Next Mexican crisis could come soon

Fitch’s downgrade of Mexico’s credit rating by a notch to BBB on Nov. 23 was a warning. Mexico has too many problems to keep going as it has.

Oil production from Pemex, the state-owned monopoly operator, averaged 2.61 million barrels a day in 2009, down 7% from 2008 and 22% from the 2004 peak. Although Pemex budgeted US$19-billion for deep water exploration in 2009, no new large fields have been found, and the company has US$50-billion in debt. In 2008, Mexico’s Congress rejected a proposal from President Felipe Calderon’s to allow some foreign investment in oil exploration.

Pemex needs some help. Its production is declining and exports are falling even faster