MEXICO, November 23, 2009.- Fitch Ratings decide downgraded Mexico’s foreign currency Issuer Default Rating (IDR)to “BBB” from “BBB+”.

In addition, US agency downgraded the country ceiling to “A-“ “from “A”.

Fitch decides to downgrade Mexico’s rating as the financial crisis and fall in oil products accentuated weaknesses in the sovereign’s fiscal profile. As well as the high oil dependence of public sector revenues, a narrow non-oil tax base and a limited fiscal cushion.

These weaknesses limit Mexico’s fiscal maneuverability facing future oil income shock. The limited ability of the country to implement a credible counter cyclical fiscal policy highlights the weaknesses of fiscal structure.

In 2009, Mexico’s government debt is expected to reach 37% of GDP, above the “BBB” median.

In energetic sector, Fitch’s view that the energy reform made in 2008, doesn’t provide enough confidence that oil production will not decline over the medium term, and Pemex could announce incentive-based contracts to attract private investment next year.

“Prospects for future revenue-enhancing tax reforms are not bright as the opposition party controls the Lower House of Congress and going forward political dynamics will be heavily influenced by the 2013 presidential lections”, said Shelly Shetty, Senior Director in Fitch’s Sovereign group, in press release.

Even when Shetty considers that recently approved tax measures are in the right direction. The agency believed that Mexico required improving structural weaknesses of public finances.

First reaction of Mexican peso was negative, increasing over 13 pesos per dollar, but Shetty’s statement that Mexico international investment position is solid, strengthens currency.

When this article was written, the peso appears 0.8%, 13.9653 pesos per dollar. According to RBC Capital Markets firm, the peso could appear in 12.50, because of Fitch downgraded decision. Mexican Stock Exchange goes up 1%. (El Semanario Agencia ESA)