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Mexican BBB Downgrade By Fitch Imminent, Claims JPMorgan
Those leaches stuck to the groin of Wall Street, the rating agencies, may make a repeat appearance, (and, oh no Mr. Geithner, they may have a destabilizing statement - quick, bail out AIG again before it is too late!) when Fitch today downgrades Mexico to BBB. Or so JP Morgan believes. Both Fitch and S&P rate Mexico at BBB+ with a negative outlook "amid concern that declining oil revenue will swell the budget
gap." And as the budget was pretty much approved in the same form as expected, Fitch will likely smack our neighbors to the south with a one notch downgrade. JPM also thinks that the intellectual sloths at S&P will merely blink at this data and continue hibernating for another century before they realize their business model went extinct sometime around 2006.
From JPMorgan
The Mexican Congress approved the budget for fiscal year 2010 this morning. In our view, the budget was approved in a quite similar fashion to what President Calderón originally sent to Congress, with some reshuffling of the destination of about 3% of the total projected public spending. It is also worth noting that Congress did not approve the disappearance/merger of the three ministries (Tourism, Agricultural Reform, and Public Administration) that President Calderón originally proposed. However, as we have mentioned earlier, this represents less than 10% of the new tax collection the Federal Government is planning to obtain. In our view, the discussion over the expenditure side has not been as intense and as important as the approval of the revenue side of the budget that was passed two weeks ago, mainly because the income part of the budget included a fiscal reform in which new taxes as well as some important upward revisions to some levies were discussed and approved. We believe that more than the approval itself, the most important part of the expenditure side of the budget is that rating agencies have mentioned that they could make pronouncements about Mexico's sovereign debt once the budget is fully approved. In this context, we continue to believe that Fitch Ratings will downgrade Mexico' sovereign debt rating by 1 notch to BBB (still keeping the ‘investment grade status’, and that Mexico will be able to avert S&P's downgrade.
Now the question is when we could see rating agencies making pronouncements about the budget and the fiscal reform. In our view, the rating agencies' assessment will take some days for any rating action to take place. Our appraisal on S&P’s take of the budget is that President Calderón did a great job passing an unpopular reform in the middle of a recession and with the Congress in hand of the opposition. However, in order to maintain the country’s rate, we believe that it would be important for them (S&P analysts) to see the Government announcing 'politically-feasible' reforms that could be implemented in the short-term. These could be a re-shaping of the deep-sea drilling incentive contracts that were approved in the last energy reform that ended up not being attractive to Exxon, BP, etc. to partner with Pemex. In fact, the Mexican Government (jointly with the Mexican-American Chamber of Commerce) plans to hold an event this Thursday (Nov 19th) in NYC to present what it has been done as well as new infrastructure projects and structural reforms that could be implemented in the short term. Even though we believe it is likely that Fitch Ratings could make its pronouncement as soon as today or tomorrow, we also have reasons to believe that analysts from the rating agencies, particularly from S&P, could attend the Government meetings this Thursday before making any pronouncement.
Even as Mexico's worst case budget scenario is about infinity times better than the outlook for America's bottom line, expect all rating agencies to keep the US at a AAA rating until such time as Goldman decides it is in its own best interest to finally pronounce a sovereign debt default of Uncle Sam (after, of course, purchasing several hundred trillion in US CDS, hopefully not with AIG this time). Because while the "we are insured against the AIG bankruptcy" defense may have worked with the intellectual and negotiation titan Geithner, it is unlikely that such a plan would be able to have a repeat performance.
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So, as much as I want to tell myself that things can't get anymore bizarre without MSM getting all over these clowns, I am being proved wrong on a daily basis.
Can the USA please get a AAAA++ rating with smiley face next?
Just to prove to the world that we are still good for our loans...
We love FOX news!
--Speedy Gonzales
Pedro sez: "Short the peso!"
it's very sad that the sheeple knowlingly accept lies like this in order to maintain a less worse scenario.
do people still care about what fitch and S&P have to say?
A meta opinion from JPM
<oh no Mr. Geithner, they may have a destabilizing statement - quick, bail out AIG again before it is too late!>
LOL, quite the acerbic wit on display today Mr. Durden. I'm normally as dour as a Liverpudlian upon finding out the bloke at the front of the que just got the last scone, but that line definitely made me smile.
Mexico is yet another disaster right around the corner - even more so than usual. Production at the Cantarell field, alone more than 40% of Mexico's oil output, is collapsing rapidly. Mexico's state owned oil company spends virtually nothing on maintenance and exploration. Mexico will soon be a net oil importer and it's biggest source of revenue will be just a memory. Get ready to move the decimal place on the peso again!
Perhaps it might be time to consider looking at (United States based and controlled) organizations who provide products related to United States border security.
It will get a lot worse down there than it does here.
It is very bad in Mexico and will get worse. They asked for a UN peacekeeping force last week. The UN said: Huh??
Many with money who already owned homes in the US have moved up here indefinitely to avoid kidnapping and ongoing violence. Others are buying homes and moving to the US.
Unfortunately for most of the population, they are left to dodge the bullets.
It goes without saying that tourism has fallen off a cliff.
Fun fact: It only takes a $100 dollars to put on a hit in Mexico.