Rating agency downgrades Pemex's rating

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President López Obrador

brushed off a credit downgrade to state oil company Pemex , arguing that corruption is being eliminated from its ranks and that the company is stronger than it has been in 30 years.

Fitch

, a rating agency downgraded Pemex , the state oil and gas producer , which holds some USD $106 billion in financial debt . The Fitch downgrade sent the peso currency tumbling on Wednesday morning before it pared losses.

The agency downgraded long-term Issuer Default Ratings (IDRs) for foreign and local currency to BBB- from BBB+ . As well, it downgraded national long-term ratings to AA(mex) from AAA(mex) , changing their outlook to negative from stable.

In a statement, the rating agency explained that “ Fitch considers that the measures recently announced by the Mexican government to aid Pemex aren't enough to compensate the recent deterioration of the company.”

“The ratings are constrained by Pemex’s substantial tax burden , high leverage, significant unfunded pension liabilities , large capital investment requirements, negative equity and exposure to political interference risk ,” Fitch said in a statement.

Fitch

also added that Pemex 's financial difficulties could affect the fuel supply throughout the country , which could have important social and economic consequences for Mexico .

It also claims that “ Pemex has been technically bankrupt since 2009 by having a negative financial balance.”

Then, during his morning news conference, López Obrador criticized the rating agency , saying Fitch was hypocritical because in the past it gave Pemex positive reviews despite fuel theft and the fact that Pemex was plagued by corruption .

“They kept quiet and were complicit , and now that Pemex is recovering they come out with their recommendations and try to grade Pemex ’s performance,” said the President .

Rival rating agency Moody’

s will maintain Pemex’s credit rating in the first half of the year, its Senior Vice President, Nymia Almeida , said on Wednesday, while monitoring how the company performs under López Obrador .

“This government is coming with a very strong mandate to reduce expenses...and this is just what the company needs,” she said at a conference in Mexico City .

Since President López Obrador took office, he has promised to reverse Pemex’s dwindling output and is pushing to stamp out rampant fuel theft from the firm’s pipeline network that has caused significant losses .

His plan to raise output, currently at about 1.8 million barrels per day , is mostly built on plans to pump more government money into exploration and production.

The President also plans to build what would be Mexico’s biggest oil refinery on the southern Gulf coast.