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LatinNews Daily - 30 June 2021

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In brief: Mexico’s Pemex risks cost overrun, says Moody’s

* International credit ratings agency, Moody’s Investors Service, has released its semi-annual update on Mexico’s state-owned oil company, Pemex, in which it said that Pemex is unlikely to get a credit ratings upgrade, citing persistent negative free cash flow despite higher international oil prices. According to the report, Pemex runs risks of cost overruns due to doubtful returns on recent investments in the Dos Bocas oil refinery that is under construction in Mexico’s Tabasco state, and the recently purchased Deer Park refinery in the US. The ratings agency noted that the cost of the Dos Bocas project was underestimated due to “limited knowledge of the Mexican government and Pemex in the construction of refineries”. The Mexican government expected a cost of US$8bn for the completion of the Dos Bocas project while Moody’s expects the projects to end up costing between US$10bn and US$12bn. In the long run, Moody's forecasts “the economic return on refining investments is likely to be low” due to extensive refining capacity in North America and globally generating doubtful returns on investments.