1、TRADE IDEA We hold the view that despite the higher political uncertainty in Mexico,markets have already priced in an adverse scenario in the short term.We have been seeing premiums across local interest rates and the MXN,in particular.We are also seeing loose global financial conditions and low US
2、rates,which support lower rates globally.Additionally,our EM portfolio flows model has been pointing to an improvement in flows.That said,we are comfortable receiving rates in the long-end of the TIIE curve through 5y and 10y tenors and holding a long MXN position against the EUR.EM ECONOMICS KEY ME
3、SSAGES Mexico said on Friday the 2019 extraordinary support for Pemex will be USD4.7bn most of which was already announced.We see this as a step in the right direction and believe that the multi-annual tax relief was a much-needed structural measure.Yet,owing to our high expectations we think the pa
4、ckage does not offer substantial relief.We are concerned about policy measures consistently being reactive and ending short of what is needed.Hence,we do not think the measures will lift the veil of uncertainty over the state-owned company.In our view,markets have already priced in an adverse scenar
5、io in the short term.We are comfortable receiving rates in the long-end of the TIIE curve through 5y and 10y tenors and holding a long MXN position against the EUR.FLASH|LATAM 15 February 2019 On the right track but at odds with expectations,we think.Our expectations for the government support for a
6、iling Pemex were high.We were hoping for more bolder measures,even if it meant adverse fiscal implications.The measures announced today add just 12%more aid in the form of tax relief(reliefs worth MXN11bn were announced on 28 January).Moreover,uncertainty still remains on the estimation of USD1.6bn
7、in extra revenues from curbing fuel theft.Mind the risk a potential feedback loop emerging from timid government measures.Todays announcement may be interpreted as a third iteration(the previous two being the 2019 budget and the 28 January tax relief)in less than three months to take Pemex out of th
8、e woods in terms of short and medium-term pressures and align it with the governments new strategy for the energy sector.By falling short on every measure,the government runs the risk of being perceived as behind the events.It also complicates the task of lifting the veil of uncertainty over Pemexs
9、finances and credit rating.Is the effort sufficient,sustainable and satisfactory?Probably not sufficient enough to eliminate the risk of further financial pressure on Pemex.It may be sustainable and could mean a structural change as tax relief for Pemex is welcome and necessary.Yet,we do not think t
10、his is satisfactory,especially for credit rating agencies as the package only provides a marginal change with respect to the current support programmes and uncertainties remain on the new policy guidelines for the energy sector.Please refer to important information and MAR disclosures at the end of
11、this report Mexico:PEMEX relief measures fall short of expectations Table 1:The Package Sources:Banxico,BNP Paribas.*Source:SCHP,BNP Paribas.Note:*This was calculated with average exchange rate considered by SHCP as the official presentation was still showing the old USD0.6bn figure.1 Joel Virgen Ro
12、jano,Mexico Economist|BNP Paribas Securities Corp.Andre Digiacomo,FX&IR Latin America Strategy|Banco BNP Paribas Brasil SA.MXN bn USD bn1.Capitalization251.32.Cash-out of Pension Liability promissory notes351.83.Additional fiscal relief150.8*4.Revenues from fuel theft recovery321.6TOTAL1074.7Governm
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