The Government of Q4 is still determined to put good money into bad, and this week it announced the additional injection of resources to Pemex “whatever the cost.” This is how many have interpreted the decision made by the Secretary of the Treasury, Rogelio Ramírez de la O, to inject 3,500 million dollars to the state company so that it can carry out a bond buy-back, unilaterally and without discussing it with the federal deputies; who have the constitutional power to approve the use and destination of the budget of all Mexicans.
The Center for Economic and Budgetary Research expressed its legitimate concern that this decision is violating the Budget and Fiscal Responsibility Law, and for that reason, I undertook the task of studying it in depth. First, let me tell you that this law contains the various budgetary control rules that the Ministry of Finance must follow, and indeed I found that the allocations destined to cover the operating deficit associated with the authorization of subsidies to entities can only be granted in exceptional and temporary form, as long as its economic and social benefit is justified.
Obviously, this fourth-class government is not interested in complying with the Law, or justifying its decisions, much less asking Pemex for a restructuring plan. When a company in trouble asks for a loan to cover its liabilities, it has to show a plan that allows it to know to its creditors when they will recover that investment and what actions they will take to return to positive balances. Much more, when these resources are lost! But none of this happens, nor will it happen.
Currently, Pemex has positioned itself as the world’s most indebted oil company. According to official figures, from 2018 to date, its foreign debt has grown by more than 7.2 billion dollars, and today it is already equivalent to 9% of the national GDP and more than half of the total debt that the country maintains. In addition, in just three years, more than 27,000 million dollars have been injected into the parastatal with the aim of improving its financial balance, as well as reducing taxes and obligations.
Despite this multimillion dollar injection of resources, Pemex’s numbers are still bad and in a tailspin. The company has lost millions of pesos, which should be used for health, education and economic reactivation.
As an economist, I am convinced that this new injection of resources to Pemex is not only illegal, but also insufficient in the face of a clearly structural problem. Today, beyond extraordinary support that has no economic or financial support, what the Government must do is: 1) make a profound modification to its tax regime, 2) present a plan by business area that allows identifying which ones generate profit and where the losses are, and 3) proceed to the sale of assets that are no longer profitable in order to reduce operating costs; where I could tell you that the bulk of the red numbers is in refining and its new Dos Bocas project.
I insist, Pemex must support us, and it should not be the Mexicans who continue to support this bankrupt company. Something has to change.
Twitter: @PerezSoraya
Economist
Between numbers
Former President of the Federation of Associations of Economists of the Mexican Republic AC
Reference-www.eleconomista.com.mx