Pemex, as the oil giant is known, is suffering from a steep decline in production that has been exacerbated by the crash in crude. Years of losses have left Pemex with huge unfunded pension liabilities and on the hook for billions to suppliers.
Things are so bad that this week the Mexican government had to come to the rescue with $4.4 billion in aid for its former cash cow. More financial assistance could be needed soon. That’s not good considering the government relies on Pemex to pay for about a fifth of its budget.
“This is just papering over the cracks considering Pemex’s problems,” said Edward Glossop, emerging markets economist at Capital Economics. “Pemex’s struggles have been very negative for Mexico’s public finances.”