LatinNews Daily - 20 September 2022

In brief: Mexican gov’t derailing Pemex recovery, says Fitch

*International credit ratings agency Fitch has warned that “stubbornly high government take” is derailing the recovery of Mexico’s state-run oil company Pemex. In a recent report, Fitch stated that Pemex’s Long-Term Foreign Currency Issuer Default Rating (IDR) was at BB-, three notches below Mexico’s overall rating of BBB-/Stable, “due to weak government support, which to date has been insufficient and uncertain”. It said that Pemex must improve its credit profile to CCC- in order to be upgraded, which can only be achieved “through massive debt repayment or a significant reduction in the government’s take from the company via taxes, royalties and other measures, including consistent government support”. Fitch states that although Mexico’s government has financially supported Pemex by cutting its effective tax rate, injecting more capital into the company and providing it with a greater share of public investment, this has been insufficient to improve the company’s credit profile. Mexico’s 2023 draft budget, which was presented to congress on 8 September, proposed spending of M$678.41bn (US$33.97bn) for Pemex, a boost on the previous year.

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