S&P Rates City of Atlixco, Mexico 'MxBBB+'

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S&P Rates City of Atlixco, Mexico 'MxBBB+'
    NEW YORK, Feb. 12 /PRNewswire/ -- Standard & Poor's today assigned its
'mx-triple-'B'-plus rating to the City of Atlixco, Puebla, Mexico. The outlook
is stable.
    The rating reflects the following credit factors:
    -- The city's lower-than-average level of own-source revenues by Mexican
       standards;
    -- The limited diversification of the local economy;
    -- The unavailability of a pension fund, which may increase the burden on
       the city's finances of this liability going forward; and
    -- Lower-than-average basic infrastructure.

    Factors offsetting these credit weaknesses include:
    -- High self funded capital expenditures;
    -- Strong budgetary performance; and
    -- Low debt levels.

    Atlixco has a lower-than-average level of own-source revenues equal to
18.5% of total revenues compared to the average of other Mexican rated cities
by Standard & Poor's at 32% of total revenues. For fiscal exercise 2002,
Atlixco will update property values and fees, which is expected to provide the
city with additional revenue flexibility. In fact, the 2002 budget should show
a 7% increase in real terms in the collection of own-source revenues.
    Atlixco's budgetary performance has been strong. Since 1996, the city has
had operating surpluses, which have averaged 26.3% of total expenditures. In
2001, the city had an overall deficit of MxP9.4 million, or 8.9% of operating
revenues, mainly driven by capital expenditures. The city has maintained
steadily growing capital expenditures, which reflects its ability to manage
operating expenditures. Since 1999, capital expenditures have increased as a
proportion of total revenues (from 40.9% to 45.9% in 2001), while operating
expenditures have dropped as a proportion of total revenues (from 59.1% in
1999 to 54.1% in 2001).
    Atlixco is located in the state of Puebla, in the central region of
Mexico. It has a total population of 117,111 inhabitants; where 38,416
employees constitute the city's employment base (commerce (45.9%) and services
(34%). The city's local economy is slightly diversified. The city's main
economic activities are focused on commerce, services, and agriculture.
Recently, Atlixco has attracted manufacturing, mainly focused on the textile
industry. This will increase Atlixco's vulnerability to economic cycles
because the textile industry has been one of the most adversely affected
industries during the current economic recession.
    Atlixco maintains very low debt levels. The city's total direct debt of
MxP3.1 million is equivalent to a low 2.9% of operating revenues. For 2002,
the city is planning to issue an additional MxP3 million in new debt to
finance infrastructure projects. After considering the issuance of additional
debt, Atlixco's debt ratios remain low at 5.5% of 2002 budgeted operating
revenues.
    The city's current contingent liabilities are manageable. However the
city's lack of a pension fund may carry an additional burden on the city's
finances. Currently, it has 76 pensioners, and the pensions' annual payment is
MxP1 million, or a relatively low 1% of operating revenues.
    The decentralized municipal water system (SOAPAMA) is self-sufficient and
according to city officials it has not required the city's financial support.

    OUTLOOK: STABLE
    The stable outlook reflects the expectation that the city will continue to
consolidate its property tax base and will maintain manageable debt ratios.
SOURCE Standard & Pooor's
http://www.standardandpoors.com/ratings
CONTACT:
Paulina Campos, +52-55-5279-2043, or Horacio
Aldrete-Sanchez, +52-55-5279-2042, or Antonio Huerta,
+52-55-5279-2041, or Jane Eddy, +1-212-438-7996, all of Standard
& Pooor's