(Adds analyst's comments, peso reaction)

By Walter Brandimarte

NEW YORK, May 11 (Reuters) - Standard & Poor's on Monday revised to negative from stable the outlook on Mexico's credit ratings, saying it may downgrade them if the government fails to address pressing fiscal issues later this year.

Mexico's fiscal and external positions have deteriorated as a result of the global economic downturn, S&P said in a statement, adding that problems stemming from the corporate and banking sectors in Mexico may add pressure to the ratings.

"We project that Mexico's fiscal position will deteriorate this year and the next," the agency said, adding that such a deterioration heightens the country's underlying fiscal vulnerabilities.

The S&P news hurt the Mexican peso MXN=MEX01, which lost 0.87 percent from the central bank's final 1:30 p.m. (1830GMT) reference on Monday, to 13.26 percent per dollar in late afternoon trade.

The main challenge for Mexico, currently rated three notches into investment-grade territory at BBB-plus, is to reduce its reliance on oil revenues, which account for about 35 percent of the government budget, S&P analyst Lisa Schineller told Reuters in an interview.

She noted that the Mexican administration has signaled its intent to add some "fiscal enhancing measures" to the country's 2010 budget.

"But it is not clear how deep those measures will be, how permanent they will be and also not clear how the political appetite will be" for approving those measures," she said.