- Mexico’s federal government delivered to Congress the budget package. The government is requesting a budget balance of -4.9% of GDP, a primary deficit of -1.2% of GDP and Financial requirements of the public sector (broad public balance) of -5.4% of GDP. Broad public debt is expected to be 48.8% of GDP at end-2024. The Federal Government net issuance will be higher next year.
- The internal debt ceiling requested by the government is MXN1,990,000 million. Regarding the external debt ceiling, USD18,000 million were requested in the budget proposal. The high external debt ceiling requested seems to be aimed at trying to moderate local issuance opportunistically in order to take advantage of the strong MXN.
- For Pemex, the internal and external debt ceilings are MXN138,100 million and USD3,800 million. The government will contribute MXN 145,000 million for Pemex and apply a reduced DUC (a significant profit sharing tax cut by lowering its DUC to 35%).
- Excess revenues in 2024 are possible due to the conservative oil price and exchange rate assumptions used to build the budget. In our view, the government also seems to be underplaying the risk of a US recession that would drag Mexico’s GDP.