Constitutional reform no silver bullet for debt-laden Pemex, Fitch says

A constitutional reform that will change the legal status of Mexico's national oil company Pemex does not mean that the Mexican government will guarantee the company's debt, according to ratings agency Fitch.

Pemex bonds have rallied in recent days as a proposal which will increase government oversight of the company makes its way through Mexico's legislature. 

"Some people are interpreting that as a potential or implicit guarantee of the sovereign to Pemex's debt, which is in my opinion incorrect," Adriana Eraso, Fitch's director for Latin American corporates, told BNamericas on Thursday.

Pemex is carrying a debt burden of almost US$100bn and relies on government support to meet its obligations to creditors.

"Saying that the government will be closer and have more oversight is not the same [as a guarantee]," Eraso said.

The constitutional reform, approved by members of Mexico's congress on Wednesday, will reclassify Pemex as a "public company" instead of a "productive company."

The reclassification could lead to tighter oversight by the finance ministry, Fitch said, and make it easier for the company to secure funding from the government. 

However, the reform is not an automatic trigger for a rating upgrade, Eraso said.

Partial guarantee more likely

A separate constitutional reform would be needed for Mexico to guarantee Pemex's debt., but no such proposal has been tabled.

Before issuing any guarantee or buying back debt, the Mexican government will want to improve Pemex's governance and operations and make it more financially stable, Eraso said.

A partial debt guarantee, perhaps covering only new debt issuance by the company, is more likely than a blanket guarantee of all Pemex's debt, she said.

Victor Rodriguez Padilla, a former university colleague of Mexican President Claudia Sheinbaum, became CEO of Pemex when Sheinbaum took office on October 1.

"Pemex is not a dead company," he said at his appointment in August. "It's not as bad as people think."