The Mexican government can
Last year, the country earned a record $6.4 billion from contracts brokered with large banks, including JPMorgan Chase, Goldman Sachs, and Citigroup.
The 2016 agreement, which began coverage on December 1st of last year, guaranteed Mexico profits equivalent to a $49 Brent barrel.
The $2.9 billion figure, which the IMF provided in response to questions emailed to them by Bloomberg, has yet to be confirmed by the Mexican Energy Ministry. The hedge will be completed at the end of this month, at which point the government will either validate or discredit the figure.
For over a decade, Mexico’s government has paid for a hedge every year as part of one of the world’s biggest sovereign oil derivatives trade. The profits from the strategy help Mexico City pad budgets, especially as new austerity measures make citizens increasingly restless.
“The Mexican government has done a good job at buying these put options because they have helped to smooth the transition of public finances towards lower oil prices, but it’s just breathing room,” Carlos Capistran, a Bank of America economist,
State-run oil giant Pemex, which finances roughly 20 percent of the federal budget,
By Zainab Calcuttawala for Oilprice.com
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