July 6, 2018 / 2:52 PM / 3 months ago

S&P warns NAFTA 'retreat' could trigger Mexico rating cut

LONDON (Reuters) - S&P Global warned on Friday that it could downgrade Mexico’s BBB+ credit rating if there was a “retreat” from the NAFTA trade pact that it shares with the United States and Canada.

FILE PHOTO: Flags are pictured during NAFTA talks involving the United States, Mexico and Canada, in Mexico City, Mexico, November 19, 2017. REUTERS/Edgard Garrido

A retreat wouldn’t necessarily mean a complete scrapping of NAFTA but it would mean changes that lessen its benefits, one of S&P’s top sovereign analysts, Joydeep Mukherji, said.

“A prolonged fall in the GDP growth rate resulting from a retreat from NAFTA would weaken government revenues, potentially resulting in higher fiscal deficits and a rising burden of government debt.”

“We could lower our rating on Mexico as a result.”

Mukherji said S&P’s current expectation was that the three governments would eventually resolve their differences in a manner that does not undermine NAFTA’s role or materially damage trade and capital flows between their countries.

Reporting by Marc Jones, Editing by Kit Rees

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