The stakes could not be higher. According to Juan Pablo Castañón, president of the Business Coordinating Council, one of Mexico’s most powerful business lobby groups, the consequences of failing to meet the challenge would be both serious and far-reaching.
“Pemex not only finances close to 30% of the public budget, it is the central provider of basic provisions for the population,” he said. “There are some states whose dependence on its operations is irreplaceable.”…
As such, a company that was once the proud sugar daddy of Latin America’s second biggest economy, providing the lion’s share of public funds for generations, could soon become a gargantuan financial liability. The fact that this is all happening at a time when state finances are already stretched to breaking point while Mexico’s gross external debt is over $400 billion, the fourth highest of 17 of the world’s biggest emerging economies, is hardly helpful.
It’s no secret that the Peña Nieto government has long sought to privatize and asset strip large chunks of Pemex; despite the government’s feeble denials, it’s what its 2014 energy reforms were all about. Now it’s got the perfect excuse to execute its grand scheme. But first it must somehow bail it out. Then it will sell it. Already, there are concerns, given how things went in the past in Mexico, that during the entire process of bailing out Pemex and then selling it, vast sums of supposedly public money will be disappearing into very deep, hidden, private pockets.
After all, what lies in the balance is not only the future of a huge, emblematic company that can no longer function in its current form, but the health of the entire Mexican economy. As Castañon says, providing for Pemex is no longer just an energy or fiscal challenge, it’s a matter of national security.
Wolf Street
Big-Oil Bailout Begins as Debt Spirals Down
Big-Oil Bailout Begins as Debt Spirals Down
Don Quijones
