Fitch has dramatically downgraded its credit rating for the state of Jalisco following the state government’s default on a 1.4-billion-peso loan contracted to help pay for the 2011 Pan American Games.
Failure to meet a December 21 payment with Banco Interacciones prompted Fitch to cut Jalisco’s previously high rating of A+ to D-, the lowest grade.
The Jalisco Congress last week voted not to include the debt in the 2013 state budget, arguing that the loan was taken out by current Governor Emilio Gonzalez of the National Action Party (PAN) and it behooved his administration to honor the commitment before it leaves office on February 28, 2013.
On July 4 voters handed the Institutional Revolutionary Party (PRI) a majority in the state’s 39-member Congress. The new session began at the beginning of October.
Apart from 11 PAN legislators, the new intake of PRI representatives were not prepared to burden their incoming governor Aristoteles Sandoval with the responsibility of paying a large chunk of the Pan Am Games bill.
Following Wednesday’s announcement by Fitch Mexico, Gonzalez said he would not look to reintroduce a state automobile owners’ tax (tenencia), which was scrapped by federal decree last year. The tax took in approximately two billion pesos annually. Instead, he said the way to meet the debt burden would be to reduce the cost of government.
Coparmex (Employers’ Confederation) President Oscar Benavides Reyes bemoaned the lack of political consensus that led to the downgrade and said he expected to see a swift negotiation between state and federal authorities to mitigate any negative effects.
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