Fitch lifts Pemex outlook to positive

Fitch Ratings said it revised the outlook for Petroleos Mexicanos's (Pemex) BBB- foreign- and BBB local-currency issuer default ratings to positive from stable following the revision of Mexico's outlook to positive from stable, which came on the heels of the Mexican government's passage of pension reform legislation, the so-called ISSSTE reform, and the passage of the Fiscal Responsibility Law in 2006.

As a state-owned oil company, Pemex's foreign-currency rating remains highly linked with the BBB sovereign rating. However, the agency said it currently rates Pemex one notch lower than Mexico due to the increasing debt levels in an environment of higher oil prices. The current rating also incorporates Fitch's concern regarding a shifting of debt from the sovereign to Pemex, as Pemex's substantial tax burden relative to revenues has forced the company, until 2005, to seek external funding to maintain an aggressive capital budget.

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