Q4 expands support for Pemex and adjusts to business model

The federal government will grant new support to Petróleos Mexicanos (Pemex) of 3,500 million dollars (about 73,500 million pesos), an amount that is equivalent to 9% of all the programmed spending of 2022 for the company or the fiscal stimulus of all of 2021 for contain gasoline prices to motorists. In addition, Pemex will carry out a bond sale plan to defer their debt maturities between 15 and 30 years and will prepare a new business plan, all in line with rescuing the oil company, which is the main axis of the current economic policy. administration.

The operation, which was announced yesterday by the Ministry of Finance and Public Credit, consists of Pemex offering holders of bonds in dollars the option of exchanging bonds maturing between 2024 and 2030 for a combination of a new bond at 10 years and cash, in addition to offering to buy back bonds maturing between 2044 and 2060.

“In line with the above, the federal government would be making an equity contribution of up to 3.5 billion dollars,” said the SHCP.

The objective of this operation is to reduce the amount of Pemex’s external debt, improve the maturity profile through the extension of its short and medium-term repayments. Likewise, it seeks to buy back certain Pemex bonds below par, in order to reduce the financial cost of the company in the following years.

The agency assured that this transaction has no budgetary impact, in addition to the fact that the government’s support does not imply the assumption of any obligation with Pemex’s creditors.

The Treasury recalled that this strategy is in addition to other measures that have been taken to support Pemex, and which are expected to be implemented in the following months, such as the reformulation of the business plan.

Likewise, it seeks to implement financial mechanisms and structures to allow the public sector to co-invest in exploration and extraction projects, as well as changes in the corporate structure and direction of Pemex.

According to the former independent director of Pemex, Fluvio Ruiz Alarcón, the support granted to Pemex consists solely of letting it use a little more of the resources obtained by the oil company since, for example, it stopped receiving income of 71.118 million pesos from January to October for the concept of fiscal stimulus to the gasoline IEPS, to contain the rise in prices that the Ministry of Finance has decreed from January to October of this year.

And although the right to shared utility that Pemex must pay to the State for the production and sale of the nation’s oil in its allocations is reduced to 40% of income from oil marketing, the measures to rescue Pemex are still insufficient, because national finances depend on the company and a real tax reform in the country has been postponed for half a century.

“As a proportion of GDP, Mexico in tax collection is five percentage points below the average for Latin America. Let’s not say Europe or the Nordic nations anymore. Thus, there will be no rescue that reaches Pemex, because it continues to be the factor for adjusting the accounts of national finances. Period, ”Ruiz Alarcón told El Economista.

For example, he detailed, the reduction of the right to shared utility is stipulated year after year only in the budget package, in the Income Law, but the Income Law on Hydrocarbons is not discussed or modified in substance to establish this rate. tax to the state company, so that next year it could increase again, if the government so requires, the expert explained.

In turn, Arturo Carranza, an analyst of the Mexican energy sector, explained that the strategy will allow Pemex to have greater cash flow, but in the face of the very important challenges it faces -such as the tax burden, the large financial debt and the deterioration of its assets. assets- government support to the company may be insufficient for it to optimally develop its portfolio of projects and increase its cash flow.

For Carranza, it is clear that the best way for Pemex to develop its portfolio of projects to increase its cash flow is through partnerships with private parties. However, it is known that in the remainder of the six-year term that will not happen.

“Under these conditions, it is unlikely that the company will be able to solve, even with government support, its structural problems and / or that it will be able to reach the production goal of 2 million barrels per day of crude oil by 2024,” said the expert. to El Economista, “for this reason, despite the efforts to rescue Pemex, the concern remains that the government’s support for the company may compromise the strength of public finances in the medium term.”

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