Mexico is Refinancing Pemex Debt After Receiving IMF Reserves

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(Bloomberg) — Mexico has begun a process of refinancing state-owned Petroleos Mexicanos’s debt, after the nation received a transfer of about $12 billion from the International Monetary Fund. 

President Andres Manuel Lopez Obrador said Monday that refinancing had begun, and restated that he wants to use newly issued IMF reserves to pay debt, but that he couldn’t provide further details. His spokesman Jesus Ramirez confirmed to Bloomberg that Pemex’s debt is being refinanced.

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AMLO, as the president is known, has prioritized aid to Pemex, seeking to reduce the company’s borrowing costs and free up cash to invest in exploration and production following a decade and a half of output declines. The company currently has $115 billion in debt.

“I can’t say much, but a process of refinancing debt has begun,” the president said at his daily morning press conference. “But let me just say that Pemex is not being left adrift. It’s a company of the nation, of the Mexican people.”

IMF Reserves

Lopez Obrador has been pledging for weeks to repay debt with the IMF’s so-called special drawing rights, or SDRs, which are allocated to member countries based on their share in the Fund. The nation’s central bank says Mexico can only use those funds, which were issued last month as part of efforts to help countries amid the pandemic, if it purchases them from the bank, which received the IMF transfer as international reserves. 

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Read More: Mexico Presses On With Plan to Pay Down Debt Using IMF Funds

Bolstering state energy companies Pemex and the Federal Electricity Commission has been a central part of Lopez Obrador’s platform. He seeks to have Mexico produce enough oil to meet domestic demand and has petitioned for a constitutional reform to give priority to the state electricity company over private firms.

“The interest rates that Pemex pays are higher than what the government pays for its sovereign debt,” AMLO said. “That cannot be the case. How can they categorize us as better than Pemex, if Pemex belongs to the people of Mexico, just like the government? That is what we are attending to and resolving.”

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