BofA Still Bets on PEMEX

Bank of America (BofA) has underscored significant risks faced by PEMEX, but still maintains its financing as long as the company improves its profitability status. Affirming this commitment, BofA renewed PEMEX's revolving credit line for US$8.3 billion by the end of 2023.

Emilio Romano, BofA's CEO in Mexico, emphasized the bank's ongoing support for PEMEX, contingent upon the company's enhanced profitability. "We are and will continue to be very active in supporting PEMEX so that it can continue its process of financial improvement," stated Romano.

While BofA remains a key financier for PEMEX, Romano stressed the necessity for the government to reallocate its subsidies to more pressing issues for the Mexican population. "Achieving this will help healthier public finances and avoid the need for tax increases or spending cuts," he commented.

Emphasizing Mexico's favorable fiscal position, Romano expressed confidence in the nation's ability to manage its deficit levels. BofA anticipates a more manageable public deficit by 2025, despite forecasts indicating a significant rise in Public Sector Financial Requirements (RFSP) to 5.9% of GDP in 2024.

Meanwhile, Carlos Capistrán, Chief Economist for Mexico and Canada, BofA, highlighted PEMEX as the primary fiscal risk for the Mexican government. He warned of potential exacerbation of fiscal deficits due to extensive support measures for the heavily indebted oil giant.

Capistrán projected a slowdown in Mexico's economy to a 2% annual growth rate in the latter half of 2024, following elections in Mexico and the United States. Despite challenges, he identified opportunities for Mexico's economic expansion, particularly through the nearshoring trend and anticipated investment announcements. However, factors such as interest rate volatility and currency depreciation may influence the pace of investment inflows. In 2023, Mexico recorded a 3.1% GDP growth, with government estimates forecasting a 3% growth for the current year, although BofA expects a 2% growth.