In the modern world, wherever there is a big, unsustainable pile of debt, there will be a bailout. It’s happening in Mexico, now. From Don Quijones at wolfstreet.com:
Taxpayers in Mexico Brace for a New Round of Plunder
How the mighty are fallen. Pemex, Mexico’s state-owned oil giant, once a goliath on the global energy scene, is now dependent on state aid to meet its day-to-day needs. Mexico’s Finance Ministry announced a series of measures aimed at loosening Pemex’s financial strains, giving the state-owned giant a decidedly short-term $4.2 billion liquidity boost.
That includes a capital injection of $1.5 billion, as well as a credit facility for a further €2.7 billion to pay down pension costs this year. The company will also receive tax breaks that will allow it to deduct more of its exploration and production costs.
But it’s a mere drop in the barrel compared to the $30.3 billion in losses the company racked up last year, its $90.5 billion in pension liabilities, and its debt which is expected to surpass $100 billion later this year.
The Markets were thrilled by the announcement.
“This is good, because it is comprehensive and it deals with the main issues,” said Alexis Milo, an economist at Deutsche Bank in Mexico City. “The reaction of markets will be positive because this is the beginning of the structural changes that markets were expecting.” As soon as the news broke, Pemex’s CEO and Mexico’s Finance Minister were on a plane to Wall Street to try and drum up investor support for the ailing oil company. Now they know that Mexico’s taxpayers have Pemex’s back — at least for now — investors are likely to view the company more favorably.
Mexico’s taxpayers are unlikely to be quite so enthused by the news, especially given the prospect of this being just the beginning of a growing trend. According to Mexico’s Business Coordinating Council, Pemex doesn’t just have temporary short-term liquidity problems, as the Finance Ministry contends, but is suffering from a structural deterioration that poses a serious threat to its long-term viability.
This deterioration is the result of “decades of bad management, lack of vision, negligence, abuse and in many cases, corruption.” The Mexican daily La Jornada went further, arguing that the company has been systematically “plundered” during successive administrations, including, of course, the current one.
To continue reading: Big-Oil Sinkhole of Debt & Corruption Gets Taxpayer Bailout. Wall Street Thrilled
