State oil monopoly Petroleos Mexicanos' board of directors has approved a joint venture with private Mexican petrochemical company Mexichem that involves capital injection and asset integration totaling $556 million.

The deal will upgrade Pemex's vinyl chloride monomer, or VCM, plant in the Gulf coast state of Veracruz, increasing production by 24,000 tons in the first year of operation and 217,000 tons in the third year, Mexichem said in a regulatory filing.

It also will "allow the vinyl-chlorine chain in Mexico to maintain its competiveness, given its disadvantages in terms of integration and size compared to its North American peers," the company added.

Mexico City-based Pemex offered some details of the public-private association at the conclusion of the extraordinary meeting of its board, which finally approved the venture a year and a half after the agreement was announced.

"In this venture, Mexichem provides the capital needed for infrastructure modernization, while the lands at the Pajaritos petrochemical complex in Coatzacoalcos (Veracruz state) will be leased for this purpose," Pemex said.

The board "determined that the industrial process for making ethylene and vinyl chloride monomer will be reserved for Pemex Petroquimica with unionized Pemex staff, safeguarding workers' rights at all times."

Mexichem employs more than 10,000 people across the Americas and is a leader in Latin America's chemical and petrochemical industry with more than $3 billion in annual revenue.

Pemex is the world's fourth-largest oil producer and the biggest source of revenue for the Mexican Treasury. EFE