Pemex Turning Into One of Mexican Gov’s Heaviest Financial Burdens

Mexican oil giant Petroleos Mexicanos has gone from the nation’s golden goose to a major albatross.

After years of pumping cash into Mexico’s coffers, Pemex is on course to post its largest fiscal deficit to the government in its 87-year history: a shortfall that analysts peg at roughly $31 billion, thanks to dwindling revenue and massive bailouts aimed at helping the company cope with a $100 billion debt load.

It’s a remarkable turning point for a state-controlled behemoth that for years was Mexico’s largest single source of revenue, at times accounting for nearly half the nation’s income. The fact that Pemex is now one of its largest expenses turns the old adage that “Mexico’s oil belongs to Mexicans” on its head, said Jorge Cano, an analyst at consultancy Mexico Evalua.

“Now, effectively, Pemex will stop contributing anything to public finances,” Cano said. “And yes, taxpayers will have to pay more to subsidize Pemex.”

Pemex’s deficit is not just the result of new government support. The company’s oil revenues have dwindled as production from slumped to nearly half its peak of two decades ago. And tax-law changes in recent years also mean that Pemex pays a much smaller portion of sales revenue to the government, widening its overall deficit, Cano said.

Neither the Mexican finance ministry nor Pemex responded to requests for comment.

Of course, government support for Pemex is nothing new. Former President Andres Manuel Lopez Obrador showered Pemex with some $80 billion via capital injections and tax breaks over the course of his term. 

Now, President Claudia Sheinbaum is amping up assistance, raising $12 billion from its so-called P-Cap deal, $13 billion from local development banks, and $14 billion from sovereign issuance that will fund a buyback operation ending later this month. The government will also transfer to Pemex more than $14 billion for debt payments and other expenses in 2026.

“This structural reversal makes Pemex the main beneficiary of fiscal flows, while the government — and by extension the public — emerges as the net loser,” Alejandro Schtulmann, managing director of Mexico-City consultancy EMPRA, wrote in a note. It “raises questions about the sustainability of this subsidy-driven model.”

From Asset to Liability

Throughout its history, the national oil company had consistently been the single largest source of government revenues. That began to change under President Enrique Pena Nieto’s energy reform, and later under Lopez Obrador, or AMLO, who slashed Pemex’s so-called “DUC” tax duties from 65% in when he took office to 30% by the time he left last year. 

Sheinbaum has since scrapped the DUC system in favor of a more simplified tax regime. Pemex now pays about 30% tax on oil revenues, and a 11.67% tax on natural gas.

And although Pemex has long been a drag on Mexico’s balance sheet, never has it been a liability on such a large scale. Pemex posted net deficits to Mexico in 2021 and 2024, following large support packages under AMLO, according to IPD Latin America, an energy consultancy. 

The effect of the support on Mexico’s sovereign rating is less clear. While Fitch Ratings Inc. and Moody’s Ratings recently upgraded Pemex credit profile, Fitch sees Mexico’s debt-to-GDP ratio rising above 57% next year — up from about 45% in 2023 — as the company’s debt burden begins to migrate to the sovereign’s balance sheet, analysts wrote in a note.

“It’s a big problem from a sovereign perspective,” said John Padilla, IPD’s managing director. “A $20 billion yearly deficit for the government probably doesn’t move the needle on its own, but if the economy continues to not grow, it could eventually put Mexico’s credit rating in jeopardy.”

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