Pemex Reform Targets Higher Debt Capacity

A reform of Mexican state-owned oil giant Pemex, set for voting in mid-August, won’t result in the company’s ability to sell an equity stake to private or public investors, government officials tell LatinFinance. “It is highly unlikely that Pemex will eventually be able issue any kind of equity,” Marco Oviedo, general adjunct director for public debt at Mexico’s Hacienda, tells LatinFinance. Instead, the reform will target measures that allow Pemex to take on debt at the corporate level, he adds. Today, as a state-owned entity, Pemex’s indebtedness levels are capped at virtually zero. It uses off-balance sheet vehicles to issue notes and raise bank debt. Ability to raise additional debt on its own balance sheet would help it fund an increase in production, which is steadily dropping, says Oviedo. Other changes being considered include allowing Pemex to outsource some of its production and exploration business to third parties. An extraordinary session in congress is scheduled for mid-August, when the proposal for a change in the rules governing Pemex will be presented to the country’s various political factions. Most of these are openly opposed to anything resembling a privatization of the oil company. Pemex has a mandate to invest up to roughly 2% of Mexico’s annual GDP in E&P.