Pemex replaces CFO as Mexico’s president tightens his grip

MEXICO CITY (Bloomberg) --Petroleos Mexicanos is replacing its finance chief as President Andres Manuel Lopez Obrador tightens his grip on the struggling state oil giant.

In Pemex’s first C-suite shift under the current administration, the Mexican producer named risk management chief Antonio Lopez Velarde its chief financial officer, replacing Alberto Velazquez Garcia, who will run a new unit. Velarde is taking the post in an interim capacity Wednesday, the company said in a statement, without clarifying whether he’ll remain at the job or eventually be replaced.

Under Velazquez’s leadership, Pemex has seen debts to suppliers and partners skyrocket, while oil production has declined for almost a decade and a half. Velazquez was also criticized for failing to instill confidence among investors. At his first New York roadshow as CFO in 2019, four investors said he didn’t deliver a clear message and one of them called for his resignation.

“Communication wasn’t his strong suit, and that created a perception among investors, he failed to convince them,” said Alejandra Leon, Latin America upstream director at IHS Markit. Replacing him “opens the possibility to change” but it is far from a solution to Pemex’s myriad financial woes, she said.

Pemex didn’t immediately respond to a request for comment.

Velarde’s career at Pemex has spanned two decades and includes heading the capital market and derivatives department, and steering the execution of the company’s insurance underwriting. His appointment was largely spearheaded by the finance ministry, according to people familiar with the reshuffle.

The state-owned oil company’s decision-making power has been increasingly concentrated at the government level, leaving little room for maneuver by the new finance director. “The decisions being taken at Pemex are now coming from the finance ministry and the presidency,” Leon said.

Lopez Obrador, widely known as AMLO, has made Pemex the focus of his strategy to revive the Mexican economy by making it self-sufficient in gasoline, and he’s rolled back the liberalizing energy reforms of his predecessor to give Pemex a bigger role in the domestic market.

The strategy, which involves allocating more resources to Pemex’s unprofitable refining business and reducing crude exports to feed the plants instead, has come under criticism from international ratings agencies such as Fitch Ratings and Moody’s Corp., which rate Pemex bonds as junk.

The company’s financial debt has soared to $113 billion, the most of any oil major, and it’s under pressure to reverse output declines after high spending that hasn’t done much to boost reserves.

Velazquez, who had been finance chief since President AMLO took power in late 2018, will head the newly created unit in charge of selling oil, gas and petrochemical products to the domestic market. He’ll report directly to Chief Executive Officer Octavio Romero, who has also been at his post since late 2018, and won’t require additional funding resources.

Lopez Obrador and Finance Minister Rogelio Ramirez de la O have pledged to keep aiding the oil giant, whose bonds have been likened to sovereign debt.

The latest management shuffle follows the resignation of Miguel Angel Lozada, the previous director of exploration and production at Pemex, in February, and the departure of Vanessa Ramirez, the former CFO of Pemex’s trading arm PMI, in April.