Here I am, in Mexico, as the 45th presidency of the United States begins. The talk among the intelligentsia is about NAFTA and, weirdly, the prospects of a war between the United States and China. So I am going to talk about the gasolinazo. Which still has a lot of people upset, as you can see from the image of this angry soldadera pointing a carbine at President Peña.
Now the notionally right-wing National Action Party is trying to escape blame for the price hike. It isn’t the reform what caused the spike, it’s “the tax structure what obscenely raises the price!” says Ricardo Anaya, the head of the party.
Well, not quite. On January 6th, I reported that the price rise was essentially a tax hike. Turns out that is wrong. All of the rise is going to Pemex, to cover the costs of refining or importing the stuff.
Moreover, decontrol of gasoline prices was part of the reform that the PAN did indeed vote for. Now, it is true that the price of gasoline in Mexico is now higher than in the United States. But that is because Pemex is a mess, both in terms of refining the stuff at home and transporting it from the United States at a reasonable price.
Right now, taxes on internal fuel sales serve as a buffer against price swings. When the international price rises, government revenues fall and vice versa. The plan, logically, is for those swings to now be passed on to the consumer. Government revenue will stabilize.
The problem is that Mexican voters, well, they liked price stability. Still, even with the recent riots, I suspect that the administration will follow through on its plans for full liberalization.
⛽️ What have they go to lose? Besides the next election, but that ship, I suspect, has already sailed.