Mild poles are pictured with out energy throughout an outage in Mexico’s electrical energy community, in Ciudad Juarez, Mexico February 15, 2021. REUTERS/Jose Luis Gonzalez
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Jan 21 (Reuters) – Mexico faces dangers to financial progress and potential for a credit standing downgrade within the medium time period from political developments together with the probably passage of a controversial vitality invoice, JP Morgan stated in a report.
Based on the financial institution, President Andrés Manuel López Obrador’s plan to tighten state management of the electrical energy market may set off sovereign debt score downgrades from Moody’s and Customary & Poor’s. U.S. Vitality Secretary Jennifer Granholm raised issues concerning the dangers to buyers from the vitality market initiative throughout talks with Mexican officers this week.
The JP Morgan report, dated Thursday, burdened that the vitality invoice was prone to move sooner or later this yr, even when in watered-down type. The opposition PRI celebration may help the laws, probably fragmenting the opposition to Lopez Obrador.
The invoice’s approval may allow Lopez Obrador to extend the energy of the presidency and undercut the roles of unbiased establishments and regulators, JP Morgan economist Gabriel Lozano wrote within the report.
Along with the invoice’s passage, Lopez Obrador is prone to get a lift from gubernatorial victories for his Morena celebration in addition to his personal anticipated win in a recall referendum scheduled for April 10, Lozano stated.
Towards this backdrop, he expects the Mexico Central Financial institution to spice up rates of interest to 7.25% this yr and to eight% in 2023 from the present 5.5% degree.
“If there are some doubts on whether or not Banxico (Mexico Central Financial institution) ought to observe the Fed all through 2023 or not, this yr’s political occasions will in all probability dictate the extent of the coupling, ” the financial institution stated.
Reporting by Carolina Pulice; Enhancing by Cynthia Osterman
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