Pemex Suggests Factoring Amid Supplier Payment Delays

Mexican oil giant Petróleos Mexicanos, also known as Pemex, created a headache for its suppliers when it announced a new policy of paying them on terms of up to 180 days, a move the company justified by declining gas prices across the globe.

Its procurement director, Gustavo Escobar, is now trying to appease these suppliers, according to Wednesday (Dec. 2) reports in The Wall Street Journal.

While Escobar reportedly held meetings across its operational areas to discuss the changes with suppliers, the executive stood by the company’s recent payment changes, highlighting Pemex’s need to cut $4 billion from its yearly budget.

But the procurement official assured suppliers that it would help them ease the financial burden of these changes. Reports said Escobar encouraged suppliers to take advantage of factoring services and stated that Pemex would negotiate with lenders to reduce the costs of this financing from 8 or 9 percent down to 5 or 6 percent.

[bctt tweet=”Pemex encouraged suppliers to take advantage of factoring services.”]

Reports said suppliers had mixed responses to Pemex’s recommendations.

“First, they came to us and said they needed a discount of 10 percent on products and 15 percent on services because they have money problems,” said one unnamed supplier. “Now, they want to pay us in six months in a best-case scenario.”

Pemex shifted from its previous 20-day payment terms to 180-day terms in September, the publication said. Suppliers leaked that decision to the media, adding that the 20-day payment term policy was one that generally led to between 60- and 90-day payment terms, because the 20-day span only began after invoice approval, which took weeks.

Some suppliers have also told reporters that factoring is expensive and will create an added financial burden on them. Some contractors are also accusing Pemex of not doing enough to reduce its spending.

The head of the Mexican Petroleum Industry Association, Erick Legorreta, however, said that Pemex’s recommendations are welcome and that the company has often paid its suppliers more quickly than even the government, adding that factoring will help suppliers access more working capital.

Pemex Interim Chief Financial Officer Rodolfo Campos has also backed the supplier payment changes, suggesting that it actually brings more financial security to suppliers by increasing transparency as to when suppliers will actually see their invoices settled.