(Bloomberg) -- Mexico is seeking as much as 138.7 billion pesos ($7.3 billion) worth of tax breaks for Petroleos Mexicanos in 2020 and 2021 as part of measures designed to help the debt-laden state driller, according to a document sent to Bloomberg by the office of Pemex’s Chief Executive Officer Octavio Romero.
The government will propose changes to the Hydrocarbons Revenue Law on Sept. 8 that would affect Pemex’s profit-sharing duty, known as DUC, which represents more than 85% of direct taxes on Pemex’s oil production, the document said. The proposal would reduce the current profit-sharing duty from 65% today, to 58% next year and 54% in 2021, resulting in savings of 47.1 billion pesos and 91.6 billion pesos, respectively.
The gradual cuts are expected to replace a previous Finance Ministry proposal to transfer $7 billion to Pemex from the Oil Revenue Stabilization Fund, known as FEIP, Romero told Bloomberg in a May 16 interview. The yield on Pemex bonds maturing in 2027 pared a rise earlier in the day to just 0.3 basis points, to 6.49%.
“Pemex faces a high tax burden, which is why the government of Mexico has decided to modify its fiscal regime to lighten it,” the document said. “This modification will be made gradually over the next few years, in such a way that it does not generate fiscal imbalances for the government.”
(Updates with additional information from document in paragraphs two, three and four. Adds bond movements.)
--With assistance from Justin Villamil, Nacha Cattan and Eric Martin.
To contact the reporter on this story: Amy Stillman in Mexico City at astillman7@bloomberg.net
To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Mike Jeffers, Catherine Traywick
©2019 Bloomberg L.P.
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