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Relevant Aspects and Current Situation of Pemex Following the Implementation of the Energy Reform, by Antonio Franck

October 19, 2015
Relevant Aspects and Current Situation of Pemex Following the Implementation of the Energy Reform, by Antonio Franck

In the midst of Mexico’s implementation of the energy reform, and the complicated situation with the decrease in oil prices, the internal restructuring and the development of investment projects by Petróleos Mexicanos (Pemex) remains at a standstill. For the past several months, the private sector has designed new strategies and alliances in search of opportunities for investments due to the opening of the sector, while preparing to compete for the best technical resources and financial strategies.

Pemex appears to be facing the competition alone, and is also faced with converting itself into a productive state entity. Its biggest challenges include: (i) a lack of clear investment objectives; (ii) financial debt and employment liabilities, such as pension and retirement plans; (iii) income tax burdens; and (iv) lack of a budget.

In the past months, the oil industry has radically changed following the worldwide drop in the price of oil. In addition, this past February, Mexico’s Department of Finance and Public Credit requested that Pemex reduce its budget by 60 billion pesos, significantly affecting its current expenses and potential capacity for investments.

Taking into consideration Pemex’s history, size and geographical conditions, it is apparent that Pemex is fragmented by differing objectives and lacks clear goals. It is evident that Pemex needs to reorganize its subsidiaries and restructure itself as a business as soon as possible to reach its short, mid-term and long term goals, raising not only Pemex’s expectations as a business, but also those of potential investors in new projects and opportunities alike.

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