MEXICO CITY—Fitch Ratings lowered Mexico’s sovereign debt rating, saying the deteriorating credit profile at state oil company Petróleos Mexicanos weighs on government finances while the economy is underperforming and the country faces external threats on the trade front.
Wednesday’s downgrade to BBB from BBB+ came as Mexican officials met in Washington, D.C., with U.S. officials, seeking to convince the Trump administration to abandon threats to slap a 5% tariff on all imports from Mexico starting June 10. The tariffs would gradually rise to 25% in October unless Mexico does more to curb a flood of Central American migrants reaching the U.S. border. The two sides agreed to continue those talks Thursday.
Fitch changed the outlook on Mexico’s sovereign rating to stable from negative.
Fitch said the downgrade “reflects a combination of the increased risk to the sovereign’s public finances from Pemex’s deteriorating credit profile, together with ongoing weakness in the macroeconomic outlook, which is exacerbated by external threats from trade tensions, some domestic policy uncertainty and ongoing fiscal constraints.”
The government of President Andrés Manuel López Obrador has supported Pemex with capital and tax breaks in a bid to halt a 15-year-long decline in oil output at the state company.
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