Moody’s Downgrades Pemex’s Credit Rating
Moody’s Downgrade
Moody’s, a well-known ratings agency, has officially downgraded the credit rating of Mexico’s state-owned oil company, Pemex. The downgrade was by two notches, from B1 to B3, reflecting the company’s deteriorating credit quality and financial stability.
Reason for Downgrade
This downgrade was primarily due to Moody’s negative outlook for Pemex, which is heavily reliant on high government support. The agency expressed concerns that this support could be compromised by a potential deterioration in Mexico’s fiscal conditions by 2024.
Pemex’s Debt Situation
Pemex, known for being one of the most indebted oil companies globally, currently has financial liabilities exceeding a staggering $100 billion. This has further raised red flags regarding the company’s financial stability and its long-term sustainability.
Looming Fiscal Deficit
Moody’s also highlighted its expectations for a significant increase in Mexico’s fiscal deficit, driven by soaring borrowing costs, substantial social spending, and various ambitious government projects. Such a deficit could further impact Pemex’s financial standing.
Future Scenarios
With Mexico’s upcoming change in administration, there are concerns that the costs for supporting Pemex will continue to escalate. This raises uncertainties about the company’s future prospects and financial viability under the new leadership.
Mexico’s Government Action
The downgrade coincides with Mexico’s government decision to expropriate a hydrogen plant at a Pemex refinery. This action, which followed the sale of the plant to a foreign company under the previous administration, adds another layer of complexity to Pemex’s ongoing challenges.
