(Bloomberg) -- Panama’s credit score was cut by S&P Global Ratings, putting the Central American nation a step closer to losing its investment-grade status.

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S&P lowered Panama by a notch to BBB-, on par with Mexico and Romania, citing rising government debt levels made worst by sluggish revenue. The outlook is stable.

“The downgrade reflects the sovereign’s weaker flexibility that increases the vulnerability to economic and fiscal challenges ahead,” analysts including Karla Gonzalez and Manuel Orozco wrote in a Tuesday statement.

Panama’s credit rating has come under pressure since last year’s sudden shutdown of a key copper mine. That raised alarms over growth and government spending as Cobre Panama accounts for about 5% of the nation’s gross domestic product.

Fitch Ratings downgraded Panama to junk in March, which means a further cut by S&P or Moody’s Ratings — which also scores the country’s debt at the lowest investment grade level — should trigger forced selling of bonds by some dedicated funds.

“It’s not a surprise, unfortunately,” said Fernando Losada, a managing director at Oppenheimer & Co. in New York. “In order to avoid further downgrades, they must make progress with structural reforms, which in the near term means endorsing a robust pension reform before year-end.”

The situation soured after President Jose Raul Mulino, who took office in July, failed to keep a promise of a smaller fiscal gap. Last month congress passed a $30.1 billion budget for 2025, disappointing investors.

The notes have lost 5.6% this quarter, the worst among emerging-market peers in that period, according to data compiled by Bloomberg.

JPMorgan Chase & Co. loaned Panama $1 billion, according to a resolution published in the official gazette last month. The interest rate on the loan can be adjusted under certain conditions, including new debt issuance or a credit downgrade, the resolution said.

(Updates with details starting in the fourth paragraph.)

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