By Tomas Sarmiento and Christine Murray
MEXICO CITY Feb 5 Mexico became only the second
country in Latin America to earn a coveted "A" grade sovereign
rating as Moody's upgraded it on Wednesday, citing a raft of
economic reforms that President Enrique Pena Nieto has pushed
Mexico's peso and leading share index
both turned positive after the upgrade, which should help lower
the country's borrowing costs.
Moody's upgraded Mexico's sovereign rating to A3 from Baa1
with a stable outlook. Until now, Chile was the only country in
Latin America with an A rating.
Moody's said it expects the economic reforms approved in
Mexico last year "will strengthen the country's potential growth
prospects and fiscal fundamentals."
Mauro Leos, the firm's senior credit analyst, told Reuters
the rating agency sees no further significant changes to
Mexico's sovereign rating for two to three years following the
Fellow ratings agencies Standard and Poor's and Fitch
Ratings are expected to eventually follow suit and upgrade
"Confidence in Mexico in the world is growing," President
Enrique Pena Nieto said after the upgrade. He is hoping that
sweeping overhauls to the telecoms and energy sectors in Mexico
will help boost competition and economic growth - which has long
lagged that of regional peers.
"I think it's very well deserved and to a large extent
reflects the recognition of the major structural reform drive
that was undertaken by the authorities last year," said Alberto
Ramos, senior Latin America economist at Goldman Sachs in New
The upgrade comes after Standard & Poor's raised its own
sovereign long-term foreign currency credit rating for Mexico by
one notch to BBB-plus in December. However, that upgrade only
brought S&P in line with both Moody's and Fitch at the time.
Brazil, by comparison, has the second-lowest investment
grade level according to the three ratings agencies.
The upgrade could not come at a better time for Mexico,
which has suffered alongside other emerging nations as investor
jitters over a winding down of U.S. monetary stimulus and a
deceleration of the Chinese economy inspired a massive sell-off
in emerging market assets.
The peso is down nearly 2 pct this year, while the
IPC stock index is down more than 6 percent in 2014.
Benito Berber, a senior Latin America strategist at Nomura
Securities in New York, said the upgrade would help Mexico
distinguish itself from other emerging markets, and that it
would positively affect prices of Mexican bonds and its peso.
However, he also delivered a word of warning.
"This is a stamp of approval but the reforms have to deliver
growth and they have to deliver investment," he said. "A rating
does not make you more productive, nor make Mexico more
important as a country."
"It will remain a country that is invited to the G20 and
that's it. I don't think it will be invited to the G7," he
added, noting that he now expected "S&P and Fitch to upgrade
Mexico in the last quarter of the year or first quarter of
In December, Standard & Poor's raised its sovereign
long-term foreign currency credit rating for Mexico to BBB-, one
notch shy of its equivalent of an "A" grade. Fitch rates Mexico
BBB-plus, also one notch below "A".