10 Sep 2021
The government of Mexico issued a proposal to steeply reduce the tax burden for state oil company Petroleos Mexicanos, and forecasts 4.1% economic growth for 2022.
As Latin America’s second largest economy continues to rally from its pandemic-induced slump, the finance ministry’s draft budget for 2022 outlined a profit-sharing rate (DUC) – in effect a tax paid to the government - of 40% for the state oil firm, known as Pemex, Reuters reports.
The DUC – which is the largest payment the oil company makes to the government – has been progressively reduced from 65% in 2019 to 58% in 2020 and 54% this year.
President of Mexico Andres Manuel Lopez Obrador is determined to revive Pemex, which since it was established in 1938 has been a strong symbol of self-reliance in the country.
Last year Mexico endured its deepest recession in close to 90 years as the coronavirus crisis impacted all sectors of the economy, with contracting by around 8.5%.
The government forecasts to make up most of the loss in 2021, as export activity and the effect of economic stimulus spending by the U.S. – Mexico’s main trade partner – help to bolster the economic recovery.
Mexico’s Finance Minister Rogelio Ramirez de la O, whilst presenting the new budget to Congress, stated the plans would concentrate on citizens’ well-being, financial stability and regional development support. He added that no new taxes would be implemented.
The budget's forecast "growth rate of 4.1% for 2022 seems very optimistic. Tax authorities will improve tax take but it won't be enough," according to Raul Gonzalez, a former finance ministry official.
Following the initial presentation, the peso barely moved, trading predominantly flat against the dollar.