Economics: A complex public finance picture compounded with a bigger bailout of Pemex
Public finances maintained in September the same basic trend seen in previous months. In the revenue column a deterioration in oil revenues contrasted with higher tax and non-tax revenues. In expenditures, there was a reduction in programmable spending that was particularly severe in the case of physical investment, while non-programmable spending rose, mainly due to rising debt servicing costs. An increase in the primary balance further lowered the public deficit but the 2025 budget targets will be difficult to achieve.
Rounding out the picture, in the third quarter of the year, Pemex sustained production of crude oil, natural gas, and high-value petroleum products, but its financial deterioration deepened even as the financing mechanism announced a few months ago (Luxembourg based trust, issuance of precaps, acquisition of T-Bills, and the injection of resources for Pemex) kicked in. Meeting the goals of the 2025-2035 strategic plan presented this past August look ever further out of reach.
In the week's economic indicators, Inegi's gross fixed investment and private consumption figures for August reaffirmed negative trends that constitute the main obstacle to a rebound in economic growth for the remainder of 2025 and early 2026. Regarding inflation, while consumer inflation receded somewhat in October, the easing was entirely due to an 84bp sequential reduction in the non-core rate, while core inflation climbed to its highest since April 2024. Even in the context of relatively high core inflation, Banxico decided to shave another quarter point off its benchmark interest rate to 7.25% last Thursday, setting the stage for a 2025 close at 7% and heightened uncertainty about central bank policy’s effectiveness in the medium term, and even its credibility.
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