Fitch to Monitor Post-Election Politics for Potential Effect on Mexico's Credit Ratings

NEW YORK--(Business Wire)--
Fitch Ratings believes the outcome of the Mexican mid-term elections could lead
to reform inertia in the country. Fitch will, however, monitor the post-election
political environment to evaluate the chances of reforms during the remainder of
President Calderon's administration. According to preliminary election results,
the balance of power in the Mexican Lower House has shifted in favor of the PRI
(the main opposition party), although the party has not gained an outright
majority.

Fitch rates Mexico's Long-Term Foreign Currency Issuer Default Rating 'BBB+'
with a Negative Outlook.

"Fitch will monitor the PRI's disposition towards economic reforms," said Shelly
Shetty, Senior Director in Fitch's Sovereign Group. "Certainly, there is a risk
that fiscal and other reforms may be more diluted, which in turn, could pressure
sovereign creditworthiness given Mexico's weakening fiscal fundamentals and
deteriorating economic environment."

To some extent, the PRI has some incentive to cooperate as its 'constructive
opposition' image has worked well at the polls. With the PRI eyeing the 2012
election, limited cooperation on reforms cannot be ruled out, especially those
that strengthen the fiscal base in advance of the next presidential elections.
However, the PRI may not be ready to assume the partial political cost of
reforming the tax system at a time of a deep domestic recession.

"How the PRI balances these competing forces will become clearer in due time and
will be useful in analyzing the success of any reform initiative proposed by the
Calderon administration," added Shetty.

"In the future, Fitch will monitor how successfully the Calderon administration
is able to negotiate with the PRI to proceed on its reform agenda in light of
the new political context in which the PRI could weigh strongly on the
legislative agenda," added Shetty. The need for revenue-enhancing fiscal reforms
has increased as non-oil revenues will be adversely affected by the economic
contraction and oil revenues will be impacted by lower average oil prices and
falling oil production. Fiscal deterioration as well as a steep recession in
2009 and a gradual recovery in 2010 will weigh on public debt dynamics.
Moreover, Mexico's fiscal cushion in the form of resources in the Oil
Stabilization Fund remains quite modest compared with rating peers and is at the
risk of being largely depleted in 2010.

Significant economic and financial dislocations, further weakening of the policy
framework, and an inadequate response to rising fiscal pressures would be viewed
negatively for Mexico's ratings. 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.

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

Copyright Business Wire 2009