A year ago, Mexico was a rising star poised to eclipse Chile as the safest bet in Latin American debt markets. It was not to be.
Plagued by a sluggish economy and an oil-price plunge that upended its historic energy privatization, Mexico has failed to live up to its promise.
On Wednesday it cost 0.48 percentage point more to insure the country’s bonds with credit-default swaps than Chile notes, the biggest premium in almost two years. For a brief time in June 2014, Mexico debt was actually cheaper to insure.
While Mexico has had to boost debt and cut spending, Chile, Latin America’s only net saver, has been able to stimulate its economy in the face of lower copper prices.
That’s helped keep Chile’s economic recovery on track at a time when Mexico has seen analysts grow increasingly bearish on the country’s growth outlook.
Mexico has “gone from a darling of the markets to just a pedestrian credit,” Bianca Taylor, a sovereign analyst at Loomis Sayles & Co., said by telephone from Boston. A press official for Mexico’s Finance Ministry didn’t respond to a request for comment during office hours Friday.
Mexico and its state-owned oil company are the biggest Latin American borrowers in the dollar-bond market this year after issuing $10 billion. The 47 percent slump in oil prices in the past year has crimped the country’s export revenue, prompting it to trim spending by 0.7 percent of gross domestic product annually in both 2015 and 2016.
Growth Outlook
That’s led economists surveyed by Bloomberg to lower their Mexican growth projections for 2015 to 2.7 percent, from the 3.4 percent they had forecast at the start of the year.
By contrast, estimates for Chile’s expansion this year have held steady at 2.8 percent as the government steps up spending by about 10 percent to make up for slower growth.
The world’s biggest exporter of the metal is Latin America’s highest-rated country. Its Aa3 ranking from Moody’s Investors Service is the fourth-highest investment-grade. Chile’s gross domestic product grew 1.9 percent last year; in Mexico it was 2.1 percent.
The Mexican peso declined 0.2 percent to 15.4408 per dollar Monday as of 10:48 a.m. in New York. Mexico’s move to jettison its 75-year-old oil monopoly and reduce dependence on revenue from crude last year earned the country a string of upgrades, with Moody’s giving the nation its highest-ever grade at A3, three levels below Chile.
Still, the cost of insuring Mexican bonds against non-payment for five years with default swaps has jumped 0.56 percentage point in the past year to 125.63 percentage points, data compiled by Bloomberg show.
“The Mexicans aren’t doing anything wrong per se,” Edwin Gutierrez, a money manager at Aberdeen Asset Management Plc, said by telephone from London. “It was the poster child for reform in the region, and Mexican assets had every reason to outperform, but their efforts haven’t been rewarded.”
bloomberg.com
Plagued by a sluggish economy and an oil-price plunge that upended its historic energy privatization, Mexico has failed to live up to its promise.
On Wednesday it cost 0.48 percentage point more to insure the country’s bonds with credit-default swaps than Chile notes, the biggest premium in almost two years. For a brief time in June 2014, Mexico debt was actually cheaper to insure.
While Mexico has had to boost debt and cut spending, Chile, Latin America’s only net saver, has been able to stimulate its economy in the face of lower copper prices.
That’s helped keep Chile’s economic recovery on track at a time when Mexico has seen analysts grow increasingly bearish on the country’s growth outlook.
Mexico has “gone from a darling of the markets to just a pedestrian credit,” Bianca Taylor, a sovereign analyst at Loomis Sayles & Co., said by telephone from Boston. A press official for Mexico’s Finance Ministry didn’t respond to a request for comment during office hours Friday.
Mexico and its state-owned oil company are the biggest Latin American borrowers in the dollar-bond market this year after issuing $10 billion. The 47 percent slump in oil prices in the past year has crimped the country’s export revenue, prompting it to trim spending by 0.7 percent of gross domestic product annually in both 2015 and 2016.
Growth Outlook
That’s led economists surveyed by Bloomberg to lower their Mexican growth projections for 2015 to 2.7 percent, from the 3.4 percent they had forecast at the start of the year.
By contrast, estimates for Chile’s expansion this year have held steady at 2.8 percent as the government steps up spending by about 10 percent to make up for slower growth.
The world’s biggest exporter of the metal is Latin America’s highest-rated country. Its Aa3 ranking from Moody’s Investors Service is the fourth-highest investment-grade. Chile’s gross domestic product grew 1.9 percent last year; in Mexico it was 2.1 percent.
The Mexican peso declined 0.2 percent to 15.4408 per dollar Monday as of 10:48 a.m. in New York. Mexico’s move to jettison its 75-year-old oil monopoly and reduce dependence on revenue from crude last year earned the country a string of upgrades, with Moody’s giving the nation its highest-ever grade at A3, three levels below Chile.
Still, the cost of insuring Mexican bonds against non-payment for five years with default swaps has jumped 0.56 percentage point in the past year to 125.63 percentage points, data compiled by Bloomberg show.
“The Mexicans aren’t doing anything wrong per se,” Edwin Gutierrez, a money manager at Aberdeen Asset Management Plc, said by telephone from London. “It was the poster child for reform in the region, and Mexican assets had every reason to outperform, but their efforts haven’t been rewarded.”
bloomberg.com
No comments:
Post a Comment