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Mexico's crackdown on teacher standards poses default risks for Crédito Real

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Mexico's crackdown on teacher standards poses default risks for Crédito Real

Mexico's planto dismiss educators for failing new evaluations could hit local payroll lenderCrédito Real SAB de CV Sociedad Financierade Objeto Múltiple, which relies heavily on teachers for its revenues,Bloomberg News reported.

Credito Real'spayroll loans to federal and state education workers comprise 50.1% of the bank'stotal loan portfolio, data from the bank said. With this, the government's crackdownon underperforming teachers could result in a default for some teachers and risingdelinquency rates, S&P Global Ratings analyst Ingrid Ortiz told Bloomberg.

President EnriquePeña Nieto endorsed the new legislation enabling the layoff of teachers who do notpass yearly competency examinations. Overall, the government's new evaluation planhas caused teacher protests that have resulted in violence and disruptions in severalparts of Mexico.

In a phone interviewwith Bloomberg, Crédito Real CFO Carlos Ochoa dismissed speculations of massivelayoffs due to the new legislation, noting that delinquencies remain steady so far.Credit demand from this segment "existed before the education reform and itwill continue to exist after, so our efforts will remain focused on this,"Ochoa reportedly said.

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