Global ratings agency Standard & Poor’s (S&P) said it has slashed the credit rating for Mexico’s national oil company Petroleos Mexicanos, or Pemex, piling more pressure on the government to tighten up the debt-laden oil firm’s finances.
S&P followed the Pemex cut with lower credit outlooks for a range of major Mexican financial institutions and companies, including telecommunications giant America Movil and Coca-Cola Femsa, the world’s largest Coke bottler.
The agency’s moves highlight overall concerns with the Mexican government’s debt load and spending plans that were raised when S&P lowered the government’s credit outlook to negative on Friday.
S&P cut its stand-alone assessment of Pemex to ‘B-‘ from ‘BB-‘, reflecting growing concern that financial support pledged by the government to shore up the firm and its slowing production will not be enough.
The agency also cut Pemex’s outlook to negative from stable while keeping its global investment grade rating at ‘BBB+’, in line with the Mexican government.
The peso currency dipped as much as 0.6 percent on Monday after the S&P moves, though it rebounded to end the trading day up 0.04 percent. At 404 GMT the peso was up 0.09 percent at 19.32 to the U.S. dollar.
The bleaker outlook reflects concern that the government’s plan to clean up Pemex’s finances is insufficient, S&P said, adding that the company is exposed to political decisions that could conflict with its financial objectives.
“The government’s financial support, in order to restore credit fundamentals, falls well short of the company’s multi-annual capital investment needs,” S&P said in a statement.