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By Anthony Esposito and Sharay Angulo
MEXICO CITY, Nov 26 (Reuters) - An agreement between Mexico’s government and the private sector to invest in infrastructure is “positive” and could lift weak economic growth, an analyst at rating agency Moody’s Investors Service said on Tuesday, though challenges persist.
The first phase of the five-year infrastructure plan consists of private-sector commitments totaling 859 billion pesos ($44.3 billion) stretched across 147 projects in the transportation, tourism and telecommunications sectors.
“Regarding the infrastructure announcement we believe it’s positive that there is an agreement between the government and private sector to identify projects that can boost growth in certain areas of Mexico,” Moody’s analyst Ariane Ortiz-Bollin told Reuters in an interview.
“If the implementation of this is fast and effective and it positively impacts the negative view of investment ... it can have a positive multiplying effect on growth,” she added.
Ortiz-Bollin also highlighted that violence was affecting certain sectors of the economy, however, including tourism, obliging the government to spend more to solve the problem.
President Andres Manuel Lopez Obrador took office in December last year as the Mexican economy was slowing down and national oil company Pemex was under pressure from ratings agencies over its high financial debt.
The left-wing populist, who has sought to trim government spending during his first year as president, hailed the first phase of the infrastructure plan as giving a jolt to Mexico’s economy.
Revised data from the national statistics agency showed on Monday that Mexico’s economy entered a mild recession during the first half of 2019 and was flat in the third quarter.
In June, Moody’s changed its outlook for Mexico’s sovereign rating to negative from stable. After months of teetering on the brink of a second downgrade following that of Fitch Ratings in June, the government provided some relief.
Pemex reduced its financial debt to $99.6 billion from $105.8 billion at the end of last year but Moody’s and others have warned that the government needs to do much more to avert a downgrade to speculative - or junk - status.
Moody’s has calculated that Pemex would need about $20 billion a year in support from the government - about half of what the government has announced so far - to pay down debt and invest in exploration and production.
“Our estimate is that it requires twice of what the government is giving,” Ortiz-Bollin said, adding there was uncertainty whether the government would free up enough to help the indebted oil company. (Reporting by Anthony Esposito and Sharay Angulo; Additional reporting by Stefanie Eschenbacher; Editing by Frank Jack Daniel and Tom Brown)