Mexico’s government will continue to provide financial support to its debt-ridden oil company while it refinances its debt, said the top official in charge of Mexico’s public finances.
Recent support for Petroleos Mexicanos has shown that the state should continue to have a direct role in helping it reduce its debt, said Finance Minister Rogelio Ramirez de la O, and the company needs to make better investment decisions and stick to austerity measures. The government’s providing money to Pemex out of the federal budget was the start of a broader process, he said Tuesday.
“The balance sheet of the federal government will be more dedicated to attending the needs of Pemex,” Ramirez de la O said at a Banco Bilbao Vizcaya Argentaria event in Mexico City. “The next step includes the need to focus more on the refinancing of Pemex debt, and involve more directly the sovereign debtor. That’s what we’re starting to do in 2024.”
The presidential candidate, Claudia Sheinbaum, said earlier that Pemex would have to do debt refinancing before payments come due in 2025. The company, which has faced declining output over the past two decades, has been helped financially under the leadership of President Andres Manuel Lopez Obrador. It is unclear whether the next president would do the same.
Analysts and investors agree that Pemex stands as one of the greatest challenges Mexico’s next president will inherit given the size of the company’s debt burden, which stood at nearly $102 billion as of the end of March. Pemex has lately relied on the tax breaks as well as cash injections from the government to meet those obligations, which have weighed on public finances.
Ramirez de la O said that the government would be more involved in addressing the company’s debt problems, building on the actions it has taken in recent years that have given the federal government a more explicit role in backing the company. He said that writing in transfers to Pemex for debt amortization payments in Mexico’s budget was the start of an “optimization” effort for the firm.
“It’s an agenda that will take on a more concrete form in the next phase of restructuring, but it’s a restructuring that will take years,” Ramirez de la O said of ongoing changes to Pemex. “The sovereign debtor along with Pemex will see what are the opportunities to reduce costs.”
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