The credit rating agency Moody’s increased the rating of Mexico’s state-owned oil and gas firm Petróleos Mexicanos (Pemex) by two notches, from B3 to B1, on Monday, citing the Mexican government’s “greater commitment” to helping the company meet its financial obligations through 2027. 

The decision marks a major change in the perception of Pemex’s credit risk, as President Claudia Sheinbaum’s administration aims to leverage its 2025-2035 Strategic Plan to alleviate financial pressure on Pemex. 

The government issued US $12 billion in bonds to help Pemex in July, before establishing a 250 billion-peso ($4.4 billion) investment fund for the oil company in August. 

“These actions indicate a change in the government’s approach,” said Moody’s Senior Vice President of Credit Roxana Muñoz. “The rating upgrade reflects a greater commitment by the current Mexican administration to support Pemex.” 

Moody’s revised its government support assumption for Pemex upward from high to very high. Meanwhile, it left Pemex’s baseline credit assessment (BCA) at the lowest on its scale, or “ca,” due to the company’s poor stand-alone credit strength. 

“Pemex continues to face persistent structural challenges, which we expect will continue to pressure its financial performance,” Muñoz said.

Muñoz explained that the “stable” outlook assigned to Pemex means that Moody’s does not expect a further rating change in the short term. However, it could upgrade the company if it can implement a sustainable strategy and demonstrate a real recovery in its operating performance and cash generation.

“Unless structural measures are implemented to effectively reduce these cash needs, the ratings will remain constrained,” Moody’s stated. “Given the strong ties between Pemex and the government of Mexico, governance risk remains a relevant factor in the rating action.” 

Moody’s said that Pemex will need roughly US $7 billion a year in funds between 2026 and 2027, which the Mexican government says it will help it obtain. 

“The Finance Ministry reiterates that it will continue to support Petróleos Mexicanos’ financial strategy, complementing the actions the company is taking to improve its operating situation and administrative management,” the Finance Ministry said in a statement. 

However, Moody’s warned that a downgrade of the government of Mexico’s ‘Baa2’ rating could also contribute to a downgrade of Pemex’s rating.

The agency also highlighted the need for more details on the potential use of the investment fund to assess its attractiveness to the private sector.

With reports from Milenio, El Financiero and El País