Regarding Pemex’s debt and its management, at the end of 2019 the company had liquidity management credit lines for up to $ 7.45 billion dollars and $ 37 billion pesos, of which $ 670 million dollars and $ 21 billion pesos were ready.
The evolution of Pemex’s debt, whose maximum annual net debt amount is authorized by the Mexican Congress, is as follows:
According to an official report on Pemex debt management, these results are consistent with the Business Plan of Petróleos Mexicanos and its Subsidiary Productive Companies 2019-2023, where one of the purposes is to stop the growth of debt and stabilize it, reducing the debt by 98.8 billion pesos despite having authorization from the Congress of the Union to obtain a net debt of up to 112.8 billion pesos.
Pemex’s debt (total financial) decreased 4.8% compared to the end of 2018, mainly due to the net indebtedness exercised by 28.7 billion pesos, and an appreciation in the exchange rate of the peso against the US dollar.
The company prioritizes dollar debt issues; However, this is not always possible, therefore, the debt issued in international currencies or is covered through derivative financial instruments (IFD), either with swaps to convert said debt to dollars or through other IFDs, in order to mitigate exposure to exchange rate risk.
The rest of the debt is denominated in pesos or in Investment Units (UDis). In the case of UDis-denominated debt, it has been converted to pesos through IFD in order to eliminate exposure to inflationary risk.
As a consequence of the foregoing, all debt issued in international currencies other than the dollar has currency risk mitigation strategies. Pemex has selected strategies that additionally reduce the cost of funding, maintaining, in some cases, part of this risk discovered when it is deemed appropriate.
However, given that the company has a greater amount of income referenced to the dollar than that of its expenses, the debt of Pemex issued in pesos and UDis presents an exposure to exchange rate risk arising from fluctuations in the peso against the dollar.