UPDATE 3-Mexico elections no help to troubled rating outlook

(Recasts, adds lawmaker's quote and background)

By Pedro Nicolaci da Costa and Jason Lange

MEXICO CITY, July 6 (Reuters) - Mexican President Felipe Calderon's defeat in congressional elections will prevent near-term improvement in the country's credit rating outlook but should not lead to immediate downgrades, rating agencies said.

Fitch Ratings told Reuters on Monday the vote results meant it would be more difficult for Calderon to negotiate the economic reforms necessary to boost long-term growth and reduce the government's dependence on oil revenue. Fitch has Mexico's rating outlook at "negative," meaning it faces an eventual downgrade.

"We don't foresee going back to 'stable' any time soon," Fitch senior country analyst Shelly Shetty said.

Mexico's centrist opposition party leapfrogged Calderon's conservatives in Sunday's polls to become the biggest force in the lower house of Congress. [ID:nN06253257]

A downgrade would increase borrowing costs in Mexico, complicating its efforts to claw its way out of deep recession caused by the U.S. downturn.

Both the centrist opposition Institutional Revolutionary Party, or PRI, and ruling National Action Party, or PAN, tried to reassure investors they will work to pass reforms and avoid a downgrade.

"Lawmakers have to do their job to avoid this risk," said Cesar Nava, a member of Calderon's inner circle who hopes to be the party's leader in the lower house. He will be a lawmaker when the next lower house is seated.

PRI leader Beatriz Paredes also vowed on Monday to work for deep economic reforms. [ID:nN06253257]

WAIT AND SEE

Voters punished the PAN for Mexico's current economic slump. The PRI took more than 36 percent of the vote versus the PAN's 28 percent, a bigger margin than was suggested by pre-election polls.

Standard & Poor's sovereign ratings director Lisa Schineller said no party has dominated Mexico's Congress in recent years and that lawmakers have a track record of passing legislation with bipartisan support.

"That's reinforced by the electoral outcome," she said in a telephone interview.

She said S&P, which also has put Mexico's credit rating on negative, would need to see real reform proposals before passing further judgment on the country's rating.

Both Fitch and S&P currently rate Mexico at BBB+, an investment grade rating.

The country's gross domestic product is expected to shrink over 6 percent this year, which would make it the worst performer among large Latin American nations.

Some market analysts were discouraged by the prospects for reforms in areas like taxation and energy, seen as key to enhacing the country's future growth prospects.

"If Calderon couldn't do it when his PAN was the leading party, what hope is there now?" said Win Thin, senior currency strategist at Brown Brothers Harriman. "Downgrades are warranted but it should be able to maintain investment grade." (Additional reporting by Luis Rojas Mena, Editing by Chizu Nomiyama)