Petroleos Mexicanos, the state oil company, may avoid deeper cuts to its 2017 budget if lawmakers approve an 86-billion-peso ($4.6 billion) reduction proposed by the Finance Ministry.
The government seeks a total budget of 392 billion pesos for Pemex, 18 percent less than what was proposed for 2016, according to documents on the Finance Ministry website. Officials at the ministry and Pemex, as the company is known, said no further reductions are expected. The amount is in in line with an earlier mandate from the government to cut 100 billion pesos from the company’s budget.
Pemex, facing its 12th consecutive year of declining output and struggling under a liquidity crunch, could slash spending further to reach that goal of cutting 100 billion pesos, according to an official who can’t be named due to the company’s policy.
The oil producer has a 2017 investment plan of 204.6 billion pesos under the government’s plan — a drop of 30 percent compared to this year’s proposal.
The reduction is less than what Finance Minister Jose Antonio Meade signaled earlier today in an interview with Radio Formula.
“It is natural that the adjustment is maintained, given the fall in international oil prices,” Meade said, when asked if the government could repeat cuts implemented this year.
Following Meade’s presentation of the nation’s 2017 budget proposal today to lawmakers, Luis Madrazo, the Finance Ministry’s chief economist, said the cut was in line with the previously announced plan to reduce Pemex’s budget by 100 billion pesos this year. The proposed reduction is adjusted for inflationary effects, he said in a phone interview.
Pemex’s cash flow shortfall, which means the company is spending more than it earns from operations, is expected to reach almost $22 billion this year from $13 billion in 2015, according to data and estimates compiled by Bloomberg. Pemex’s company losses reached $32 billion last year.