Mexico aims to lower taxes on troubled Pemex by $7.3 bln over 2 years

Credit: REUTERS/Carlos Jasso

Adds quotes from document, background details

MEXICO CITY, May 23 (Reuters) - Mexico's government aims to give tax relief for state oil firm Pemex PEMX.UL of 138.7 billion pesos ($7.28 billion) over 2020 and 2021, according to a Pemex document seen by Reuters on Thursday, part of the government's effort to cool fears about Pemex's financial viability.

Pemex, lumbering under a debt burden of at least $106 billion, is the world's most indebted oil company. It hands over much of its income to the federal government in a profit-sharing tax.

The company said the tax reductions would be achieved by lowering the profit-sharing tax to 54% by 2021 from a current 65%. The tax relief would be 47.1 bln pesos in 2020 and 91.6 bln pesos in 2021.

"Pemex faces a high tax load, as such Mexico's government has decided to modify its tax regime to lighten it. This modification will be done gradually over the coming years so as to not create fiscal instability for the government," the internal Pemex document stated.

Agencies Fitch and Standard & Poor's cut Pemex's standalone assessment earlier this year and put it on negative outlook, inching the firm closer to a financial cliff. Fitch now rates Pemex's long-term foreign debt at BBB-, while Moody's puts it at Baa3 - both one level above a junk rating.

Fitch, Moody's and S&P, were not immediately available for comment on what implications the measures would mean for Pemex's rating.

The agencies have been on high alert over Mexican President Andres Manuel Lopez Obrador's plans to have the state oil firm build a new $8 billion refinery.

On May 13, the government announced plans to ease Pemex's debt woes, including $2.5 billion in debt refinancing plus the renewal of credit lines with three banks and a gradual tax cut.

Those measures include two extended lines of credit with the banks worth up to $5.5 billion.

(Reporting by Ana Isabel Martinez; Additional reporting by Stefanie Eschenbacher; Editing by Frank Jack Daniel and Cynthia Osterman)


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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