Fitch Affirms Mexico at 'BBB-'; Outlook Stable

Fitch Ratings gave Mexico a confidence vote, affirming that its long-term foreign currency issuer default rating (IDR) is is at 'BBB-' with a Stable Outlook.

Key highlights

Credit Fundamentals: Mexico's rating is supported by a prudent macroeconomic policy framework, robust external finances, and its large and diversified economy. The rating is constrained by muted long-term growth, weak governance indicators, fiscal challenges related to a low revenue base and budgetary rigidities, and contingent liabilities from Pemex.

Stable Outlook: The Stable Outlook reflects Fitch's view that Mexico's rating has headroom to withstand the tougher economic environment implicit in our new baseline. An economic slowdown already underway is likely to worsen amid an aggressive turn toward trade protectionism in the U.S. under the Trump administration. However, we currently expect these developments will reinforce the muted growth already captured in the rating, but not worsen it in a major and lasting manner. We expect the administration of President Sheinbaum will keep its fiscal consolidation goals broadly on track despite this difficult backdrop.

Elevated Tariff Uncertainty: Mexico is especially vulnerable to U.S. trade protectionism, as decades of integration have made exports to its northern neighbor a mainstay of the economy (27% of GDP in 2024). Tariffs already imposed could have significant impacts, especially in the auto sector, and the uncertainty is weighing on activity. These developments remain fluid, and the fate of the trade relationship is likely to remain unclear at least until a review of the USMCA agreement scheduled for mid-2026. Even if U.S. tariff policy preserves a preferential treatment for Mexico relative to competitors, we see dimmer prospects for "nearshoring" so long as this uncertainty persists.

Economic Contraction In 2025: Real GDP growth slowed to 1.5% in 2024, ending the year on a weak note (-0.6% qoq seasonally adjusted in 4Q24) due to a falloff in public investment and elevated uncertainty. We expect a 0.4% contraction this year as tariffs, tariff-induced uncertainty, fiscal adjustments, and a slowdown in the U.S. weigh on activity. Risks are tilted to the downside, and counter-cyclical policy scope is limited.

USD/MXN Reaction to Fitch's ratings headline

The USD/MXN continues to trade lower, below the 20.00 psychological figure, with the Mexican Peso appreciating sharply. On further weakness, the exotic pair might test the 200-day Simple Moving Average (SMA) at 19.86, followed by the 19.50 figure. Otherwise, buyers could drive the pair towards the 20.00 psychological figure.