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PEMEX’s Contribution to the Mexican Treasury Is in Decline

By Anamary Olivas | Fri, 06/17/2022 - 15:16

National oil company (NOC) PEMEX faces many challenges that have deteriorated its financial situation and its production capacity. This has been reflected in a decrease of its contributions to the Mexican treasury, which reached MX$95.57 billion (US$4.7 billion) at the end of May 2022. This amount represents 5 percent of total tax revenue of MX$1.7 trillion (US$83.4 billion), in comparison to the 11 percent in registered in 2020, according to the Tax Administration Service (SAT).

 

PEMEX’s contributions to SAT experienced an annual contraction of 43.3 percent, with the oil company delivering MX$61.45 billion (US$2.9 billion) less than what was recorded in the same period last year.

 

Victor Gómez Ayala, Economy Professor, the Instituto Tecnológico Autónomo de México (ITAM), explained that a likely reason for the reduction in PEMEX’s tax contributions is the fiscal stimulus of the Special Tax on Production and Services (IEPS) on gasoline, as well as the complementary fiscal stimulus. IEPS is the tax paid for the production, sale and import of some products, such as beers, soft drinks, tobaccos and fuels.

 

The fiscal stimulus is being implemented to reduce the impact on gasoline prices resulting from international issues. According to SAT Head Raquel Buenrostro Sánchez, gasoline incentives would cost Mexico MX$350 billion (US$17.2 billion) at the close of 2022.

 

In this regard, the Ministry of Finance and Public Credit (SHCP) notified that it will not transfer shares from the Special Tax on Production and Services (IEPS) on gasoline and diesel to the states. According to El Financiero, this is the first time the country's states would not receive these resources since the tax was created. PEMEX is facing complaints from states, which argue that the NOC is not only contributing less to public finances, but it is also receiving heavy financial support from the government.

 

PEMEX saw its income boosted by billions more than it had expected at the start of 2022 on the back of an international oil price rally. Russia’s invasion of Ukraine, which caused the country to be shunned by many of the international community, plays a major role in the rally. “The recent price hike comes from a supply shock that cannot possibly be substituted in the short term. During 2021, Russia produced 11.3MMb/d million barrels a day, out of which some 4.6MMb/d are exported, ranking third worldwide, just below the US and Saudi Arabia,” wrote Gabriel Cerdio Gudiño, Investment Director, AINDA for MBN. Nevertheless, the price rally is not necessarily a net benefit for Mexico, which imports much of the refined fuel products it consumes and is therefore also subjected to higher oil prices.

The data used in this article was sourced from:  
SAT, PEMEX, MBN
Photo by:   Steve Buissinne, Pixabay
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Anamary Olivas Anamary Olivas Journalist & Industry Analyst