December 10, 2020

By Abraham Gonzalez

MEXICO CITY (Reuters) – S&P Global Ratings said on Thursday its next rating decision on the Mexican sovereign will depend on the evolution of the finances of the country’s heavily indebted national oil company Petroleos Mexicanos and the government’s fiscal performance.

While Pemex has long financed a substantial portion of the budget of Latin America’s second-largest economy, its debt burden is also weighing heavily on the country’s sovereign rating.

“Things we are looking for the next year is how is the government is going to manage Pemex finances and operations, and what will the results be,” said Joydeep Mukherji, sector lead for sovereign ratings in the Americas.

Pemex’s impact on the sovereign as well as the government’s own fiscal performance, including the tax regime, will be key factors in the assessment, Mukherji said on a call.

Mexican Deputy Finance Minister Gabriel Yorio told Reuters on Wednesday in an interview that the tax burden of the oil company could be reduced further.

S&P Global Ratings confirmed Mexico’s investment grade credit rating last week, saying that despite a record hit to the economy from the coronavirus pandemic, the government’s cautious policy response had kept public debt under control.

(Reporting by Abraham Gonzalez; Writing by Stefanie Eschanbacher; Editing by Frank Jack Daniel)

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