The Beginning of 2017 for Mexico

The New Year has brought about a difficult economic reality for Mexico. The general outlook for prior years was generally optimistic, based on the structural reforms previously used by the federal government to outline its plan of governance. Despite success in uniting Mexican political parties, international conditions – specifically the drop in oil prices – affected the price of consumer goods, the stability of the Peso against the U.S. Dollar, the value of wages and the price of gasoline.  This change caused serious concerns among large sectors of the population. The technical explanations given by government officials to justify such effects have been insufficient, and there is strong public dissatisfaction with the 14% to 20% increase in gasoline prices. For instance, it was reported that the gasoline price adjustment, among other things, was due to the parity between the Mexican Peso and the U.S. Dollar, as well as the increased oil prices in the global market, all with the idea that the decrease of gasoline subsidies would strengthen public finance. Furthermore, it was reported that in the past the gasoline subsidy was equivalent to seven percent of the gross domestic product, which limited the ability to spend government funds on infrastructure, social programs and addressing the national debt. Considering that Mexico occupies the fourth position in the world when it comes to gasoline consumption per capita, and that such consumption is by groups with higher incomes and socioeconomic status, the official government rationale for continuing with the subsidy did not make sense to many people. The issue is, indeed, complex.  At the border for example, Mexican gasoline retailers do not compete with retailers in other parts of the country, but rather gasoline retailers based in the U.S. border cities.  

  Category: CCN MexicoReport™