Gambling the rent money

8 September 2009 By Martin Hutchinson

Mexico s $8bn oil hedging gain distracts attention from its operational failings. Pemex s resistance to outsiders caused oil output to fall in a region where others find recordbreaking fields. Economically suicidal statist policies can t be offset by even the savviest hedging.

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Mexico recorded a profit of $8bn on its hedges of 2009 oil output, locking in a price of $70 per barrel for the output in 2008 at an option premium cost of $1.5bn, according to the Financial Times. The country has so far averaged less than $50 per barrel for its oil exports in 2009. Mexico is currently attempting to lock in a floor price of $5055 for 2010.

Mexican President Felipe Calderon has replaced Pemex director general Jesus Reyes Heroles as part of a midterm cabinet reshuffle, with Juan Jose Suarez, a former banker and beer executive with Citigroup and Grupo Modelo. Jose Suarez has a mandate to accelerate the exploration and exploitation of new gas and crude reserves.
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According to the Economist poll of forecasters, Mexico's GDP is expected to decline by 7.1% in 2009, with inflation of 5.4%, followed by 2.8% growth in 2010. Its 2009 balance of payments deficit is expected to be 2.4% of GDP and its budget deficit 4% of GDP.

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