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Exclusive: Mexico's government readying roughly US$5 billion Pemex lifeline, source says

Exclusive: Mexico's government readying roughly US$5 billion Pemex lifeline, source says

FILE PHOTO: A logo of the Mexican state oil firm Pemex is pictured at Cadereyta refinery, in Cadereyta, on the outskirts of Monterrey, Mexico August 27, 2020. REUTERS/Daniel Becerril

MEXICO CITY: Mexico's government will inject between US$1.3 billion and US$1.6 billion into state oil company Petroleos Mexicanos (Pemex) this year and offer a tax break of 75 billion Mexican pesos (US$3.68 billion), a senior official told Reuters on Thursday.

The world's most indebted oil company, Pemex had more than US$110 billion in financial debt at the end of the third quarter last year while its liabilities far exceeded its assets.

In the past two years, the government of President Andres Manuel Lopez Obrador has injected billions of dollars in capital in the loss-making company and reduced its tax burden.

The source, who has direct knowledge of the matter but declined to be identified, said the tax reduction will be applied on a monthly basis and be separate from the profit sharing rate (DUC) that was already reduced from 58per cent to 54per cent for this year.

Neither Pemex nor the finance ministry immediately responded to a request for comment. Earlier on Thursday, Lopez Obrador said a new agreement will come into force to further reduce the tax burden on Pemex, but he gave no details.

Last year, the government reduced the DUC, the largest payment Pemex makes to state coffers, from 65per cent to 58per cent.

The source also said the first of several capital injections, scheduled within the next two weeks, will be used to pay down debt, and that it is unlikely Pemex will issue bonds on the international market this year.

Pemex has carried out liability management of different types, including bond refinancing and bank line extensions, totaling more than US$30 billion between 2019 and 2020.

(US$1 = 20.3594 Mexican pesos)

(Reporting by Ana Isabel Martinez in Mexico City; Writing by Stefanie Eschenbacher; Editing by Frank Jack Daniel and Matthew Lewis)

Source: Reuters

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