Mexican finance ministry official denies Pemex heading to a debt crisis

Mexican finance ministry official denies Pemex heading to a debt crisis

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The head of the public debt office at the Mexican Finance Ministry dismissed speculation that state-owned Pemex is headed to a debt crisis.

“There are some investors who are worried by Pemex’s hard-currency debt, but it is not on a ‘collision course’ that could lead to a debt restructuring,” Gabriel Yorio told LatinFinance.

Yorio’s comments came as the Latin American Committee on Macroeconomic and Financial Issues (CLAAF) said the government must do more to resolve Pemex’s issues to avoid bigger problems.

“Pemex is by far the single most important fiscal problem faced by the AMLO administration,” CLAFF  said in a statement. It added that “Investors have become increasingly weary of holding Pemex bonds and, following its credit risk downgrade, the spread differential between Pemex and the sovereign has increased by 100 basis points.”

Pemex’s rating has been lowered to a near junk status by Fitch. The company has around $20bn in debt maturing in the next four years.

Yorio said the government is aware of the urgency to tackle the company’s debt and tax burden, but it will take time for the government’s turnaround plan to show results.

“There is a need for structural reform and the president has called for Pemex to reduce its tax burden,” said Yorio. “This is necessary but cannot happen overnight because the Mexican government cannot absorb this at once.”

Yorio said Pemex is working to increase savings, including taking steps to stop fuel theft and slash operating costs to make more funds available for exploration and production.

While the CLAAF welcomed those plans, it said the government must further reduce expenditures and restructure operations, including selling non-core assets to help reduce the company’s debt burden.

Yorio agreed with these recommendations but cautioned that Pemex’s situation is complex.

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