Mexico is facing an economic storm, triggered by a credit downgrade, a judiciary overhaul, and a furious president. The situation began when President Claudia Sheinbaum accused ratings agencies of having a “bias of origin” against the economic policies her party adopted under former President Andres Manuel Lopez Obrador.
Moody’s ratings service downgraded Mexico’s government debt outlook to “negative” on Friday, citing concerns about newly approved laws that could weaken the judiciary branch and checks and balances. Although it reaffirmed Mexico’s Baa2 overall credit rating, Moody’s highlighted the risk of increased government debt and the possibility of additional transfers to support Pemex, the heavily indebted state-owned oil company.
President Sheinbaum responded by criticizing ratings agencies for their biased approach to evaluating Mexico’s economy. She claimed that these agencies often base their evaluations on a specific economic model, which changed in 2018 under Lopez Obrador’s administration. This shift led to significant budget deficits, with federal expenditures amounting to about 6% of Mexico’s gross domestic product in 2024 and expected to continue at lower levels in 2025.
The government is also pushing forward with changes to the judiciary system, which will require all federal judges to stand for election in 2025 and 2026. This move has been met with criticism from the United States and business groups, who fear it may weaken the independence of the courts and make them vulnerable to political pressure.
Critics also warn that this overhaul could allow drug cartels to fund judges’ election campaigns and influence the outcome. Moody’s echoed these concerns in its report, stating that the changes “have the potential to materially alter the checks and balances and the business operating environment in the country.”
As a result of these developments, the Mexican peso has declined in value to about 20.50 to $1 in recent days.
Source: Fortune
