Subnational Entity Credit-Risk Ratings

This chapter examines some factors that Standard & Poor’s considers relevant for analyzing the development of a sustainable subnational financial system. Mexico is the country that has advanced most in recent years in developing a local subnational finance market in Latin America, with Colombia coming in second. Although this chapter is based mainly on the experience observed in Mexico’s states and municipalities, it also refers to some cases in other countries where Standard & Poor’s has rated subnational entities and infrastructure projects. It includes comments about alternative means of financing infrastructure projects through joint partnerships between the public and private sectors. In addition, it reviews experiences with financial instruments whose development could be relevant at the regional level in the mid and long term. The chapter concludes by highlighting Standard & Poor’s tendencies and perspectives on subnational rating and the application of new financial instruments in this sector in Latin America.