Monday, November 23, 2009

Downgrades and Such

As rumored, Fitch lowered Mexico's credit rating to BBB (from BBB+) today, based on worries about the country's budget deficit and its falling oil revenue. The move provoked a defense of the reforms undertaken by the Calderón administration from the Calderón administration's finance secretariat. With somewhat more objectivity, Goldman Sachs said the downgrade was less than fair, calling it "unnecessary roughness". Pacific Investment Management predicts that the downgrade will spur a peso rally of up to 20 percent against the dollar in the next year, with investors taking advantage of the export rebounds. (According to the firm, investors had been awaiting the long-rumored downgrade before sinking money into Mexico, but now that it's finally happened, a flood of interest should result.)

A couple of other interesting Mexican business facts I came across while trolling for info: Mexican regulators slapped retailer Comercial Mexicana with a $3.7 million fine for withholding info on its derivatives transactions last October, when the company suspended debt payments. I believe there's some debate about whether the company can rightfully be charged with causing a peso decline that occurred at the same time, but it's certainly encouraging to see Mexican regulators with some teeth. Also, Televisa sold $600 million in 30-year bonds.

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