This rating measures the average level of short-term default risk presented by companies in a country. It measures the extent to which a company's financial commitment is influenced by its country's economic, financial, and political outlook. The country rating (@rating) complements the individual company's rating (@rating).
Doubts surrounding the recovery of economic activity, coupled with numerous financial scandals, have led to a collapse in financial markets and excessively cautious behavior from investors. This heightened risk aversion has exacerbated financing difficulties for companies operating throughout the Americas. At the macroeconomic level, the climate of distrust has slowed the recovery of investments, particularly in the United States, triggering a sharp depreciation of emerging market currencies. In an uncertain geopolitical context, affected by oil prices and investment decisions, a return to growth remains contingent on restoring confidence in financial markets.
In the North, the American authorities have demonstrated a great capacity for reaction, putting into action an expansionary monetary and budgetary policy from which the Canadian economy and, to a lesser extent, the Mexican economy have already benefited.
The expected recovery in investment has not taken place despite a relative improvement observed in the profitability of companies and the introduction of new accounting standards aimed at restoring investor confidence.
In the South, the continent has been marked by recession, financial imbalances, and political instability. Rising risk premiums and the depreciation of the real have weakened public finances and companies indebted in dollars. Brazil, heavily dependent on financial markets, has been the country most affected by the crisis of confidence. Argentina continues to experience a severe crisis, both economic and financial, as well as political. In Venezuela, the political crisis has plunged the country into a deep recession. Only Chile appears to exhibit a macroeconomic environment and a geographical structure of exports similar to that of the North of the continent.
This uncertain environment has resulted in a sharp deterioration in the solvency of companies operating throughout the Americas, leading to downgrades in the ratings of numerous countries. Brazil, Paraguay, and Uruguay have been downgraded to category C, and Venezuela to category D. The United States' rating has remained at A2. Improved growth prospects and payment behavior by companies have led to the suspension of negative watch on the ratings of Canada (A1) and Mexico (A4).
Mexico is in the A4 group of countries. These countries exhibit payment behavior that could be affected by a change in economic circumstances. The default rate remains moderate.
After a mild recession in 2001, the Mexican economy is recovering. Currently, it is moderately affected by the widespread crisis of confidence throughout South America. In the short term, the economy is highly dependent on the situation in the United States and on exchange rate fluctuations. The depreciation of the currency has, on the one hand, stimulated sales and, on the other, generated inflationary pressures, tightened monetary policy, and discouraged private investment.
The recovery of the economic situation and the decrease in defaults led to the suspension of negative watch on Mexico's credit rating in 2002. Some companies indebted in dollars remain weak, especially those in the IT and textile sectors.
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