1. Mexico: Dark Clouds on the Horizon William Hayes Managing Director LA10003Shetty_v1

2. Mexico’s ‘BBB+’ Rating Assigned Negative Outlook in November 2008 Global Factors >Vulnerability to U.S. recession: HIGH >Vulnerability to lower oil prices: MODERATE >Vulnerability to reduced international credit: MODERATE Local Factors >Limited fiscal and external cushion >Large FX intervention >Weakened corporate sector due to derivative losses Mexico: Credit Pressures Increase

3. Source: UN, Datastream, Fitch Ratings Mexico and U.S.: Annual GDP Growth Rates Impact of the U.S. Slowdown on Mexico: A Historical Perspective

4. Source: U.S. Department of Commerce and Fitch Ratings Main Mexican exports to the U.S. Mexican Exports are Very Sensitive to U.S. Consumption

5. The Impact Is Being Felt Manufacturing ProductionExport Growth Source: DatastreamSource: INEGI

6. Exposure to U.S. is Beyond Trade of Goods Remittances & Tourism Growth Source: Banco de México *LAC = Latin America & Caribbean Source: Secretary of Tourism, Mexico Breakdown of Tourism, 2008 For 2008USDbn% GDP Remittance25.142.31 Tourism13.291.22

7. Domestic Demand Is Losing Steam Credit Growth Consumer & Business Confidence Index Source: Banco de Mexico, INEGI

8. Business and Social Indicators Ease of Doing Business Rankings 20082009 Overall Ranking (181 countries)4256 Starting a business79115 Dealing with construction permits2933 Employing workers140141 Getting credit5159 Protecting Investors3338 Paying taxes142149 Enforcing contracts7879 Social Indicators 2006** Human Development Rank (179 countries)52 Urban Poverty (%)26.8 Population Living below $2 a day (%)11.6 Gini Index46.1 Homicides per year per 100,000 inhabitants10 Share of the labor force (not covered by a pension scheme) 65 Mexico Growth Average Source: Fitch RatingsSource: World Bank Stagnant Economy Will Further Exacerbate Existing Vulnerabilities

9. Inflation vs. Interest RatesForeign Exchange Rate (MXN/USD) Source: Banco de MexicoSource: Bloomberg Monetary Policy Tradeoffs Inhibit Aggressive Cuts

10. Counter-Cyclical Fiscal Policies Have a Limit in Mexico Source: Fitch Ratings Commodity Stabilization Funds 2008 Debt Indicator

11. Mexico’s Vulnerability to Lower Oil Prices: Moderate Source: PEMEX, Fitch RatingsSource: Fitch Ratings Commodity ExportsOil Revenue vs. Production

12. Mexico’s Vulnerability to Lower Private Capital Inflows: Moderate Source: Fitch Ratings NO BOP Crisis Expected

13. S&P Index vs. Bolsa Index Source: Banco de México Source: Bloomberg But Financial Linkages are Strong with the ROW Lehman’s collapse Bolsa Market Capitalization

14. Non-Resident Holdings Government Domestic Bonds Mexico vs. Latin America Spreads Source: Banco de MexicoSource: JP Morgan Mexico is Exposed to the Global De-Leveraging Process

15. Source: Banco de Mexico, Fitch RatingsSource: Fitch Ratings …And Mexico’s External Cushion Is More Limited Gross External Requirements 2009 Banxico sold US$13.1bn through Extraordinary auctions in October 2008. Total fx sales have been over USD 20 bn since October 08. Peso vs. Dollar (Sept 2008-Apr 2009)

16. Mexico’s Starting Position is Better than in 2001 Source: Fitch Ratings Government Debt Composition Foreign Currency Debt Local Currency Debt NXD and NSXD

17. Policymakers Respond To Worsening Conditions >Counter-cyclical fiscal package. >Swap Line with the U.S. Fed. >IMF Flexible Credit Line >Increased access to multilateral funding. Measures to Stabilize domestic financial markets >Support the CP market >Banxico offering IRS and buying IPAB instruments >Reduced supply of LT federal govt. domestic securities >Buyback of LT fed govt. domestic securities Source: Banco de Mexico, Fitch Ratings

18. Manageable Sovereign External Amortization Flows >Smooth and manageable external amortization profile. >USD 2bn Issuance in December 2008 USD 1.5bn in 2009 so far improves Treasury’s options. >Increased Multilateral borrowing likely in 2009. Source: SHCP, Fitch Ratings Federal Government2009201020112012201320142015 Total3,810.13,016.12,156.61,696.63,109.31,870.12,676.7 Capital Markets3,292.72,398.81,545.61,087.22,505.61,291.12,206.9 External Trade16.3 15.9 15.6 Multilaterals501.1524.5595.1593.5587.8563.1454.2 External Amortization (USDmn)

19. Mexico: Overall Summary >Mexico likely to face a perfect storm in 2009 and the economy to contract >Mexico enters this uncertain period with limited fiscal and external cushions >Inflation relief likely in 2009 but peso volatility has inhibited aggressive interest rate cuts >Scope for greater counter-cyclical fiscal stimulus is limited >Peso weakness reflects Mexico’s exposure to global de-leveraging >Rating Drivers –Significant financial and real sector dislocations, and further weakening of policy framework (significant FX intervention or large-scale fiscal stimulus) could lead to a downgrade –Resilience of economy and skillful navigation through tough times could stabilize ratings

20. Fitch Ratings www.fitchratings.com Singapore 6 Temasek Blvd. #35-03/04/05 Suntec Tower Four Singapore 038986 +65 6336 6801 New York One State Street Plaza New York, NY 10004 +1 212 908 0500 +1 800 75 FITCH Fitch GroupFitch Ratings Fitch Solutions Algorithmics London 101 Finsbury Pavement London EC2A 1RS 44 20 7417 4222