Mexico Energy Monitor
September 13, 2023
How Much To Save Pemex?
For the first time since coming to power in 2018, Mexican President Andrés Manuel López Obrador (AMLO) sent Congress a budget proposal that explicitly commits to paying off billions of dollars in national oil company Petroleos Méxicanos (Pemex)’s maturing debts through the next annual cycle. The 2024 budget package introduced last week with Congress now back in session, also proposes a 5-percentage-point reduction of Pemex’s profit-sharing rate (DUC) to 35%, essentially lowering what the NOC pays in taxes every year to the government. This would be the administration’s second such reduction, having lowered it from 52% to 40% in a strategy announced December 2021.
The question has sparked a wide range of debate in financial circles on the budget’s shift in strategy towards more direct support of Pemex, coming in tandem with Mexico’s presidential election set for June 2, 2024. Polls indicate AMLO’s party Morena will likely retain the presidency with former Mexico City mayor Claudia Sheinbaum now officially running as its candidate. Less likely, but still possible is that the winner will be the candidate representing the PAN-PRI-PRD opposition party, Xóchitl Gálvez -- a former senator and head of the Miguel Hidalgo borough of Mexico City under the center right PAN party.
The certainty of a new administration may mean some change, even a subtle one with Sheinbaum, in the kind of commitment the state provides to Pemex (and coincidentally also to state power company CFE) from that of AMLO who has made no secret of his wish to return the state energy companies to their former monopoly status. And dependent on that shift – large or small – in the government’s commitment to Pemex, is the concern in some (admittedly a minority) circles that the oil and gas giant may even consider restructuring its outstanding debt – currently sitting around US$110 billion.
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