Mexico's oil firm Pemex deals Obrador another blow.
Mexico was already going to have it tough. With a U.S. president blaming its friendly neighbor on doing nothing to stop the flow of illegal immigration through the border, coupled with threats to upend a decades-old trade deal, Mexico has been on edge since November 2016, the month Trump was elected.
Blame Pemex for a weak start to the week for Mexico. Even though Pemex is not a listed equity, the latest news out of Mexico City is that current president Andrés Manuel Lòpez Obrador, a.k.a. AMLO, has failed to deliver to the market what bond investors really want to see from Pemex. The problem with the rescue plan is that Pemex bond investors believe the tax cuts and the government loans are fine, but policy makers missed out on addressing long-term challenges at the company. In other words, this is a Band-Aid policy.on Monday that those very bondholders should expect further downgrades from the big credit rating agencies, with negative consequences for Mexico's government bonds.
Those funds in particular are designed to be used to increase Pemex oil production from its historic low of just 1.6 million barrels per day in January of this year to 2.6 million by the end of AMLO’s term in 2024.
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