Economics: Pemex results deliver more bad news
The current government continues to channel just enough relief to keep Pemex on life support, but never enough to get it squarely back on its feet. Neither has it adopted a strategy that could allow a diverse sector to both flourish and meet the country’s energy needs.
The gravity of the company’s second quarter results was magnified by numerous transitory events including compliance with OPEC+ production cuts, and the plummeting of prices and demand for Pemex products amid the covid-19 pandemic and global economic contraction. But those were by no means the only factors explaining the 88.7% plunge in gross income to 10.16 billion pesos, and 29.59 billion peso operating loss.
Despite some relief, mainly in the form of capital infusions, tax credits, and temporary reductions to the tax rates and fees the company pays, the government’s passion for austerity has led to successive budget cuts especially to the company’s physical investment budgets, with the exemption of Dos Bocas refinery. Moreover, the government has committed it to abstaining from assuming any new debt between 2019 and 2021 and then gradually lowering existing financial liabilities between 2022 and 2024. Meanwhile, Pemex is saddled with 13.66 billion in short term debt including 11.5 billion that is coming due this summer and fall.
Pemex’s earnings statements bode ill for Mexico’s energy sector, and confirm the company’s ongoing operational and financial wasting. While the period covered by the latest quarterly statement includes the months in which the pandemic and economic crises were most profound, the lows have been magnified by budgetary and management deficiencies.
A non-official document, not yet confirmed nor refuted by the Government, appears to confirm that the government is doubling down on its failing approach to the energy sector: officials remain focused on trying to turn back the clock with an autarkic approach, and centralizing activity in the hands of state owned energy companies, entailing numerous violations of existing law, and leaving the door open for future legislation.
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