(Bloomberg) -- Mexico is pressuring Pemex to reduce spending -- and the state-owned oil company is responding by delaying payments to suppliers due in December, a person familiar said.
The move is part of Mexican President Andres Manuel Lopez Obrador’s effort to end the year with a government-wide surplus and to avoid any possible sovereign downgrade.
Lopez Obrador has pledged to rescue Pemex from its debilitating debt and long term production declines. Pemex faces about $100 billion of debt, the most of any oil major.
Pemex is asking its trading arm PMI to cancel $400 million of a nearly $3 billion debt. That in turn could make it difficult for PMI, a wholly owned subsidiary of Pemex that operates independently, to meet payments to top international firms like Royal Dutch Shell PLC and Chevron Corp.
Pemex already faces months of overdue payments to offshore suppliers. One company, Marinsa de Mexico, is owed about $8 million, of which 30% is seven months late, said Marinsa’s strategy director Sergio Suarez Toriello.
The Finance Ministry and Pemex were not immediately available for comment outside of normal business hours.
Lopez Obrador has made fiscal austerity a key pillar of his government and aims to run a surplus of 1% of gross domestic product before interest payments this year, the biggest in a decade.
That budget discipline, plus a real interest rate that’s among the world’s highest, has kept the peso steady despite frictions with the U.S. It hasn’t done much for the economy, which narrowly avoided a recession in the second quarter.
Pemex’s efforts to balance its books at times conflicts with the need to finance the nation’s budget, which relies on the company for nearly a fifth of its revenue. A fresh downgrade of its bonds looms as the company has failed to deliver a viable strategy to reverse declining output, now half of what it was at a 2004 peak, and reduce its debts.
--With assistance from Nacha Cattan.
To contact the reporter on this story: Amy Stillman in Mexico City at email@example.com
To contact the editors responsible for this story: David Marino at firstname.lastname@example.org, Ian Fisher, Linus Chua
For more articles like this, please visit us at bloomberg.com
©2019 Bloomberg L.P.