UPDATE 1-Mexico’s drugs war weighing on economy -Fitch

* Economy supported by exports, domestic demand subdued

* Drugs war seems to dampen sentiment, curb investment

* Fitch reaffirms Mexico’s foreign-currency rating at BBB

By Walter Brandimarte

NEW YORK, Jan 12 (BestGrowthStock) – Mexico’s drugs war seems to be
hurting the country’s economy and investment outlook, Fitch
Ratings said on Wednesday.

Rising insecurity caused by drug-related violence could be
weighing on Mexico’s credit ratings as it dents the confidence
of investors and consumers, Fitch said in a report in which it
reaffirmed the country’s BBB foreign-currency debt rating.

“The rising wave of drug-related violence appears to be
dampening confidence, retail and commerce activities, possibly
weighing on a more robust investment and economic outlook,”
said Shelly Shetty, head of Latin America Sovereigns at Fitch.

President Felipe Calderon’s government has jailed hundreds
of cartel henchmen, seized some 90,000 weapons, and captured
major drug lords in the past few years as it battles powerful
drug cartels.

In retaliation, drug lords ordered attacks that resulted in
many civilian deaths, some of them as shocking as women and
children gunned down at parties.

Although the drugs war has not become a major drag on
Mexican financial markets, Fitch said it could be contributing
to subdued domestic demand and investment conditions in the
country.

Mexican ratings remain supported, however, by the country’s
favorable external trade performance, which is highly dependent
on the U.S. economy.

Sustaining higher growth levels in the medium term will
require additional structural reforms, however, Shetty said.

Mexico’s fiscal performance remains in line with Fitch
expectations, the ratings agency said, but the country remains
vulnerable to swings in oil income, which makes up more than 30
percent of the total public sector revenues.
(Editing by Leslie Adler)