Government of Mexico rules out refinancing Pemex state debt due to its high cost
The Government of Mexico could use the Oil Stabilization Fund to refinance the state-owned Petróleos Mexicanos (Pemex) without contracting more debt in the financial markets this year, which would be very expensive, said Gabriel Yorio González, head of the public credit unit of the Ministry of Finance of Mexico.
"There is a lot of volatility and the risk premium that the market is imputing to Pemex is very expensive," said the official within the framework of the Mexican Financial Summit, organized every year by LatinFinance.
The strategy that the federal financial authorities consider is to prevent Pemex from refinancing its debt because it would mean paying higher interest for the lack of liquidity that the company shows. Pemex reported losses on April 30 during the first quarter of the year, while in the same period of 2018 it made profits.
The strategy that the financial authorities will use to comply with the debt maturities in 2019 does not contemplate increasing the debt of the oil company, at least for 15 months until the first quarter of 2020.
The high finance official did not rule out that next year Pemex will use international markets to finance its debt amounting to 106 billion 500 million dollars. This year, Mexico could use the Oil Stabilization Fund that accumulates 300,000 million pesos (about 15 billion 800 million dollars). The Government has already used 60 billion pesos from the current year's federal budget to support Pemex (some 3.1 billion dollars), avoiding going out to contract debt to the markets.
Pemex informed the Mexican Stock Exchange that it suffered a loss of 35 billion 719 million pesos (about 1 billion 800 million dollars) in the first quarter of 2019. In the same period of 2018, the company registered no losses, instead, it reported earnings of 113 billion 312 million pesos (almost 6 billion million dollars today).
From January to March 2019, the company's total sales fell by 10.3% compared to the same months of 2018, "mainly due to a 16.3% drop in domestic sales." In that period, the Government implemented a military operation against fuel theft that cost it 2018 losses of around 3 billion dollars per year, with which it reduced losses by 90%, according to official figures.
However, this fight against organized crime generated shortages in the center of the country, by replacing the distribution by pipelines with the distribution of roads, through almost a thousand tankers.