(Reuters) - Standard & Poor’s could decide to boost Mexico’s debt rating only if the government approves a raft of ambitious reforms and the measures are effective, credit analyst Joydeep Mukherji said on Thursday.
Mexico’s major parties signed a pact last year to push long-sought measures through the country’s divided Congress, including reforms to boost the country’s paltry tax take and raise production at ailing state-owned oil monopoly Pemex PEMX.UL.
Earlier this month, Fitch Ratings upgraded Mexico’s sovereign foreign currency credit rating by one notch to BBB-plus, pointing to the country’s solid economic foundations and welcome progress on reforms.
But S&P’s Mukherji said his agency would only consider an upgrade after the reforms were approved and could be evaluated for their impact.
“We want to look at the details of all (the reforms) and say, ‘OK, based on all that, what do we think is going to be investment and growth prospects in the future, what do we think is going to be the fiscal situation in the future...make our calculations and then decide whether to upgrade or not,” he told Reuters Latin American Investment Summit.
Standard & Poor’s changed its outlook on Mexico’s BBB-rating to positive in March, suggesting an upgrade is possible within 18 months.
Optimism about the reform agenda, promised by President Enrique Pena Nieto after taking office in December, drove hefty capital flows into Latin America’s no. 2 economy and helped the peso rise more than 3 percent this year.
While overhauls of the telecommunications, financial and education sectors are already underway, a political spat over possible misuse of state funds to bribe voters ahead of July elections threatened to derail the pact earlier this month.
Mukherji brushed off concerns about pact headwinds derailing reform efforts.
“That is just par for the course,” he said. “What you are seeing now are the normal events that take place in any country which has a modern democracy with lots of different parties and you are dealing with extremely difficult issues where people have serious disagreements.” Follow Reuters Summits on Twitter @Reuters_Summits
Reporting by Alexandra Alper in Mexico City; Editing by Lisa Shumaker