Mexico: Pemex accounts, red lines against Trump, cut growth forecasts.

Spain – Mexico

The slight improvement in the price of oil in the last quarter of last year has meant that the 2016 financial year has been less catastrophic than previous ones for the Mexican public oil company Pemex.

Even so, it has recorded losses worth $14.900 million (60% less than in 2015). The average production was 2 million. b/d, 9% less than the previous year and revenues decreased by 7%, reaching $52.000 million. The fourth quarter has saved the accounts for the year, with a loss of “only” $1.530 million. The real burden for Pemex continues to be the company's debt, which reaches $172.000 million and has increased 14% during the year, mainly due to the accounting effect caused by the depreciation of the peso against the dollar. Pemex's bet for the coming years is to compensate for the decrease in production at one of its main fields (Cantarell) with the start-up of new ones, and achieve a primary surplus in its accounts. A second challenge lies in the fact that, until recently, the United States was the main buyer of Mexican oil. But unconventional oil production has reduced the need to purchase from its northern neighbor, a trend that will intensify as prices rise.

· Red lines against Trump. The Mexican government has established a line of defense regarding the issues in dispute with its powerful neighbor to the north. As far as illegal immigrants are concerned, Mexico will not accept the deportation of people who are not Mexican nationals from the United States. Foreign Minister Luis Videgaray has also pointed out Washington's responsibilities with regard to organized crime, emphasizing that drug consumption and the uncontrolled sale of weapons are fundamentally North American problems that impact his country, although he recognizes that drug trafficking is a common problem. . Regarding trade relations, Mexico intends for the Free Trade Agreement to remain in force, and will not accept trade tariffs. To a greater or lesser extent, this discourse generates consensus in the Mexican political spectrum and in civil society.

Cut growth forecasts. The Central Bank of Mexico (Banxico) has cut its GDP growth forecast by two tenths of a percentage point, leaving the target band at 1,3%-2,3%, mainly due to the uncertainty generated by the protectionist and anti-Mexican rhetoric of the American President Donald Trump. Inflation should remain above the 2%-4% target band for most of 2017, although it is expected to decline towards the end of the year. Trump's intention to renegotiate the North American Free Trade Agreement (NAFTA) is causing great concern among Mexican businessmen, since more than 80% of Mexican exports are directed to the United States.

Source: CESCE