LatinNews Daily - 24 July 2023

* International credit ratings agency Moody’s has lowered its outlook on Mexico’s indebted state-run oil company Pemex from stable to negative. Moody’s stated that this reflected its view that “absent fundamental changes in Pemex’s business strategy the company is likely to face increased credit risks, given the inability of the company to increase capital investments and improve its financial and operating performance as a result of liquidity constraints”. In the same statement, Moody’s also affirmed Pemex’s baseline credit assessment, which reflects its standalone credit strength, at caa3. This reflects Moody’s expectations that Pemex “will continue registering negative free cash flow and the need for large amounts of external funding given persistent losses at the company’s refining business, the necessity to maintain capex [capital expenditure] at least at current levels to sustain production and reserves stable, high interest expenses and high debt maturities in 2023-25”. Pemex has received much support from Mexico’s government under President Andrés Manuel López Obrador, which Moody’s said would likely continue in 2023 and 2024. However, it stated that the following administration would likely find it “increasingly burdensome” to continue this support. On 14 July, fellow international credit ratings agency Fitch downgraded Pemex’s Long-Term Foreign Currency Issuer Default Rating (IDR) from B+ to BB-.