Fitch Upgrades PEMEX to ‘BB’ on Stronger Sovereign Support

Fitch Ratings upgraded Mexico’s state oil company PEMEX to ‘BB’ from ‘B+’, removing it from Rating Watch Positive following the government’s successful US$12 billion P-Cap transaction, which reinforced expectations of federal backing. The outlook is stable.

The upgrade reflects an improved linkage between PEMEX and the Mexican government under Fitch’s Government-Related Entity (GRE) criteria. Mexico’s strengthened oversight, through legislation enabling shared debt ceilings and a role for the Finance Ministry in PEMEX’s liability management, raised the company’s Overall Linkage Score (OLS) to 30, prompting a two-notch upgrade. The OLS could rise further if decision-making oversight is deemed “very strong,” potentially supporting a future upgrade to ‘BB+’.

Fitch also raised PEMEX’s standalone credit profile (SCP) to ‘ccc’ from ‘ccc-’, citing temporary improvements in liquidity. However, the company’s financial fundamentals remain deeply distressed, with leverage above 15x, tight liquidity, and mounting downstream losses. Operational performance continues to deteriorate due to underinvestment, and recent incidents at critical assets have raised serious environmental and safety concerns.

The company’s ESG profile remains a major drag, with elevated risks related to GHG emissions, hazardous materials, and employee well-being. While the government’s support has led to a ratings uplift, Fitch warned that PEMEX’s sustainability hinges on continued external backing and a reversal in its weakening production base.