Pemex and CFE debt interest payments grew 12%: Treasury

At the close of the first half of the year, the federal government allocated 18,983.4 million pesos to pay the interest on the internal debt of Petróleos Mexicanos (Pemex) and the Federal Electricity Commission (CFE), a figure 11.9 percent higher in nominal terms – without discounting inflation – compared to the 16,950.9 million pesos allocated in the same period last year, official figures show.

According to the latest reports issued by the Ministry of Finance and Public Credit (SHCP), the public administration allocated 3,553.2 million dollars to pay the interest on the external debt of state-owned productive companies, an amount that is 12.1 percent higher than the 3,168.3 million dollars that were paid between January and June of last year.

If the most recent figure for the payment of interest on the domestic debt of both firms is compared with what was reported at the end of the first half of 2019 – which totaled 15,800.7 million pesos – at the start of the government of President Andrés Manuel López Obrador, there is an increase of 20 percent.

Regarding the 2,679.7 million dollars of interest that were settled between January and June 2019 for the payment of the external debt of state-owned productive companies, the most recent amount is 32.5 percent higher.

On Wednesday, Morena and its allies approved in committees changes to articles 27 and 28 of the Constitution to return Pemex and CFE to the status of public companies of the Mexican State, a move that is causing debate among analysts in the financial sector.

“This move gives the impression that the government would have to assume the payments of the oil company’s debt… Both companies will enjoy the benefits of the government’s debt, but it does not mean that the resources are unlimited,” said Gabriela Siller, chief economist at Banco Base, in an interview.

The analyst explained that although strictly speaking it is not possible to compare issues made by Pemex and the government if they are not on the same date, the latest placements by both actors have a rate differential of approximately three percentage points.

The change that was approved by the commissions could mean that Pemex and CFE can go to the markets to finance themselves at the same cost as the government and that the payment of debt interest is the same. Currently, the oil company does not have an investment grade rating from the securities rating agencies, which means that its costs are higher than those of the State.

Pemex and CFE bonds pay higher interest rates than those of the federal government. If this guarantee is given explicitly, the difference would be closed, but the financial cost of the government would not necessarily be reduced, because this would cause the rates paid by the government and CFE to rise, they would have to get closer to those of Pemex in the markets, there could be risks.added James Salazar, deputy director of analysis at CIBanco.

Pemex’s latest quarterly report indicates that 72 percent of its debt is in U.S. dollars, 17 percent in Mexican pesos, and the remainder is divided between euros, yen and other currencies.