(Bloomberg) – President Claudia Sheinbaum’s proposed 2027 budget reduces support for state-owned oil company Petroleos Mexicanos, pledging 81 billion pesos ($4.8 billion) to help cover its debt payments, down nearly 70% from the amount allocated this year.
The government expects the company, known as Pemex, to achieve a rare financial surplus next year of around 95 billion pesos, according to Sheinbaum’s budget blueprint. The plan was formally submitted to Congress on Tuesday evening.
The oil giant’s financial woes have dragged down Mexico’s standing in financial markets, with sovereign bonds currently hovering near junk status and paying higher interest rates than much smaller, lower-rated neighbors including Guatemala and Panama.
Even with less support for Pemex, the government will still run a 2027 deficit of 3.9% of GDP, though narrower than the 4.1% deficit it expects this year. That’s because spending on social programs and infrastructure projects are set to increase by billions of dollars.
Last year, Mexico allocated$14 billionto Pemex through capital injections to pay 2026 debts. The government also completed a $10 billion buyback operation designed to cancel out Pemex’s maturities coming due this year. Sheinbaum has stressed that Pemex would become financially self-sufficient bynext year, a goal analysts have called ambitious given the company’s many operational challenges.
Pemex has around $5 billion in debt payments coming due in 2027, according to its latest earnings presentation.
“We said that by 2027, support for Pemex would be very limited, and that’s indeed the case,” Sheinbaum told reporters on Wednesday at her morning press conference. “Pemex now receives very little support from the Mexican government, and its own finances will sustain its development.”
The president explained that managing Pemex’s debt has been one of her top priorities and that the company’s funds aren’t being used to finance other government programs.
Although the cash infusions have staved off immediate calamity for the company, the support papers over real problems including a bloated workforce that pulls ever-shrinking quantities of oil and gas out of aging wells, in addition to its historically money-losing refining business.
Pemex’s proposed budget for 2027 totals 527 billion pesos, 2% higher than this year, according to the spending plan. Its infrastructure budget next year will nearly quadruple to almost 236 billion pesos.
The company’s long-standing financial problems have raised concerns they could hurt the government’s own financial standing and debt profile.
Sheinbaum has arranged more than $50 billion in support for Pemex during her two years in office, on top of roughly $80 billion provided under former President Andrés Manuel López Obrador. The vast outlay has helped to nearly double the government’s fiscal deficit.
Still, successive governments have been determined to keep Pemex afloat, viewing the driller as a potent symbol of national pride.
Last year, state support for Pemex resulted in a reduction of its debt to 4% relative to the size of the Mexican economy, officials saidlast month. The same figure was more than 9% at its peak in 2016.
Sheinbaum’s government is also seeking private partners to help lift oil output, which the budget projects will reach 1.8 million barrels a day next year, or up about 6% compared to current crude and condensate production.
Interest in joint ventures with Pemex, however, has so far been limited. Apart from Brazil’s state-run Petroleo Brasileiro, known as Petrobras, few oil majors haveexpressed interest.
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