S&P lifts Queretaro Arteaga

Standard & Poor's said it raised its the national-scale rating on the State of Queretaro Arteaga to AA-(mx) from A+(mx) and revised its outlook on the rating to stable from positive.

The upgrade reflects the strong performance of the new payroll tax Queretaro implemented in 2005, which strengthened the level of modifiable revenue, S&P said.

In addition, S&P noted that the state has maintained a consistently solid budgetary performance over the last five years and improved it debt profile by fully achieving debt restructuring from inflation-adjusted units to Mexican pesos.

However, the agency said the rating is constrained by an unfunded pension system, which requires reform to become sustainable in the long term and potential financial support to the water entity, which could pose an additional burden on the state's finances.

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