By THÉRÈSE MARGOLIS
When the international rating agency Moody’s Analytics downgraded Mexico’s state-run oil giant Petróleos Mexicanos credit again earlier this week — this time to out-and-out “junk” with a “negative outlook” — it should have set alarm bells ringing nationwide as to the country’s credibility with investors and lenders.
Moody’s new rock-bottom Ba3 rating — based mostly on the bankrupt oil giant’s dubious plans to expand its refining capacity — came Tuesday, July 27, sending the already in-the-red company yet one step deeper into the swampy world of junk territory.
This was not the first time that the rating agency has warned about the unreliable creditworthiness of Pemex, which has more than $115 billion in accumulated financial debt and very little chance of paying it off.
And since Pemex relies heavily on government funding, it could get an even lower rating if Mexico’s sovereign credit is downgraded, Moody’s said in a statement.
Moody’s noted that the latest rating downgrade was the consequence of “high liquidity risk and increasing business risk as the company faces high debt maturities while it expands its refining capacity and production.”
The implications for both Pemex and Mexico as a whole, will be multiple.
To start with, Pemex will find it harder and harder to get loans, and those credits it does manage to get will come with a much heftier interest rate.
And if the leftist administration of President Andrés Manuel López Obrador (AMLO) decides to back the company’s debt — which it already has said it will do — the nation’s sovereign rating could also be compromised.
With investor hesitancy already at an all-time high due to AMLO’s reversing and canceling of existing contracts (from airports to energy production), a lower sovereign rating could make Mexico a blackballed nation when it comes to attracting fresh capital.
Rather than taking the logical steps to downsize Pemex to make it more viable, the AMLO administration has stubbornly opted instead to enlarge it, purchasing the quasi-efficient Deer Park refinery in the United States and betting heavily on the construction of the Dos Bocas refinery in Tabasco, even when the global trend has been toward more sustainable energy sources.
Unless the government decides to reverse course, both the credit ranking of Pemex and the country could end up so low that it will be hard for Mexico to ever recover its former reputation as a credit-worthy nation.
When he heard about the Moody downgrade, Pemex’s chief executive officer, Octavio Romero, called the decision “shameful
“It seems to us that it’s an action taken by the credit rating agency that lacks professionalism and ethics,” Romero said.
But the real shame lies with a government that is milking the last of Mexico’s oil dry while capriciously condemning the country to an international perception as an unreliable business partner.