by Ivan Castaño
Mexico's short and long-term sub-national debt levels have
skyrocketed since the 2009 global recession, triggering several
rating downgrades and forcing the federal government to act
before the situation deteriorates further.
Cause for Concern
Underreported debt loads by Mexican state governments has alarm bells ringing. The federal government and banks are moving to contain the damage.
In comparative terms, Mexican state debt levels may not be
that high. But the lack of transparency about local government
books and banks' exposure to such entities is a cause for
concern at a time when sub-sovereigns are spending more despite
limited flexibility in how they can meet their obligations.
Tax authorities' recent discovery that several regions have
underreported short-term liabilities served as a wake-up call
and encouraged both banks and government officials to respond
after several high profile restructurings, most notably the
State of Cohahuila.
Banks' increased exposure to municipalities and states has
left some analysts wondering whether this has the potential to
become a more widespread problem, both for banks and the
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