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Fitch downgrades Mexico credit rating amid trade tension with US
[MEXICO CITY] Fitch downgraded Mexico's credit rating on Wednesday, saying Latin America's second-largest economy faced greater risk due to US President Donald Trump's threatened tariffs and financial woes at state oil company Pemex.
Fellow ratings agency Moody's changed its outlook for Mexico to negative from stable, as a high-level Mexican delegation in Washington scrambled to reach a deal to avoid US tariffs of five per cent starting Monday and rising incrementally to 25 per cent by October.
Fitch said it had downgraded Mexico's long-term foreign currency and local currency issuer default ratings to BBB from BBB+, citing "Pemex's deteriorating credit profile together with ongoing weakness in the macroeconomic outlook, which is exacerbated by external threats from trade tensions," among other factors.
"Downside risks are magnified by threats by US President Trump to impose tariffs on Mexico from June 10... to compel it to stop the flow of migrants across its territory into the US, amid a pattern of trade uncertainty," Fitch said in a statement.
Mr Trump tweeted that there had been "progress" in the US-Mexican talks to defuse the tariff situation, but said it was "not nearly enough!"
The tariff threat has caused severe jitters in Mexico, which sends 80 per cent of its exports to the United States.
Both ratings agencies said the huge debt burden at Pemex, Mexico's biggest company, would also weigh heavily on President Andres Manuel Lopez Obrador's government, which has vowed to get the struggling firm back on its feet.
Hit by years of declining production, Pemex owes more than US$100 billion, making it one of the world's most indebted companies.