Reform allows the “little bits” of Pemex and CFE to be united

The constitutional reform so that Petróleos Mexicanos (Pemex) and the Federal Electricity Commission (CFE) recover their role as public companies is positive, since the changes approved by the Chamber of Deputies expand the capabilities of the State so that both guarantee reliable supply and energy insurance, experts considered.

Alonso Romero, energy specialist, commented that the changes that were approved by legislators allow each of the state companies to act as one again, since the energy reform promoted in 2013 by Enrique Peña Nieto divided Pemex and CFE into companies. small, imposed conditions on how they could coordinate and forced them to give access to their infrastructure to private parties.

We once again have this type of economies of scale, which is important in this type of industry. This will make the processes much more efficient and will also allow us to act more quickly and with much more agile planning.

He noted that it will also allow planning that will not be indicative, but mandatory. It will give an idea of ​​how an energy policy will be able to be mandated and implemented, but acting as integrated companies, not as bits of each company.Romero noted.

He mentioned that returning the status of public companies to Pemex and CFE corrects this fragmentation, since as has been seen in the case of Sears in the United States, it only leads to the bankruptcy of the companies.

“The intention to convert Pemex and CFE into public companies is part of an approach that understands that, well managed, both can favor the functioning of the sector, especially in critical junctures – such as extreme weather events –, when the government has to take quick decisions to guarantee the reliable and secure supply of energy,” said Arturo Carranza, an expert in the energy sector.

The main change that Pemex is going to have is in the issue of the cost of debtRomero said.

He explained that The main concern is what you have to pay in interest, the cost of the debt, and that is determined by how risky the market considers it to be to lend to you..

For the oil company, the effect of the constitutional reform it’s going to be positivesince as a public company it will have 100 percent explicit support that the government is going to assume the debt, which amounts to almost 96 billion dollars. The country has a much greater payment capacity as a State, which in the end lowers the interest rateRomero explained.

The rating of Pemex’s debt is going to be the same as sovereign debt, that is going to lower the interest rate a lot, it is going to allow Pemex to make financing by greatly lowering the interest rate being paid and that is going to free up a lot of flow. effective cost of debt.

For his part, Carranza considered that converting Pemex’s total debt into sovereign debt would imply a cost for public finances that would complicate the goal of bringing the public deficit to 3.5 percent of gross domestic product.

The additional burden would lead the rating agencies to review, with great rigor, the economic decisions that the Mexican government makes in the short and medium term. This does not mean that the rating agencies immediately lower the sovereign’s rating. It means that the government will have to make forceful and difficult decisions that give credibility to its objective of achieving fiscal consolidation (public deficit of 3.5 percent with respect to GDP).he warned.