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In a special report, Mauro Leos (Moody’s Vice President) said that in the absence of elements that can lead to a sudden deterioration in the indicators of debt and hence a lower rating, the credit profile of Mexico is in line with the respective countries whose rating is located within the Baa category. The sovereign rating of Mexico is Baa1, three steps within investment grade.

The fundamentals are still solid, although it is acknowledged that "the inability to solve structural problems, coupled with the presence of persistent shocks, represent elements that could weaken the foundations of the sovereign rating of Mexico," he said.

Leos commented that the current sense reflects latent concerns about various issues, among which are:

An economic contraction more severe than expected and the expectation that a higher fiscal deficit will increase the financial requirements of government.

While the government will face a drop in income next year, as the oil coverage is not during 2010, Moody's estimates indicate that the amounts should not compromise the short-term fiscal outlook.

"The authorities should be able to manage this budget situation by taking measures, which would lead to reduced costs, increased tax revenues or, if necessary, more debt," he said.

Since the dependence of government revenues on oil will continue in the coming years, the downward trend in oil production raises questions over the medium term.

"This situation can lead to a gradual decline, but persistent in the public finances which, if not corrected, will eventually impact the fiscal perspective," said Leos.

Source: Mexico's Credit Rating: Still Investment Grade