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Mexican companies to face tough market in 2017: Moody's

Xinhua, January 13, 2017 Adjust font size:

Mexican companies face a tough marked in 2017 by low economic growth, a weakening peso, and uncertain ties with Mexico's biggest trade partner, the United States, credit rating agency Moody's warned on Thursday.

In a report titled "Mexican corporates face difficult 2017 as growth slows and interest rates rise," the agency said how well Mexican companies fare in the coming year will largely depend on the incoming administration of U.S. President-elect Donald Trump.

"Slowing growth, a weaker currency, accelerating inflation, rising interest rates and an uncertain trade relationship with the U.S. are among the risks that Mexican corporates face in 2017," said the agency.

"The magnitude of these risks will depend on the extent to which the new U.S. administration pursues and implements policies such as renegotiating NAFTA and imposing import tariffs," both key platforms of Trump's campaign.

Trump claims the North American Free Trade Agreement (NAFTA), which went into effect between Mexico, the U.S. and Canada in 1994, unfairly benefits Mexico.

Any changes to the free trade agreement could negatively impact Mexican exporters and billions of dollars in remittances Mexican migrants send back to Mexico each year, Moody's Nymia Almeida says in the report.

In the first 11 days of 2017 alone, the peso lost more than 5 percent of its value against the dollar, to exchange at more than 21 to 1.

The economic growth rate in 2016 is expected to register 1.8 percent.

Mexico's oil and gas companies will suffer most from the sliding peso, which makes it much more expensive to import raw materials and machinery, elevating operational costs and investment, said Moody's.

One sector of the economy that benefits from the cheap peso is tourism, with travelers finding vacation bargains at its beachside resorts, the agency noted. Enditem