Pemex Budget Cuts Spur Speculation of Wider Spending Reductions
Pemex Budget Cuts Spur Speculation of Wider Spending Reductions
At an AS/COA panel discussion on Mexico’s 2015 economic outlook, a group of experts examined the government’s expenditure and stimulus policies to counteract the global oil crisis.
(Bloomberg) -- Budget cuts at Mexico’s state-owned energy companies are spurring speculation the nation will need to make wider spending reductions after oil prices tumbled to a five-year low and production waned.
Petroleos Mexicanos, the national oil producer known as Pemex, may cut 60 billion pesos ($4 billion) from its budget due to oil’s plunge, Gustavo Hernandez, head of exploration and production, said last week. Comision Federal de Electricidad, Mexico’s state-owned power provider, will also have to adjust spending due to lower oil prices, Chief Executive Officer Enrique Ochoa said Thursday in an interview with Radio Formula....
One Percent Cut
A spending reduction of 1 percent of gross domestic product “seems reasonable,” Alonso Cervera, chief economist for Latin America at Credit Suisse Group AG, said on a panel at the Council of the Americas in New York on Thursday.
“What I would expect is the government to look for a mix between current expenditures and capex investment spending,” Cervera said. “Some of the state-owned companies are going to suffer. Pemex is likely to suffer a lot.”
The government in November won legislative approval for 4.7 trillion pesos in spending for this year, which would give the nation a deficit of 1 percent of GDP, excluding spending on Pemex and CFE.
Speaking on the same panel as Cervera, Shelly Shetty, the head of Latin American Sovereigns at Fitch Ratings Ltd., said she expects the government to target current spending rather than capital spending to avoid removing stimulus from the economy.
“Given that the economy is still weak, authorities will try to preserve as much capex as possible,” she said....
