High crude prices won’t help improve Mexico’s credit picture: S&P

Despite the fact that the price of oil will remain at high levels this year, the S&P rating agency does not anticipate a better credit outlook for Mexico, one of the largest crude oil producers in Latin America.

The sovereign analyst for the region at the firm, Joydeep Mukherji, noted that high oil prices have not been capitalized on in Mexico because production has remained stable and the government has opted for a tax waiver to subsidize fuel prices. .

When participating in the first webinar of the year on the trend of qualifications for the region in 2023, he also noted that Mexico was no longer a net exporter of oil.

In the balance sheet, the gain that could result from higher oil revenues due to the international price has been diluted, which, on the other hand, has been presented for other oil producers and for companies in the sector.

Figures from the Ministry of Finance show that last year the federal government gave up collecting 373,000 million pesos, as a result of the fiscal stimulus for the Special Tax on Production and Services (IEPS) on gasoline.

The analyst did not elaborate on the financial situation of the Mexican oil company, since his participation focused on the conditions of the region in general.

However, he stressed that this year a tightening of financial conditions will prevail, as a result of high interest rates, which he said will have an impact on the administrative management of issuers that have important obligations and maturities.

Just on Friday, the Fitch rating agency detailed that the Mexican oil company Pemex needs to refinance almost 30,000 million dollars between now and 2026.

Mukherji explained that the case is similar for Colombia, which has also failed to capitalize on the benefits of the high price of crude oil and is also subsidizing fuels.

Government debt, legacy of pandemic

In the webinar, he explained that the sovereign outlook for the economies of the region is heterogeneous and depends on their particular financial conditions.

Several governments in the region applied fiscal stimuli in the pandemic that generated public pressure in countries such as Chile and Peru.

“Government debt is a legacy of the pandemic and the context of high interest rates is a risk factor for those who have maturities for this year and next,” he stressed.

It is a different story for each country in the region, he stressed. In fact, she presented a comparison of the debt of Latin American governments and they place that of Mexico with approximately 42 points of GDP. In contrast, Brazil’s is equivalent to 65 points of GDP and Colombia’s is close to 58% of GDP.

Mexico’s grade in S&P is “BBB” with a stable outlook since July 2022, which is two levels above investment grade. Pemex has the same qualification, since the agency assumes that it is the Mexican government that supports the financial situation of the oil company.

ymorales@eleconomista.com.mx