Home ListingJuly 31, 2014

Mexico Mulls Taking On $53B of Oil Pension Liabilities

Two state-owned companies could be relieved of a significant chunk of pension liabilities if new oil sector rules are passed by Mexico’s government.

Reported by Featured Author

The Mexican government is set to take on a significant proportion of the country’s biggest oil producer’s pension liabilities in an effort to free up capital for other projects, according to reports.

The government is considering taking on roughly 700 billion pesos ($53.3 billion) in pension liabilities from Petroleos Mexicanos (Pemex) and Comisión Federal de Electricidad (CFE), state-owned oil producers and electricity providers, according to Bloomberg.

The pension changes are part of a wider set of new legislation being considered by Mexico—including the introduction of tax rules for Pemex and CFE, and contract guidelines for private producers—aimed at opening up the country’s oil sector from Pemex’s near-monopoly.

In return for offloading more than a third of their liabilities, Pemex and CFE would be required to reduce their remaining liabilities within 12 months, Bloomberg reported. This is likely to involve a shift from a defined benefit (DB) scheme to defined contribution (DC). Any changes would have to be agreed by workers’ unions as well as the oil companies.

According to Reuters, Pemex and CFE have combined pension liabilities of roughly 2 trillion pesos ($152 billion).

Mexico’s public pensions were switched from DB to DC in 1997, and in the past few years the Afores—pension fund managers—have been given gradually greater investment flexibility from the country’s pension regulator.