Mexico leftist, oil woes could spark downgrade-Moody's

MEXICO CITY Aug 30 (Reuters) - The rise of a leftist political leader in Mexico or a prolonged crisis in its oil industry are two unlikely scenarios that could jeopardize its investment-grade credit rating, Moody's Investors Service said on Monday.

Moody's was the first major rating agency to class Mexican government debt as safe for risk-shy investors when it bestowed the 'investment' grade rating in 2000 and the country now firmly grasps that prize, said Mauro Leos, Moody's regional credit officer for Latin America.

"It was hard to come up with a scenario that would lead to a downgrade," Leos told Reuters, two days ahead of an investor presentation in the Mexican capital.

"One of the scenarios would be an oil scenario where you have a persistent decline in oil production... coupled with low prices."

A spiral of declining oil output and prices below $50 a barrel for several years could put a stranglehold on the Mexican treasury which relies on oil exports for a third of spending, Leos said.

With prices now around $70 a barrel and output fairly stable, Leos said, that kind of dire outcome seems unlikely in the near-term as does another scenario where a leftist political figure rose to power.

"If anything, the last (election) was when we came closer to that," he said of the 2006 vote, in which President Felipe Calderon nosed ahead of leftist Andres Manuel Lopez Obrador.

Wall Street was spooked by Lopez Obrador's social spending as Mexico City mayor and a presidential campaign that focused on class divisions.

Pointing to the razor-thin difference in votes, Lopez Obrador dubbed himself the 'legitimate' president of Mexico and continues a one-man campaign for his pet causes while his popularity has waned.

Leos said that investors and the Mexican public should write a thank-you note to Lopez Obrador for creating a spectacle that has strengthened the cause for balanced books and brought office-seekers to the political center.

"There are two thank-you notes. The other is to (Hugo) Chavez," Leos said, of the populist president of Venezuela.

Since he was elected in 1998, Chavez has become an emblem of Latin American leftist politics supported by the president of Bolivia and Ecuador while scorned by the conservative former president of Colombia.

"The best thing that happened to Latin America is Chavez," Leon said. "The electorate is now aware of what you might end up with."

Both Standard & Poor's and Fitch slapped Mexico with a credit downgrade late last year, though keeping sovereign debt as investment grade, while Moody's did not budge.