Mexico to Keep Credit Rating as Pemex’s Losses Mount, S&P Says

2/16/16 Bloomberg

pemex2Mexico’s efforts to reduce energy subsidies and broaden its tax base is helping to insulate its credit rating as state-controlled oil producer Petroleos Mexicanos confronts a plunge in crude prices, according to Standard & Poor’s.

The fiscal changes enacted in 2014 have helped cushion the blow from a drop in revenue from Pemex, which has accounted for about 20 percent of the national budget, according to Victor Herrera, the managing director for Latin America at S&P in Mexico City. He cited measures including the end of a gasoline subsidy and efforts to bring more workers into the formal economic system.

“We don’t see pressure now as the government has so far reacted to contain this blow,” Herrera said in a telephone interview. “Everyone was criticizing the fiscal reform a few years ago, but look at how it’s helped us cushion this drop.”

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