Proposal to Make PEMEX’s Debt Public Ignites Debate

A proposal to make PEMEX's debt public is igniting debate about the NOC’s finances, with defenders alleging it could safeguard public finances while detractors underscoring concerns about the company's growing debt and limited operational results.

Lorenzo Meyer Falcón, Independent Advisor to PEMEX's Board of Directors, discussed the notion of making PEMEX's debt public as a “PEMEXproa.” Meyer cites the NOC’s financial deterioration in 2024 and looming risks into the next term, advocating analyzing the transfer of debt to safeguard public finances.

In an interview with Energía a Debate, energy expert Mario di Costanzo questioned the administration's approach to PEMEX. He argues that despite resource injections and tax facilities, its debt continues to swell while its operational results decline, making PEMEX a risky endeavor.

Di Costanzo highlights the international listing of PEMEX, particularly in the US Securities and Exchange Commission (SEC), where organizations emphasize Environmental, Social, and Governance (ESG) criteria. He argues that the ESG focus will make it challenging for the company to keep refinancing its outstanding debt.

Moreover, the downgrading of PEMEXdebt bonds to "junk" status benefits international investors, but if it becomes sovereign debt, the burden shifts to public finances. Moody's and Fitch Ratings downgraded PEMEX due to its risk management, ESG strategies, and its debt, which is mainly sustained by federal support. 

Meyer argues that transfer is necessary. PEMEX's high financing costs, around 10%, contrast sharply with the federal government's 5% debt issuance rate. The upcoming administration is expected to face challenges with debt maturities, posing risks to public finances, according to Meyer.

The term “PEMEXproa” alludes to “Fobaproa,” a term used in Mexico to evoke the bank rescue carried out by the federal government during the 1995 crisis, which involved converting private debt into public debt. Meyer argued that a PEMEXproa is justified because part of PEMEX's debt was contracted to pay taxes and government spending, and because the cost of the debt for the company is double that of the government's debt. He says that continuing with the current strategy only benefits banks, as they lend to PEMEX with a risk premium, even though they know the company will not default because it has government support.