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article imageFitch cites airport cessation in negative Mexico outlook

By AFP     Oct 31, 2018 in Business

Fitch on Wednesday affirmed Mexico's long-term BBB+ debt rating but revised the outlook to negative, after president-elect Andres Manuel Lopez Obrador said he will halt a multi-billion-dollar airport project.

Downgrading the outlook from stable reflects "the deteriorating balance of risks confronting Mexico's credit profile associated with scope for policy uncertainty and deterioration under the incoming administration," Fitch said on its website.

Lopez Obrador on Monday said he will halt construction of Mexico City's new airport in line with the wish of voters who rejected it in a referendum.

The estimated cost of the airport exceeds $13 billion.

Fitch said the decision "sends a negative signal to investors."

The agency added that it expects the new government to continue to embrace budget discipline and autonomy of the central bank, but risks related to the incoming administration's fiscal stance persist.

Some promises in the platform of Lopez Obrador's Morena party, including an increase in social transfers and pensions, "may be difficult to accommodate within the budget framework," Fitch said.

The two other major ratings agencies, Moody's and S&P, already maintained their ratings on Mexico's debt.

Lopez Obrador has been a staunch critic of the airport project's environmental impact and said it is marred by corruption.

Business leaders said the airport was sorely needed.

His announcement led to falls on the stock market and in the peso, which lost 1.26 percent on Wednesday to 20.30 to the dollar.

Mexico's economy is Latin America's second largest and recorded growth of 0.9 percent in the third quarter, according to preliminary figures from the national statistics agency.

The referendum which rejected the airport was not organized by the national electoral authorities and critics have pointed to cases of voters casting multiple votes.

Dropping plans for the new airport would cost $20 billion to the economy annually, Peter Cerda, vice president for the Americas with the International Air Transport Association, has said.

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