Mexico’s Pemex may need substantial state support

Significance

The government has provided substantial financial assistance to the company, and President Andres Manuel Lopez Obrador (AMLO) has said more will be available whenever needed. How much more will be provided, however, and by precisely what mechanisms, is unclear. Much will depend upon how oil prices evolve.

Impacts

• Pemex is unlikely to default suddenly on its debt payments, but the possibility that it will cannot be completely discounted.
• Government provision of financial assistance to Pemex could negatively affect the government’s fiscal deficit.
• A financial rescue of Pemex could result in the government’s credit rating being downgraded.