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Weekly Roundups

PEMEX Cancels Fitch Contract

Thu, 03/04/2021 - 19:56

PEMEX and Mexico’s government have taken the decision to terminate the NOC’s contract with credit rating agency Fitch. The company will no longer be in charge of evaluating PEMEX’s standing in local and international markets, reported El Economista. PEMEX Director Octavio Romero claims that the contract was simply not renewed and allowed to expire rather than be cancelled. He also declared that this decision was made as part of a strategy of contractual rearrangements expected to generate US$6.57 billion in savings. This specific Fitch contract termination represents  savings of US$350,000. This means that the NOC´s BB- rating awarded in April 2020, will be its last one for the time being. Carlos Petersen, Mexico Analyst at consultancy Eurasia Group considers that this decision goes against international best practices and does little to increase investor confidence in PEMEX. He said the contract termination might represent a decision of strategic convenience for PEMEX, since Fitch is the agency that had given the NOC the lowest credit rating out of the three most important agencies in this category. 

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We Will Still Rate PEMEX: Fitch

In response to PEMEX’s announcement, Fitch declared that they will continue to give PEMEX a credit rating without a contract, reports La Jornada. The credit rating agency said in an official statement that it would continue issuing ratings of the NOC as a service to its investors, considering it pertinent to continue informing international entities of the risk represented by PEMEX’s debt. The ratings “will be based on the availability and receivership of sufficient information, assuming the company continues to answer Fitch’s requests,” added the agency in its statement. 

PEMEX Debt a Global Systemic Risk: Former SHCP Leaders

Mario Maldonado,  a writer for El Universal, has quoted two anonymous former leaders of SHCP saying that PEMEX’s US$110 billion in debt creates a systemic risk in international markets. Some of the funds that currently hold PEMEX bonds as part of their assets are considered some of the most important funds in the world. These include the Federal Retirement Thrift fund and the New York State Common fund in the US, along with the Canada Pension fund. The column also cites other market analysts saying that the NOC is categorized as “too big to fail” and current SHCP leader Arturo Herrera as saying that he disagrees with the idea that PEMEX’s debt creates a global risk, although he does admit that some of the current government’s financial strategies for the company are not viable. 

PEMEX Finalizes Deal With Braskem Idesa 

Forbes reports that PEMEX and Braskem Idesa have reached a new agreement for the supply of ethane gas to the Etileno XXI petrochemical plan. The deal calls for the gas to be paid according to international market rates, rather than a preferential rate, and for the mandatory minimum supply to be set at lower levels that PEMEX can reach with less difficulties. The deal is expected to generate over US$653 million in savings for Mexico’s public finances.    

Odebrecht Case Still Active: López Obrador

President López Obrador addressed investigations by the US Justice Department and 10 Latin American countries on the Brazilian construction company Odebrecht, which continue to unveil details about the bribes made to presidents, former presidents, politicians and government officials from 12 countries. The case was first brought to court in 2016. In Mexico, the case against former PEMEX head Emilio Lozoya, who was arrested last year in Spain and has implicated numerous officials in Odebrecht corruption allegations, is in development. Lozoya is accused of taking bribes in exchange for awarding a refinery contract to Odebrecht. “The investigations continue and we must also see who authorized the signing of this contract,” the president said.

The data used in this article was sourced from:  
MBN, El Economista, La Jornada, El Universal, Forbes
Photo by:   CNH