Moody’s Says Mexico Ruling Party Changes Help Credit Outlook

A preliminary decision by Mexico’s ruling party to lift internal barriers against taxing food and medicine and increasing private investment in the oil industry is “credit positive” for the nation, according to Moody’s Investors Service.

The proposal to change the bylaws of President Enrique Pena Nieto’s party is “one of the elements that would have to be present for us to contemplate an official higher rating,” Mauro Leos, a Moody’s senior credit officer, said in an interview today, adding that it would not lift Moody’s Baa1 rating on Mexico on its own.

The decision by Institutional Revolutionary Party leaders requires a final vote in the party’s March 1-3 national assembly and approval would constitute another credit positive event, Leos said by telephone from New York.

Pena Nieto has pledged to lift growth by boosting tax collection and breaking state-run Petroleos Mexicanos’s oil monopoly after eight years of production declines. Changing the bylaws of the party, known as PRI, would give Pena Nieto the option, not the obligation, of presenting bills to expand the items covered by the nation’s value-added tax and amend Mexico’s Constitution to let companies sign joint ventures with Pemex. The president hasn’t announced specifics for his planned legislation.

Party documents currently state that the PRI “won’t accept applying VAT on food and medicine” and that it supports “the principle of a nationally integrated oil industry that conforms to what is established in Articles 25, 27 and 28 of the Constitution.” Both phrases would be stricken under the proposal.

Moody’s rating puts Mexico, Latin America’s second-biggest economy, in the same category as Russia, South Africa and Thailand.

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