Traders sceptical Mexico can avoid downgrade as debt surges

Bloomberg

Traders are growing increasingly pessimistic about Mexico’s ability to stave off a credit-rating downgrade.
It costs 0.23 percentage point more to insure Mexico’s bonds against nonpayment than debt from lower-rated Panama, based on trading in credit-default swaps. That’s the most in six years. Mexico is also more costly to protect against default than Peru, which shares the same A3 rating from Moody’s Investors Service, four levels above junk, and the BBB+ from S&P Global Ratings and Fitch Ratings.
Mexico is struggling to convince investors it can hold on to its rating as the country’s debt load increases and losses deepen at state-owned oil producer Petroleos Mexicanos. The nation’s gross debt will be equal to 55 percent of its gross domestic product this year, compared with less than 40 percent a decade earlier. Moody’s Investors Service and S&P Global Ratings both have a negative outlook on Mexico’s grade.
“Debt-to-GDP has been rising, and there is concern about the accumulation of fiscal deficits,” said Benito Berber, an analyst at Nomura Holdings Inc. in New York. “Part of that has to do with the support the government gives to Pemex and the inability of Pemex to be financially
sustainable.”