Can the Mexican Government’s Bailout Solve the Pemex Crisis?

The best solution would be to put the company through a bankruptcy process. The new president could justify this as a means to clean the ossified structures before more tax-payer money must be thrown into a bottomless pit. How many voters in Mexico depend on patronage from PEMEX – and how many subsidize this monster without ever feeling any advantage out of that. Throwing endless money at such a company for national price only is a recipe for future failure. Economically and at the ballot box.

In response to Fitch Group’s & Moody’s downgrade of Pemex’s credit rating to one notch above junk, Mexico’s government recently pledged a $3.9-billion capital injection and $200 million in tax relief, according to international media reports. This bailout package and the six-year business plan aims to help reverse Pemex’s credit downgrade, help control its USD $106 billion debt, boost cash flow, and increase crude production.

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