May 26, 2019 / 8:51 PM / 25 days ago

Mexico's president says no layoffs planned at indebted Pemex

May 26 (Reuters) - President Andres Manuel Lopez Obrador said Sunday that there will be no layoffs of workers from state oil company Pemex, whose soaring debt and obligations have worried investors and sparked fears of a ratings downgrade.

In recent weeks, the president announced measures designed to shore up the finances of the world’s most indebted oil company by extending its lines of credit with banks and reducing its tax burden.

“There will be no layoffs, (employers’) pensions are completely safeguarded and I say to them: we are going to improve the medical services that are bad,” Lopez Obrador said.

Next year will see a greater government budget, making it possible to increase gasoline production and other hydrocarbons, Lopez Obrador added.

The veteran leftist took office in December promising to revive Pemex, whose financial debt surged 75 percent under the previous administration and now stands at over $106 billion.

The company’s total obligations, including pensions, exceed its assets by more than $70 billion.

Lopez Obrador’s plans include building a new $8 billion refinery, refurbishing existing refineries and reversing a steady decline in crude production.

But credit agencies have warned of downgrading Pemex bonds to “junk” status, which would likely sharply increase borrowing costs as many investors dump its bonds.

Critics have also questioned the government’s support for Pemex even as it executes on an austerity plan. Spending has been slashed for several major government departments, including the health service.

On Tuesday, German Martinez, head of Mexico’s social security institute (IMSS), resigned, saying that budget cuts and lay-offs ordered by Lopez Obrador’s finance minister were harming health services for the poor. (Reporting by Lizbeth Diaz; writing by Delphine Schrank; editing by Dave Graham and Susan Thomas)

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