By Anthony Harrup
MEXICO CITY--The most urgent tasks facing the incoming Mexican government administration are narrowing a widening fiscal deficit and resolving the reliance of state oil company Petróleos Mexicanos on the federal budget, ratings firms said on Monday.
Claudia Sheinbaum of the ruling Morena party won Sunday's presidential election by about a 30-percentage point margin over her closest rival and is due to take office on Oct. 1. The party is also set to secure a two-thirds majority in congress that will allow the administration to pass constitutional changes without opposition support.
"The new administration inherits a stable economy, where Mexico's characteristic sound macroeconomic policy framework remains a positive for the sovereign rating," Fitch Ratings said in report. But with the fiscal deficit widening to more than 5% of gross domestic product this year, "consolidation will be a key challenge for the new government."
The government's support for Pemex is a contingent liability for the country's sovereign debt rating, Fitch adds. They rate Pemex B+ and Mexico's sovereign debt at BBB-. Both have a stable outlook.
"The incoming administration has advocated for maintaining Pemex's large role in the country's oil market, which will entail continued federal government transfers absent meaningful improvements to the company's operating efficiency," Fitch said.
S&P Global Ratings rates both Pemex and the nation's sovereign debt BBB on the assumption that the oil company will continue to receive strong government support, also singles out the deficit and Pemex as tasks for the next administration.
The Sheinbaum administration "will face embedded challenges in public finances, including a recently growing fiscal deficit and long-standing weaknesses in state-owned Pemex," S&P Global Ratings said. The next government will also need to raise economic growth in a sustained way to address social needs, the firm said.
Write to Anthony Harrup at anthony.harrup@wsj.com
(END) Dow Jones Newswires
06-03-24 1713ET
