Moody’s Warns of Risks to Pemex’s Government Support Due to Mexico’s Fiscal Conditions

Summary

Moody’s negative outlook towards Pemex, the world’s highly indebted oil corporations with a liability of over $100 billion, is triggered by a belief of high government support, which seems uncertain with Mexico’s deteriorating fiscal conditions expected by 2024. The agency anticipates a significant rise in Mexico’s fiscal deficit due to high borrowing costs, social spending and crucial government projects. Aside, Pemex support costs are projected to increase before the next Mexican administration’s arrival in October. This follows the recent acquisition of Pemex’s hydrogen plant by Mexico’s government, earlier sold to France’s Air Liquide.

Moody’s Concern over Pemex’s Financial Health amid Mexico’s Fiscal Conditions

Moody’s has signaled concern about the fiscal health of Pemex, one of the most burdened oil firms globally, with a staggering debt exceeding $100 billion. The international credit agency currently maintains a negative outlook on the firm, factoring in high levels of government support that it presumes the company is receiving. However, with anticipated declining fiscal conditions in Mexico by 2024, this support could be in danger.

Anticipation of Increased Fiscal Deficit in Mexico

Moody’s anticipation of a significantly escalating fiscal deficit in Mexico roots from high borrowing costs, increased social spending, and iconic government initiatives. The agency firmly believes that such developments will substantially affect the financial environment, particularly for corporations like Pemex.

Support Costs for Pemex Expected to Escalate

The credit agency anticipates that by the time Mexico ushers in a new administration in October, costs for extending support to Pemex would have amplified significantly. This projection highlights the financial challenges that the incoming administration could face on the fiscal front.

Mexican Government’s Acquisition of Pemex Plant

Simultaneously, the latest downgrade followed a decision by Mexico’s government to reclaim a hydrogen plant at a Pemex refinery, formerly offloaded to France’s Air Liquide during the previous administration’s tenure.

This elaborate analysis of the financial outlook pertaining to Pemex and the broader Mexican fiscal landscape offers critical insights into the challenges ahead and the financial market’s future.

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