On November 16, 2024, Moody's downgraded Mexico's government debt outlook from stable to negative, citing concerns over new laws that could weaken the judiciary and disrupt checks and balances within the government [469e8944]. Despite this downgrade, Moody's reaffirmed Mexico's long-term credit rating at 'Baa2', which is two notches above junk status. The agency highlighted the risks associated with increasing government debt, which is projected to reach 51.4% of GDP by the end of 2025 [469e8944].
The downgrade comes in the wake of significant federal budget deficits that reached approximately 6% of GDP in 2024 under former President Andrés Manuel López Obrador. The current administration, led by President Claudia Sheinbaum, aims to reduce the deficit to 3.9% of GDP in the 2025 budget [469e8944]. Sheinbaum criticized Moody's for what she described as a 'bias of origin' against her party's economic policies, suggesting that the agency's assessment may not fully reflect the country's fiscal realities [469e8944].
Additionally, the Mexican peso has recently been valued at about 20.40 to USD1, indicating investor concerns following the downgrade. Economic growth is forecasted at 2-3% for 2025, but potential impacts from U.S. policies under Donald Trump could further complicate the economic landscape [469e8944].
The ongoing judicial reforms, which require federal judges to stand for election in 2025 and 2026, are also a focal point of concern. Critics argue that these reforms may undermine the independence of the judiciary and exacerbate existing governance issues [469e8944]. As Mexico navigates these fiscal challenges, the interplay between debt management, judicial reforms, and international trade agreements will be critical in shaping the nation's economic future [469e8944].