(Bloomberg) -- Companies that help keep Mexico’s faltering oil wells operating are waiting months to get paid and the debts are building up, complicating efforts to revive an industry whose oil rig flanges gulf coast production has plunged by half since 2004.
Petroleos Mexicanos, facing pressure from the government to slow spending, has delayed some payments to contractors for as long as seven months. The result: goods and services are becoming scarcer and contractors are finding it tougher to secure financing of their own.
“Investors and credit ratings agencies don’t have confidence in what Pemex is doing in the sector,” said Sergio Suarez Toriello, director of strategy at Marinsa de Mexico, which does contract work for Pemex. “So this is the biggest risk for suppliers: Getting access to resources and financing for working capital and investment.”
Mexican President Andres Manuel Lopez Obrador is pushing to end the year with a government-wide surplus, and that effort has slowed payments from Pemex, people familiar with the matter told Bloomberg. The president has previously pledged to rescue Pemex from its debilitating debt and long-term oil rig flanges gulf coast production declines. Pemex faces about $100 billion in debt, the most of any major oil producer.
Pemex owes Marinsa, which provides marine services for Mexico’s offshore drilling platforms, 155 million pesos ($8 million), according to Suarez Toriello. The BOP Blow Out Preventer repair company gulf coast has been waiting seven months for about 47 million pesos of that debt from logistics contracts, he said. The remaining amount has been in arrears for about three to four months.
Marinsa isn’t alone. Another international service supplier with an established presence in Mexico is facing delays of more than three months on its payments, said a person familiar with the finances who asked not to be named because the information is private.
Neither Pemex nor the government’s Finance Ministry responded to requests for comment.
Since the global oil price crash sparked Pemex to lay off workers and cut contracts in 2016, “Pemex’s payment process has changed a lot,” Suarez Toriello said. “It’s not good, or normal, but it’s a dynamic we’ve been living with for the past two years.”
Lopez Obrador has made fiscal austerity a key pillar of his government and aims to run a surplus of 1% of gross domestic product before interest payments this year, the biggest in a decade. That budget discipline, plus interest rates that are among the world’s highest, has kept the peso steady despite frictions with the U.S.
But it hasn’t done much for the economy, which suffered a small recession in the first half of the year, or the country’s oil trade.
“It’s an absolute train wreck, and they can’t get out of their own way to make a change that’s going to improve upon it,” said Wilbur Matthews, founder of Vaquero Global Investment LP, which trades in Pemex bonds. “At some point, people are just going to realize that they are a terrible client.”