S&P affirms Guerrero

Standard & Poor's said it affirmed its mxBBB+ national scale rating on the State of Guerrero, United Mexican States, based upon the full faith and credit of the state. The outlook remains stable.

S&P said the rating reflects Guerrero's adequate financial performance and manageable debt levels, with a lower debt service given the new debt refinancing. Guerrero had an operating surplus of 9.9% of operating revenue in 2005, up from a tight 3.9% operating surplus in 2004, and the state prepaid its bond issuance in February and replaced it with loans from six different commercial banks.

Factors offsetting these credit strengths include a shallow economy, characterized by extreme pockets of poverty, limited revenue and expenditure flexibility under the Mexican system of local government finance and an increasing burden posed by the state's pension obligations, according to the agency.

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