PEMEX Payment Crisis Drags Down Construction

Mexico's construction sector is experiencing a significant downturn, primarily driven by an unprecedented collapse in oil and petrochemical infrastructure projects, a situation exacerbated by outstanding debts from PEMEX. INEGI reported that the total production value of construction companies registered its second consecutive monthly decline in May, falling by 2.1% (following a 0.2% drop in April). Annually, the sector contracted by 16.6%.

As reported by El Economista the segment most severely impacted is oil and petrochemical works, which includes refineries, oil plants, pipelines, and gas pipelines. This area saw a 30.7% plunge in May, deepening from a 15.3% contraction in the previous month. This steep decline is linked to the ongoing crisis stemming from PEMEX's non-payments to specialized construction firms. The president of the Mexican Chamber of the Construction Industry (CMIC), Luis Méndez, has previously indicated that PEMEX's debt to these companies amounts to approximately MX$3 billion.

General infrastructure development in Mexico reports stagnation. Construction of buildings (including housing, industrial, commercial, and service structures, which represent 51% of the total private sector construction), fell by 1.8% in May after a 1.6% increase in April. Similarly, public works related to transportation and urbanization (accounting for 19.2% of national construction) saw a 0.2% decrease in production value, ending a three-period streak of growth.

Geographically, the lack of construction activity is particularly evident in states like Campeche and Tabasco, traditionally significant for oil and gas exploration and production. Campeche's contribution to construction value fell from 6.8% to 3.2%, and Tabasco's from 3.6% to 1.8%. This downturn is directly linked to the reduced oil exploration and production activity, compounded by the financial burden of PEMEX’s outstanding payments to contractors. The ongoing crisis highlights how the financial health of the state oil company directly impacts the broader national construction industry and regional economies reliant on the energy sector.