This industry report examines the varying levels of risk, or “moral hazard,” associated with six quasi-sovereign energy companies in Latin America: YPF (Argentina), Petrobras (Brazil), ENAP (Chile), Ecopetrol (Colombia), Pemex (Mexico), and Petroperu (Peru). These companies are crucial to their respective emerging economies, either as significant oil and gas exporters or as domestic refiners of imported oil. Given the substantial capital demands of the exploration and production (E&P) industry, these major companies often have some degree of government ownership. Investing in their bonds is perceived as a moral hazard trade, as it’s believed the sovereign would prevent these companies from defaulting.

Overview of Companies 

These six firms exhibit considerable size, correlating with their country’s population. Petrobras and Pemex are the largest, followed by Ecopetrol and YPF, with ENAP and Petroperu being the smallest. ENAP and Petroperu primarily focus on midstream and downstream operations, with minimal upstream activity, which contributes to their smaller size.

Three of the six companies are fully state-owned: ENAP, Pemex, and Petroperu. Ecopetrol is nearly entirely sovereign-owned (88.49%). The governments hold just over 50% of voting rights in YPF and Petrobras. Specifically, Brazil has 36.61% of Petrobras’s economic rights, and the Argentine government holds 51% of YPF.