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Pemex directs 33.7% of its sales to the U.S.

Export sales of Pemex to the United States totaled 503.359 billion pesos in 2021, representing 33.7% of its total sales and 69.1% of its export sales that year.

Since 2003, Mexico‘s petrochemical exports to the United States have enjoyed a zero tariff rate under the North American Free Trade Agreement (NAFTA) and, subject to limited exceptions, exports of crude oil and petroleum products have also been free or exempt from tariffs.

On November 30, 2018, the Presidents of Mexico and the United States and the Prime Minister of Canada signed the Treaty between Mexico, the United States and Canada (USMCA), which entered into force on July 1, 2020, replacing NAFTA.

Economic conditions in Mexico are highly correlated with economic conditions in the United States due to the physical proximity and high degree of economic activity between the two countries.

Therefore, political developments in the United States, including changes in government administration and policies, may also have an impact on the U.S. dollar/Mexican peso exchange rate, economic conditions in Mexico and global capital markets.

Pemex

This company is obligated to make significant payments to the Mexican government, including in the form of taxes and duties, which may limit its ability to make capital investments.

During the first six months of 2022, total taxes and duties paid by Pemex were Ps.278.5 billion, or 24.0% of its net sales revenues in the form of taxes and duties, which constituted a substantial portion of the Mexican government’s revenues.

Through a presidential decree on April 21, 2020, the Mexican government granted Pemex a reduction of its tax burden equivalent to Ps.65 billion for 2020 through a tax credit applicable to the Derecho por la Utilidad Compartida (DUC).

Then, on February 19, 2021, the Mexican government, through another presidential decree, granted Pemex a reduction of its tax burden equivalent to Ps. 73.3 billion for 2021, also through a tax credit applicable to the Derecho por la Utilidad Compartida (DUC).

As of December 31, 2021, the entire tax credit was applied.

Likewise, as of January 1, 2022, 2021 and 2020, the applicable rate of this tax credit was 40%, 54% and 58%, respectively.

Because the Mexican economy is strongly influenced by the U.S. economy, policies that may be adopted by the U.S. government that are unfavorable to Mexico may adversely affect economic conditions in Mexico and could, in turn, have an adverse effect on Pemex’s financial condition, results of operations and ability to service its debt.

 

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