country's vulnerability to the global recession, falling
commodity prices and lower private capital inflows. Furthermore, Fitch expressed
concern that Mexico was entering the worsening economic environment with weaker
external and fiscal cushions relative to its peers. In the period since then,
vulnerabilities in Mexico's economic outlook have come under sharper focus,
particularly with the decline in U.S. consumer spending and other external
factors.

'The U.S. recession has accelerated Mexico's economic woes, highlighted by the
decline in Mexico's manufactured exports, overseas workers' remittances and
tourism receipts,' said Shelly Shetty, Senior Director, Fitch Ratings. Rising
unemployment, depressed consumer and investor sentiment as well as sharply
decelerated credit growth have dampened domestic demand despite the interest
rate cuts delivered by the central bank.

'The economic contraction this year will do little to help bridge the gap of
Mexico's average five-year GDP growth of 3.3% in 2008 with the 'BBB' median of
5.3%, highlighting the need for further structural reforms to improve the
country's competitiveness,' added Shetty.

Pressures on public finances are likely to increase in 2010 as the government is
unlikely to have access to the 'oil hedge' it had executed this year. Oil prices
are unlikely to see a strong recovery in 2010 as Fitch anticipates a muted
global recovery next year. Non-oil tax revenues will also be affected by the
economic contraction in 2009 and a gradual recovery in 2010. A fiscal response
will be required in 2010 to contain further fiscal deterioration.

The outlook for policy reforms following the mid-term Congressional elections
scheduled for July 5 remains unclear, and policy flexibility to mitigate the
fallout from the unfavorable external economic environment is relatively
limited. The direction of Mexico's sovereign ratings and Outlook will partly
depend on the authorities' overall policy response to the growing economic and
fiscal pressures.

Significant economic and financial dislocations, further weakening of policy
framework and inadequate response to rising fiscal pressures would be viewed
negatively. Conversely, progress on fiscal and other reforms, a successful
navigation through the current global recession and financial crisis with the
credibility of the country's policy framework well intact could help in
reverting the Rating Outlook to Stable.

'The Calderon Administration's fiscal strategy and its political feasibility
will become clearer after the July elections which Fitch will assess to evaluate
the effect on Mexico's credit profile,' said Shetty.

The full report is titled 'Mexico: Deteriorating Economic and Credit Outlook'
and is available on the Fitch web site at www.fitchratings.com. The report
provides additional analysis on Mexico's credit profile, its economic outlook
and fiscal pressures and a discussion of the aforementioned midterm elections.

Fitch's rating definitions and the terms of use of such ratings are available on
the agency's public site, www.fitchratings.com. Published ratings, criteria and
methodologies are available from this site, at all times. Fitch's code of
conduct, confidentiality, conflicts of interest, affiliate firewall, compliance
and other relevant policies and procedures are also available from the 'Code of
Conduct' section of this site.

Fitch Ratings
Shelly Shetty, +1-212-908-0324
Theresa Paiz-Fredel, +1-212-908-0534 (New York)
Media Relations:
Brian Bertsch, +1-212-908-0549 (New York)
brian.bertsch@fitchratings.com

Copyright Business Wire 2009