Fitch Mexico Rating Affirmed at ‘BBB-‘, Outlook Stable
Mexico gets a thumbs up from Fitch Ratings! The ratings agency has confirmed its assessment of the country’s financial stability, reaffirming its long-term foreign currency issuer default rating (IDR) at ‘BBB-‘ with a Stable Outlook.
Key highlights: What’s behind the rating?
Credit Strengths: Fitch points to Mexico’s sound approach to managing its economy, its strong international financial position, and the sheer size and diversity of its economic activities as key supports for the rating. However, they also note that the rating is held back by factors like sluggish long-term economic growth, some weaknesses in governance, ongoing fiscal challenges from a relatively low tax base and inflexible budget, and potential financial risks stemming from Pemex, the state-owned oil company.
Stable Outlook Explained: That ‘Stable Outlook’ isn’t just jargon. It means Fitch believes Mexico’s current rating is robust enough to handle the bumpier economic road ahead that they foresee in their latest forecasts. They acknowledge an economic slowdown is already happening and could get worse due to increasing trade protectionism in the U.S.—especially if the Trump administration takes a tougher stance. However, for now, they anticipate these headwinds will mostly reinforce the existing picture of slow growth already factored into the rating, rather than causing a significant, lasting downturn. The expectation is that President Sheinbaum’s administration will generally stick to its fiscal belt-tightening plans, even with these economic challenges.
Trade Winds of Uncertainty: Mexico is particularly sensitive to protectionist trade measures from the U.S. Decades of close economic ties have made exports to its northern neighbor a cornerstone of the Mexican economy, representing a sizable 27% of GDP in 2024. Existing tariffs are already biting, particularly in the auto industry, and this uncertainty is casting a shadow over economic activity. The situation remains very fluid, and the future of the trade relationship probably won’t become clearer until the USMCA agreement is reviewed around mid-2026. Even if Mexico manages to maintain some trade advantages compared to other countries, the ongoing trade uncertainty still dims the prospects for “nearshoring” – companies relocating production closer to the US—for as long as this cloud of uncertainty hangs over trade relations.
Economic Picture in 2025: Economic growth in Mexico slowed to 1.5% in 2024, ending the year on a soft note with a 0.6% quarter-on-quarter contraction in the final quarter of the year. This was driven by a decrease in public investment and that familiar uncertainty. Looking ahead to this year, a 0.4% economic contraction is expected as tariffs, trade uncertainty fuelled by tariffs, fiscal adjustments, and a slower US economy all weigh on activity. The risks are skewed towards things getting worse, and there’s limited room for government policies to counteract these negative trends.
How did the USD/MXN react to the Fitch announcement?
The USD/MXN pair is continuing its downward trend, trading below the psychologically significant 20.00 level, meaning the Mexican Peso is getting stronger. If this weakness persists, the pair could test the 200-day Simple Moving Average (SMA) around 19.86, and potentially even drop to the 19.50 level. On the flip side, if buyers step in, they might push the pair back up towards that 20.00 mark.
Mexican Peso FAQs
Why is the Mexican Peso important? It’s actually the most actively traded currency in Latin America! Its value is influenced by a bunch of things: how well the Mexican economy is doing, the policies of Mexico’s central bank, how much foreign money is flowing into the country, and even the remittances sent home by Mexicans working abroad, mainly in the US. Global events also play a role. For instance, “nearshoring”—when companies move production closer to their home countries—is seen as positive for the Peso, as Mexico is a key manufacturing hub in the Americas. And don’t forget oil prices; Mexico is a major oil exporter, so those prices can also move the Peso.
What does Mexico’s Central Bank do? The central bank, known as Banxico, has a primary goal: keeping inflation low and stable, ideally around their 3% target (with a wiggle room of 2% to 4%). To achieve this, they adjust interest rates. If inflation is too high, Banxico will try to cool things down by raising rates. This makes borrowing more expensive for households and businesses, reducing demand and slowing the economy overall. Higher interest rates are generally good news for the Mexican Peso because they offer better returns for investors, making Mexico a more attractive place to put your money. Lower rates tend to weaken the Peso.
How do economic reports affect the Peso? Keep an eye on economic data! These releases are key to understanding the health of the Mexican economy and can definitely impact the Peso’s value. A strong Mexican economy, characterized by solid growth, low unemployment, and strong business confidence, is usually positive for the Peso. It attracts more foreign investment and might prompt Banxico to raise interest rates, especially if strong growth is accompanied by rising inflation. Weak economic data, however, is likely to cause the Peso to depreciate.
How does global risk sentiment impact the Peso? As a currency from an emerging market, the Mexican Peso tends to do well when investors are feeling optimistic and “risk-on”—meaning they’re comfortable taking on investments with potentially higher returns, even if they come with more risk. Conversely, when markets get choppy or economic uncertainty rises, the Peso tends to weaken as investors become more cautious, selling off riskier assets and seeking the safety of more stable investments.
