October 12, 2019 / 1:58 AM / 6 days ago

IMF urges Mexico to open up Pemex to cooperation with private companies

FILE PHOTO: An employee makes a payment next to fuel pumps at a Pemex gas station in Mexico City, Mexico February 8, 2018. REUTERS/Edgard Garrido

MEXICO CITY (Reuters) - The International Monetary Fund (IMF) on Friday recommended that Mexico reconsider its position of limiting private companies’ cooperation with state-owned oil company Pemex, whose debt is weighing heavily on the government’s finances.

The administration of President Andres Manuel Lopez Obrador, who took office in December, has ended the tenders seeking partners for Pemex implemented under his predecessor, Enrique Pena Nieto. Instead, Lopez Obrador has favored service contracts, which give the government more control over projects.

“The mission recommends reconsidering these decisions as they place the onus of stabilizing Pemex squarely on the government,” the IMF said in a statement after a mission visit to Mexico in September. “Most importantly, joint ventures with the private sector remain the most promising way to replace reserves and increase production given fiscal pressures.”

The government has tried to shore up Pemex’s finances with tax breaks and capital injections, but the support has not been enough.

Credit ratings agency Fitch reduced Pemex’s rating to the junk category in June.

In addition to managing its debt, the company is struggling to reverse declines in production. Pemex Chief Executive Octavio Romero said in late September that the company was producing an average of 1.715 million barrels per day of crude oil that month, up from a previous average of 1.672 million barrels per day.

Reporting by Adriana Barrera; Editing by Leslie Adler

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