November 8, 2018 / 6:07 PM / in a month

UPDATE 2-Mexico should fix Pemex finances before new refining investments -IMF

(Add details on Pemex’s debt)

MEXICO CITY, Nov 8 (Reuters) - The International Monetary Fund (IMF) on Thursday called for an improvement in Mexican state oil company Pemex’s financial position before it invests in building new refineries.

Mexico’s incoming leftist government has vowed to build what could be the country’s largest oil refinery, with construction set to begin as soon as next year. It says investment could be financed by Pemex.

“A strengthening of Pemex’s financial situation was a prerequisite to contemplating new investments in refining,” the IMF said in a statement.

Pemex held total financial debt of $106 billion as of Sept. 30, with nearly 86 percent of the debt denominated in currencies other than the Mexican peso, mainly in U.S. dollars, according to the firm’s quarterly results report.

On Oct. 31, credit agency Fitch revised Mexico’s rating outlook to negative, citing “growing risks for contingent liabilities” for Mexico from Pemex.

“Proposals that Pemex invest in new refining capacity to substitute for gasoline imports would entail higher borrowing and larger contingent liabilities to the government,” Fitch said at the time.

Fitch revised its outlook two days after President-elect Andres Manuel Lopez Obrador, who takes office on Dec. 1, said he would cancel a partly built new Mexico City airport in which billions of dollars have already been invested, pummeling the peso currency.

The IMF also called for “a continuation of the energy sector reform and private participation in the oil and gas sector to bring in necessary investment and boost production and growth.”

Lopez Obrador opposed a constitutional change pushed through by Mexican President Enrique Pena Nieto that opened production and exploration in the energy sector to private capital.

Mexico has already awarded more than 100 oil exploration and production contracts to private companies, which Lopez Obrador has said he would respect as long as a review does not find evidence of corruption. (Reporting by Anthony Esposito; Editing by Michael O’Boyle, Bernadette Baum and Susan Thomas)

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