Politics: Moody's Says Mexico Not a Failed State

Moody's Investor Service announced that Mexico's investment grade remains "solid" and talk of Mexico becoming a "failed state" is "far-fetched."

Moody's did acknowledge issues such as rising crime and violence, end of the oil hedge in 2010 that buffers government revenues against oil price fluctuations and subsequent need for possibly higher taxes, issuing debt and lower spending, an increasingly severe economic downturn, and structural issues.

Still, it says these do not fit the general profile of a failed state, such as Somalia, and that Mexico's credit profile remains in line with peers of the sovereign Baa credit rating group (Mexico is rated Baa1, three grades into investment grade).

Nearsourcing includes studying all aspects of location, rather than just lowest cost wins automatically. One factor is the political climate. Here, Moody's is recognizing the challenges facing Mexico; but, it is also downplaying the potential for an imminent collapse as some have pondered.

You can see the announcement on Moody's study released March 24 by registering for free at www.moodys.com and then searching "Mexico" under "Title."