The predicted economic recession in the United Statesthe high interest rates and the little capacity for investment threaten the finances of the 32 states of Mexico, according to analysts from the credit rating agency Fitch Ratings.
The vast majority of the economies of the federative entities have ties to the economic activity in the United Stateseither through sending remittances, trade with this country or the arrival of tourists to Mexican destinations.
The recession in the United States would translate into a slowdown in the collection of public revenue both locally and federally, according to Gerardo Carrillo, senior director of International Public Finance at Fitch Ratings.
If the collection goal is not achieved, resources from the Federal Entities Income Stabilization Fund (FEIEF) to make up for lack of federal moneyknown as participations, for the states.
Even, in extreme cases, FEIEF resources can be potentiated, although a slowdown in revenue is expectedbut not necessarily a decrease, Carrillo said.
In addition to the recession, Fitch Ratings expects interest rates around the world to continue risingat least this 2023 and 2024.
This situation will put pressure on the states on the spending side and may affect the variables reviewed by Fitch Ratingssince there will be a need for more resources to pay interest on the debts that the states have.
Although manageable ranges are expected, the rating agency’s analysts are concerned about the little capacity of the states to allocate money for investment.
Regarding inflationAlthough it is less aggressive than last year, it can introduce volatility in the operating balance sheets of entities, especially those that have a significant level for personal expenses.
However, the states would have “little capacity to counterbalance what may come from abroad in the United States,” said Carrillo.
Those states with better infrastructure can benefit from the nearshoring issue, but that is still early days, he concluded.
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