Exclusive: Mexico’s Support for Pemex Unsustainable, S&P Global Says

In an interview with Bloomberg Línea, Omar de la Torre, director and head of analysis at S&P Global, says “something must be done structurally” going forward

Omar de la Torre S&P
November 13, 2023 | 12:15 PM

Mexico City — The Mexican government’s support for Petróleos Mexicanos Pemex (rated BBB) is unsustainable in the medium and long term, said Omar de la Torre, director and head analyst at credit rating agency S&P Global Ratings, in an interview with Bloomberg Línea.

“All these solutions are short term, but structurally something has to be done, because this is unsustainable, we could not live like this all our lives in the medium and long term.”

Omar de la Torre, director and head analyst at S&P Global

S&P Global’s credit evaluation of Pemex falls to a CCC+ grade if government support is not considered, he explained. This rating is at a speculative level, known in the financial world as a ‘junk bond’, vulnerable and dependent on favorable commercial, financial and economic conditions for Pemex to meet its payment commitments.

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But Mexico and Pemex’s rating is evenly matched thanks to the “extraordinary” support of the Mexican government and its willingness to help the company should it require it, which has been expressed “clearly” and explicitly, he said.

“If for some reason this is modified and the sovereign’s relationship with Pemex becomes different, that would of course imply a modification in Pemex’s ratings. Right now we assume that the support is maintained,” he added.


The administration of Mexico’s President Andrés Manuel López Obrador will inject $8 billion for Pemex to cover its debt maturities and reduce its tax burden from the shared profit tax from 40% to 30%, according to the budget approved by Congress for 2024.

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Structural changes

Among the structural changes to improve Pemex’s rating, the analyst mentioned the state-owned company’s participation in renewable energies, in addition to the company’s financial and operational institutional framework.

He added that while Pemex invests around 2% in clean energies, other oil companies invest around 20% in an environment of more sustainable demands from investors towards companies in the hydrocarbon sector.


“What are you going to invest in if you can barely make ends meet?,” he asked.

When asked about the risk of the change of government in 2024, De la Torre said that at least the fiscal support is already included in next year’s deficit, a factor that could move the needle, but it is already captured in their analysis, even having included the capital injection in the 2024 budget “gives more certainty” and the maturities will already be covered with those resources.

Pemex is the world’s most indebted oil company, with financial liabilities amounting to $105.8 billion. The Mexican giant reached this level of indebtedness during the administration of former president Enrique Peña Nieto, while its oil production, the company’s main and most profitable business, fell to 1.7 million barrels per day.

Today the company’s production under AMLO has stabilized at a level of 1.9 million barrels per day, but the government’s efforts have been focused on the refining business in order to produce the diesel gasoline demanded by the country, but it yields multi-million dollar losses every quarter.

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