Mexico would need major reforms for better rating: Fitch
MEXICO CITY |
MEXICO CITY (Reuters) - Meaningful reforms to Mexico's energy sector and tax base after Sunday's presidential election could move the country toward a higher credit rating, a top official with ratings agency Fitch said on Wednesday.
Any boost to growth from reforms, though, would have to be weighed against a worsening global environment, said Shelly Shetty, who heads sovereign ratings for Fitch in Latin America.
Opinion polls give front-runner Enrique Pena Nieto a wide lead ahead of the vote, putting the opposition Institutional Revolutionary Party, or PRI, on track to return to power.
Pena Nieto has promised reforms, including opening Mexico's state-run energy sector up to more private investment as well as tax and labor reforms to widen Mexico's revenue base and reduce the number of black market workers.
Shetty said the reforms would be a good start although they would probably require negotiation with opposition parties, depending on whether the PRI won a majority in Congress.
Fitch confirmed Mexico's BBB rating on long-term foreign currency debt in May and has a stable outlook, with its next formal review due by May 2013. A stable outlook means Fitch sees upside and downside risks to the rating as balanced.
"If we saw a significant reform momentum and started to see some of the results of that ... then one could contemplate taking a positive view of Mexico," she said.
"But we are in a very uncertain global environment, and clearly there's no one reform that will do the trick because we have to balance the reforms and growth outlook with what Mexico faces, just like other emerging markets, in terms of the external environment."
Shetty said the reform priorities for the new administration should be fiscal reform; reduce dependence on the oil revenues that make up about a third of Mexico's budget, and energy reform.
Both Pena Nieto and Josefina Vazquez Mota, candidate of the ruling National Action Party, support a constitutional change that could let Pemex grant oil concessions to private companies.
But it would require a tough two-thirds vote in Congress, and Shetty said the reform was unlikely in the first six months of the new government.
(Reporting by Krista Hughes; Editing by Jan Paschal)
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