Mexico Plans More Help for Pemex But Limited Covid Spending

Mexico is preparing a significant tax break for its state-owned oil firm while the constitution blocks it from taking on debt to increase social spending during the pandemic, Finance Minister Arturo Herrera said in an interview, Bloomberg News reported. Lowering the state’s demands on Pemex, its biggest taxpayer, could help the oil giant reorder its finances as it struggles with a $110.3 billion debt load, sinking production, and some of the highest tax obligations of any oil company in the world. During the past two years Mexico adjusted its tax policy to compensate for a reduction in oil revenue from royalties and other contributions, Herrera said. Pemex’s euro and dollar-denominated bonds gained on the news. “We are heading in that direction, and in the coming days we will update how we continue down that path,” he said Wednesday. “Anything to do with Pemex given its size has to be significant.” President Andres Manuel Lopez Obrador is tackling the competing goals of reviving Mexico’s struggling state energy firms and redistributing wealth to the poor while maintaining his credentials as a budget hawk. Where Mexico’s peers responded to the crisis with spending, Lopez Obrador has continued his austerity drive, arguing that a lower debt load will make it easier to recover. Read more.