Federal transfers to Mexican states and municipalities have stalled, driven by a national economic slowdown and weaker growth in the Federal Participable Revenue (RFP), according to Moody's Local.
The rating agency highlighted that the stagnation in these critical fiscal flows is creating an unfavorable environment for subnational budgets.
With the RFP serving as the primary funding source for many local governments, the deceleration in revenue growth limits their ability to service debt and maintain public services without seeking additional financing or cutting expenditures.
This warning arrives as global equity markets face significant turbulence, with a pronounced selloff in US technology stocks triggering broader investor anxiety.
The sharp decline in high-growth names has sent shockwaves through international markets, underscoring a shifting risk appetite that could further pressure emerging market assets.
Compounding the concern for investors, Morgan Stanley has issued a stark warning to equity investors, cautioning that the Federal Reserve will not step in to rescue markets if a significant downturn occurs.