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Latest Mexico decisions on Pemex neutral for credit rating: S&P

Published 05/13/2019, 09:11 PM
Updated 05/13/2019, 09:15 PM
© Reuters.  Latest Mexico decisions on Pemex neutral for credit rating: S&P

By Stefanie Eschenbacher

MEXICO CITY (Reuters) - The financial package announced by the Mexican government on Monday and an earlier decision to have state oil company Pemex build a new refinery are neutral to Standard & Poor's assessment of Pemex's creditworthiness, the rating agency said on Monday.

Mexican President Andres Manuel Lopez Obrador announced measures designed to help Pemex with its debt load by renewing credit lines with three banks, as well as plans to gradually reduce the company's tax burden.

Luis Manuel Martinez, a sector specialist at S&P, one of the three main rating agencies that investors rely on for guidance when making investments, said the measures changed neither its assessment of the Mexican sovereign rating nor that of Pemex.

"The announcement that the government made today – and I would say even the announcement that was made last week on the new refinery project – both of them are neutral to the rating," Martinez said in an interview.

S&P in March cut its standalone assessment of Pemex to "B-" from "BB-" on what it said were growing concerns that the support pledged by the government was not enough.

It also cut Pemex's outlook to negative from stable, while keeping its global investment grade rating at "BBB+," in line with that of the Mexican government.

Martinez said it was too early to make predictions for another downgrade.

"We have identified certain downside risks on economic activity, which also puts pressure on the sovereign rating," he said. "With respect to the sovereign rating, it's premature to have a strong case for a downgrade down the road."

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The Dos Bocas refinery, slated to be built on the Gulf coast for $8 billion, is one of Lopez Obrador's top priorities.

The president said last week that Pemex and the energy ministry would oversee construction of the refinery because private companies could not meet his budget or deadline.

Investors and ratings agencies have repeatedly raised concerns that it would divert funds from Pemex's more profitable exploration and production business.

Ratings agency Moody's said on Monday the project would likely far exceed the government's budget because of its "limited know-how."

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