Exterior view of the Fitch Ratings offices in New York (USA)
The state oil company, Petróleos Mexicanos (Pemex), announced on Tuesday that it would terminate its contract with Fitch Ratings, a rating company for its debt.
The decision was made to save $ 350,000 and to cope with the current economic context, according to the CEO of the company Octavio Romero at a press conference.
Although the rating agencies use different scales and methodologies, Fitch stands out for being the one that gives the lowest rating to Pemex, considering it "speculative", that is, it contemplates a certain risk of non-payment due to its weak finances.
The tortuous relationship between Mexico and credit rating agencies, such as Fitch, began during the administration of President Andrés Manuel López Obrador.
In March last year, legislator Salomón Jara from the president's party, Morena, proposed to reform the Securities Market Law to give the regulator power to sanction rating agencies that work without transparency or objectivity.
This was necessary, the senator argued at the time, because "they are not worth disqualifying."
The initiative faced his same party in Congress and was discarded.
A couple of weeks later, rating agency Standard & Poor's downgraded Mexico's sovereign rating for its foreign currency debt from 'BBB +' to 'BBB'.
Shortly after, Fitch Ratings cut Pemex's credit rating from 'BB +' to 'BB' and within the range considered "speculative", arguing that the company's finances deteriorated.
Pemex is the world's most indebted oil company and reported losses of 23,000 million dollars during 2020.
"I do not share your point of view, some international organizations are very insensitive," López Obrador responded to a question about Fitch's decision at that time.
"I respect all the decisions that are made, but also, as this has already changed, its parameters are no longer the Bible as it was before, at least in the case of Mexico," he added.
Pemex's debt is a federal government debt.
If before this relationship was only implicit, President López Obrador made it clear at a press conference on Wednesday that Pemex's debt will be paid by the State, that is, with Mexican taxes.
In addition, the Ministry of Finance recently granted Pemex a tax benefit of 3.54 billion dollars.
The finances of the Government and those of Pemex are, therefore, linked.
The rating of one affects the other.
The fact that Pemex has decided to terminate its contract with Fitch does not prevent it from entering the international market to issue debt.
The regulation of the Securities and Exchange Commission (SEC), in the United States, obliges any debt issuer to have at least two risk rating agencies to place its debt among international investors.
Pemex still has Standard & Poor's and Moody's.
The most important impact of this decision will be seen in the quality of the financial information about Pemex that will be available to the public, explains Oscar Ocampo, analyst and researcher of the energy sector for the non-profit organization the Mexican Institute for Competitiveness.
"The rating agencies, on the one hand, are based on the financial statements, on the books, on all this, but, on the other hand, there is also an exchange with the company," says Ocampo about the way in which the agencies collect the information. required to issue a rating.
“There are interviews with managers or with the finance department, it is a coming and going of information and by removing that part, if a certain value is lost and the company itself loses an opportunity to convey to its vision or its plans in a way a bit more informal, than perhaps in their financial statements ", adds the specialist.
In a statement sent Wednesday, Fitch Ratings announced that it will continue to rate Pemex's debt as a service to global investors "for now" and that it will do so based "on the availability and receipt of sufficient ongoing information."
For Ocampo, it is Mexico and Pemex itself that have the most to lose by canceling the contract with Fitch.
The best practice is to work with the three most recognized rating companies, he assures, “and in that sense a highly negative signal is sent to the markets, a negative signal about Pemex's situation, because it is also allowed to see that, and this can be a coincidence, Fitch is the one who had the worst rating for the company and it was Fitch which, curiously, they eliminated and they do so, also, shortly before a review is made on Pemex ”.
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