Durango, under the greatest pressure due to the Financial Discipline Law: HR Ratings

Derived from the fact that the state map was reconfigured due to the elections on June 6 and the guidelines of the Financial Discipline Law that requires the settlement of short-term loans, Durango will be facing the greatest pressure, reported HR Ratings.

In interview with The EconomistRicardo Gallegos Miranda, senior executive director of Public Finance and Sovereign Debt at HR Ratings, explained that as an agency they analyzed the entities that recently faced state elections, as well as the financial situation they leave behind and the pressures they face.

Specifically, five entities that have credit ratings with HR Ratings were evaluated. Is about Gentlemanwith HRAA, Durango with HR DS (which is the lowest rating that can be obtained), oaxaca Y Tamaulipas with HR A, as well as Quintana Roo with HR BBB-.

From the analysis, the agency found that it is Durango that is in the most complicated scenario to pay short-term loans, since the administration of José Rosas Aispuro is in non-payment situations, either due to financial pressure.

“Durango, probably, despite the fact that the debt issue is not necessarily the highest at the national level, because, having a default situation, it surely has an important liquidity issue,” he said.

He specified that this situation of non-payment of financing is that the lowest rating has been given to the Durango entity.

Regarding how the other states are with their financial obligations, Ricardo Gallegos reported that Hidalgo and Oaxaca have already paid their short-term loans, while Quintana Roo and Tamaulipas are already in the final settlement process.

“Therefore, at the level of law, at the level of obligation, the one we see with the greatest risks would be the state of Durango,” he stressed.

He stressed that this situation would further complicate the situation, since the new local administration will have more financial pressure on the eve of the preparation of revenue and budget laws for 2023.

Meanwhile, Ricardo Gallegos explained that the new administration of Quintana Roo will also have to analyze its financial situation, derived from its tourist vocation and the vulnerability of this sector.

“The new authorities will have to face it very quickly, in the case of Quintana Roo, it would be one of the states that we also believe will have to quickly make an assessment of where it wants to go,” he added.

The senior executive director of Public Finance and Sovereign Debt highlighted that of the states that had elections, Hidalgo is the entity with the strongest local finances, therefore, the incoming government should take advantage of this opportunity to implement public policies that guarantee development.

“They will find windows of opportunity to continue consolidating this behavior, something that perhaps should be taken advantage of is the geographical location of the state of Hidalgo. Despite the fact that it probably has one of the largest consumer markets in the periphery, it could still exploit this condition much more and especially the issue of how to chain the growth of the rest of the state’s municipalities”, he pointed out.

In accordance with the guidelines of the Financial Discipline Law, the states have the obligation to finalize the short-term credits three months before the renewal of the entry of a new state administration.

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Regarding the state electoral results, Ricardo Gallegos indicated that this process had an eminent political and not statistical content, that is, an evaluation of the results was not generated.

In greater detail, he deepened that the electorate did not focus on analyzing that an administration will carry out good financial management, otherwise, several parties would have repeated.

“It is still an eminently political process, we do not see a statistical correlation between the financial results and the credit quality results with the electoral results,” he considered.

“I am going to give an example (…) Hidalgo, with an HR AA rating, is probably the one with the best ranking at the national level (…) and Durango has a significant non-payment problem. (…) Hidalgo, with a very high rating, will have a change of party for the next period”, added the specialist.

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