How much is Pemex worth

PEMEX, pandemic and state monopoly are dragging Mexico's economy into crisis

In addition, the pension obligations amount to $ 65 billion. In addition, the government must cut the fabulous debt of $ 107 billion with the company that was created after nationalization in 1938.

The pandemic has exacerbated the Pemex crisis and made the country's largest company a national emergency. Crude oil prices fell in April, prompting Pemex to cut production for months. And since the monopoly is also the largest taxpayer, the state finances suffer directly with every crisis. As a result, taxes to the tax authorities fell by 38 percent last year compared to the previous year to the equivalent of 25 billion euros.

Alleged renaissance of fossil energies

In any case, due to Corona, 2020 was a black year for Latin America's second largest economy. According to the statistics institute Inegi, the gross domestic product shrank by 8.5 percent, the largest decrease in almost a hundred years.

Pemex is a bottomless pit, but the Mexican President Andrés Manuel López Obrador wants to bring the company and other state monopoly to its prime. That is why he is relying on the renaissance of fossil energies, but in doing so jeopardizes Mexico's economic growth and at the same time tests the patience of investors.

Instead of seizing the opportunities of the energy reform of 2013 and giving renewables more space in energy generation and thus creating new growth areas, national and international start-ups that are involved in wind and solar power are being thwarted by ever new bureaucratic hurdles. As a result, they reduce staff and production or leave the country entirely.

And now a law of its own is supposed to tighten the supremacy of state-owned companies in energy generation. The left-wing nationalist López Obrador defends his “Ley de la Industria Eléctrica” against criticism from Mexican and, above all, international entrepreneurs.

The economically liberal predecessor governments wanted to abolish the electricity monopoly CFE in favor of “corrupt, private multinationals”, the president claims. The important North American partners in Washington and Ottawa are disillusioned.

The US Chamber of Commerce AmCham / México warned that the planned energy law would endanger the rule of law, competition and sustainable development. In addition, it is hardly compatible with the new North American trade agreement USMCA, which replaced NAFTA in July and now defines the new legal framework for trade relations between the three states of North America. The agreement negotiated under pressure from Donald Trump is also respected by his successor Joe Biden.

Canada's Minister of Commerce, Mary Ng, recently addressed Mexico's new Minister of Economic Affairs, Tatiana Clouthier, directly, demanding in a letter that Mexico must maintain “a stable and predictable economic climate” for international companies. Johannes Hauser, Managing Director of the German-Mexican Chamber of Commerce and Industry (AHK Mexico), sees precisely this climate at risk.

The willingness of international investors to get involved in Mexico depends primarily on López Obrador's attitude towards the private sector. That this is welcome, there has been reason to doubt in the past few years. "In our surveys, German companies are increasingly concerned about the economic and political framework in Mexico," stressed Hauser to the Handelsblatt.

Mexican analysts criticize the fact that López Obrador also indignantly offends the new US administration. In doing so, President Biden is propagating exactly what López Obrador has campaigned for for many years, says analyst León Krauze: away from the migration agenda and towards cooperation for economic growth. "But it is unclear whether López Obrador is still pursuing the common goal."

The economic well-being and woe of Mexico is closely related to its main trading partner, the USA. The Swiss bank UBS and the International Monetary Fund IMF are therefore expecting growth in Mexico this year. In the shadow of the good US economy, the emerging market's economy will grow by 5.6 percent.

A Pemex reform is not in sight

The development will be supported primarily by the increase in exports and remittances from Mexican migrants in the United States, said Gabriela Soni, investment expert at UBS México. The IMF is assuming an increase in gross domestic product of 4.3 percent.
Energy experts such as the independent analyst Rosanety Barrios are demanding further steps such as a major Pemex reform: "The company's situation is serious because it cannot produce enough oil and its depleted reserves cannot be renewed."

The problem will persist at least as long as Pemex is instrumentalized for the interests of the respective governments, underlines Barrios. Only with private partners is it possible to acquire modern technologies without burdening the state treasury.

López Obrador, however, remains a vehement opponent of the energy reform, which under his predecessor Enrique Peña Nieto opened the sector to private investments seven years ago. Since then, more than a hundred licenses for the search and exploitation of oil and gas fields have been issued. But others are frozen. "With so many contracts, not a barrel of oil has been extracted so far," criticized the President last year.

Instead, López Obrador wants to re-arm Petróleos Mexicanos. In the coming years, the output should again reach 2.4 million barrels per day. The left-wing president has a Pemex role like in the eighties in mind. At that time, the company was the pride of the country and was almost solely responsible for Mexico's foreign exchange income. But apparently nobody told the head of state that the (energy) times have changed dramatically since then.

More: Record losses in the past year: Corona crisis forces oil multinationals to make a radical change