Fitch: Risk in Mexican infra sector may rise in 2017 due to Trump presidency

Thursday, December 1, 2016

Risks could potentially increase next year for Mexico's infrastructure sector, according to a 2017 sector outlook published Wednesday by international ratings agency Fitch.

Even though the overall credit rating of the country's infrastructure assets will remain stable, factors such as the Donald Trump presidency in the US could negatively impact the performance of different areas of the sector, it said.

Start your 15 day free trial now!


Already a subscriber? Please, login

According to Fitch, the Mexican transportation sector could be affected by a potential increase in trade protectionism in the US despite its ample liquidity and flexible debt structures. A change in US trade policy could translate into obstacles for the transport of commercial goods, which would affect border areas or those Mexican states whose economies are dependent on the automotive industry.

Fitch reduced its 2017 growth forecast for Mexico to 1.7% from the 2.6% it estimated in September as a result of Trump's victory. Fitch cited the uncertainty over the potential policies to be adopted by Trump regarding Nafta, immigrants' remittances and the construction of a wall along the two countries' border could negatively impact the country's international investment prospects.

Fitch forecasts that the volatility of the Mexican peso, which was triggered by some of Trump's statements during his election campaign, will continue next year.

Traffic growth on Mexican toll roads, which was stronger this year due to the construction of large projects such as car manufacturing plants in Puebla and Nuevo León and the expansion of Veracruz port, would also be impacted due to the weakened economy expected for next year, reads the report.

The toll highway groups that could be most affected by an increase in US trade protectionism would be those serving the border areas, such as Autopistas del Estado de Chihuahua and Concesionaria Autopista Monterrey-Saltillo, as well as those running roads connecting regions that are most dependent on the automotive industry, including Grupo Autopistas Nacionales, Red de Carreteras de Occidente and Vías Concesionadas de Oriente.

The Mexican airport sector would also likely be affected, due not only to the limited capacity of the existing Mexico City international airport, but also to a slowed traffic volume resulting from a negative economic situation in the country.

In the aftermath of Donald Trump's election as US president, international organizations such as the IMF, as well as ratings agencies and banks lowered their estimates for Mexico's 2017 growth. During Trump's campaign, some high-level Mexican officials stated that a Trump win would unleash a 'hurricane' on the country's economy.