The Mexican government’s relationship with state-owned Petróleos Mexicanos (Pemex), the world’s most indebted energy company, will remain a fiscal challenge for the country’s next president, according to S&P Global Ratings.

Pemex’ debt reached $106.1 billion at year-end 2023, the Mexico City-based company reported in February in its fourth-quarter 2023 financial report. Importantly, Pemex remains a net contributor to Mexico’s federal government and its cash flow is jointly managed with Mexico’s Finance Ministry.

Pemex is eying a debt repayment of $8.8 billion in 2024, and debt repayments will “remain a source of strain” in coming years with $6.8 billion due in 2025 and $10.5 billion due in 2026, S&P said in an April 15 research report.

Thereafter, Pemex will face debt repayments of $7.5 billion in 2027, $5.1 billion in 2028 and $3.9 billion in 2029, according to the company.

“Given the weak state of Pemex' finances and our expectation that any government will continue to back its debt repayment, the potential for pressure on the sovereign rating remains,” S&P said.

S&P’s sovereign credit ratings on Mexico include a foreign currency rating of BBB/Stable/A-2 and a local currency rating of BBB+/Stable/A-2.

“How the next administration tackles Mexico's overall fiscal trajectory, chooses to support Pemex, addresses policy in the energy sector, and organizes Pemex' management will likely affect our ratings on both Mexico and Pemex,” the rating agency said.

S&P said continued cautious macroeconomic management was a key consideration in its ratings.

“We assume [cautious macroeconomic management] will prevail in the run-up to the elections, during the presidential transition period, and under the next administration. Such caution has been a hallmark of Mexico's macroeconomic policy execution for several decades,” S&P said.

Mexico will hold presidential elections on June 2. The next president takes office in October.

The race to occupy Los Pinos, Mexico’s presidential palace, is between Morena party's Claudia Sheinbaum, who is President Andres Manuel Lopez Obrador's preferred successor, and opposition coalition Strength and Heart's Xochitl Galvez.

S&P doesn’t expect the contour of energy policy to differ under either Sheinbaum or Galvez.

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