Valle de Bravo registers increase in own income

HR Ratings ratified the rating of “HR AA-” with a stable outlook, for the municipality of Valle de Bravo, State of Mexico.

According to a report sent to the Mexican Stock Exchange, the ratification of the rating is due to the surplus observed in the primary balance (BP), equivalent to 2.2% of total income (IT) at the end of 2020, when in the 2019 registered a deficit of 0.1 percent.

This as a result of a reported increase in own income, added to a contraction registered in investment spending. With this, an increase in the entity’s Free Disposal Income (ILD) was reported, so the Net Debt (DN) to ILD decreased from 6.4% in 2019 to 5.5% in 2020.

For the next few years, a recovery in federal revenue is expected. However, it is expected that the pressure observed in current spending will continue in the following periods, with which a surplus BP is estimated equivalent to 0.2% of IT. Additionally, the DN to ILD is expected to maintain an average level of 5.1% in the coming years.

The municipality reported a surplus in the BP in 2020, equivalent to 2.2% of the IT, when in 2019 a deficit of 0.1 percent was observed. This as a result of a registered increase of 1.6% in ILD, in accordance with a higher performance in the collection of taxes and duties. Additionally, there was a decrease in investment expense during the period.

HR Ratings estimated for 2020 a deficit primary balance equivalent to 0.8% of IT. However, investment spending was 1.8% lower than projected in the previous review. Likewise, own income registered a level higher than the estimated, with which the ILD reported an amount 5.6% higher than projected.

The total debt of the municipality amounted to 32.5 million pesos at the end of 2020, and is made up of a structured loan with Banobras. With this, together with an increase registered in ILD, the DN as a proportion of ILD registered a level of 5.5% during the past year, this result is lower than the level observed in 2019 and the one expected by HR Ratings of 6.4% percent .

Additionally, the debt service (SD) presented a level of 1.1% of the ILD, a level similar to that observed in 2019 of 1.4%, as well as the one estimated by HR in the previous review of 0.9 percent.

The municipality’s current liabilities decreased from 58.8 million pesos in 2019 to 46.7 million pesos in 2020, derived from a reduction in liabilities with suppliers.

However, due to a decrease in advances with suppliers and contractors, the current liability metric (PCN) to ILD increased from 8.8% in 2019 to 10.0% in 2020. The result in this metric is lower than expected by HR Ratings of 11.2 percent.


The firm estimates for 2021 a deficit in the BP equivalent to 0.3% of IT, this due to an expected increase in current spending, mainly driven by an increase in the chapter on materials and supplies.

For the next few years, the rise in own income and an increase in ILD are expected to continue, derived from a higher performance in own collection and in Federal Participations.

Additionally, it is estimated that the pressure observed in current spending will continue, with which the BP to IT is expected to register an average surplus level of 0.4% for the years 2022 to 2023.

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