Mexico's Central Bank Vice-Governor warns: "Pemex will soon go from being a migraine for the government to an incurable cancer"
Jonathan Heath regretted that the government sees the troubled oil giant as a promise. Tough questions about the 2021 budget outlook for the oil company.

For the government of Andrés Manuel López Obrador, Pemex has to become the engine of growth for Mexico in the coming years, but not everyone agrees with this assessment. The deputy governor of the Central Bank (Banxico), Jonathan Heath, has been one of the main critics of this project, assuring that far from it, Pemex is more of a "headache".

In a virtual event organized by Moody's, Heath warned -in a statement that he emphasized is personal and does not conform to Banxico- that, in addition, the problem that the Mexican oil company means to the government is "soon" to become a migraine with high possibilities of getting worse".

"Part of the problem is that the government does not see Pemex as a headache but rather sees it as an engine for future growth, which is practically impossible. This is something the government has to realize sooner or later and take care of it, otherwise it will soon become a migraine and then an incurable cancer".

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Heath stressed that the government is well on time to address this problem, because in his opinion, the approach it is giving Pemex is not aimed at solving the fiscal risk issue.

This opinion is shared in the market, which observes with fear López Obrador's strategy of putting the oil company at the center of its objectives and showing willingness to continue supporting the oil company to get out of its very complicated financial situation.

For her part, in the same event, Arlane Ortiz-Bollin, senior analyst of Moody's, said that the state-owned company directed by Octavio Romero is the principal fiscal risk for the country and also questioned the management that is being given to its budgetary resources.

Octavio Romero, Pemex CEO.

Ortiz-Bollin stressed that while the 2021 budget, given the lack of "cushions" and a frankly weakened economy, required cuts in several sectors of the government, it did not apply to Pemex, where, on the contrary, there was a slight increase.

The problem, according to the analyst, is that she sees "substantial and recurrent" support of at least 1% of the GDP that could reach 2% according to market conditions, but that is only enough to comply with the huge debts that the oil company has.

"But this is not enough for Pemex to be able to increase its production and its level of reserves, which will continue to be one of the factors in the persistence of the debt," warned Ortíz-Bollin.

According to the 2021 budget project delivered on Tuesday, Pemex and CFE -the state-owned energy company- as a whole, will receive a total of 300 thousand million pesos, which is in fact about 5.1% less than what was approved for the previous year.

Of both companies, it is Octavio Romero's oil company that received a slight increase in its resources by 0.6% in real terms, by receiving 554 thousand million pesos while CFE gets the reduction, since its resources are 11.6% less than last year's, thus, it is left with 417,100 million.

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