The opening of Mexico’s energy industry to foreign investment resulted in major immediate changes to the country’s financial rating. Moody’s Investor Service has raised Mexico’s credit rating to A3, citing new economic reforms signed into law by President Enrique Pena Nieto in 2013.
The new credit rating puts Mexico alongside Malta and Malaysia. It is now four steps above the high-yield, high-risk debt category classified as “junk-grade” by the credit rating agency. During the last year, Mexico passed more than 10 amendments to its constitution aimed at increasing oil production and improving the economy.
Prior to the amendments, the Mexican oil industry was owned and operated largely by the state as part of a public monopoly. The new reforms allow an increased level of competition in the energy industry, as well as Mexico’s rapidly growing telecoms sector.
Mauro Leos, a Moody’s analyst, says the “rules of the game have been redefined” for the large North American economy. In a phone interview with Bloomberg, he noted that if the impact of the reforms is significant over the next three years, the credit rating for Mexico could become even higher.
Mexico has been pointed to as a key source of economic growth in the Americas, as the country’s large oil reserves are opened to international investment. Experts are optimistic about the country’s future economic growth, as many core industries that were previously stifled by government monopoly have been liberalised.
Robert Abad, of California’s Western Asset Management Co., believes that the higher debt rating will cause more investors to take Mexico seriously. Foreign investment in Mexico has already increased, with fixed-rate government bond holdings hitting an all-time high in January, based on Mexican central bank data.
