Mexican gasoline, among the cheapest in the world, but at what cost?

The cost of having one of the cheapest gasoline

The Mexican government stopped charging 100% of the Special Tax on Production and Services for gasoline this week and, in addition, increased the extra stimulus for importers and suppliers.

This maneuver keeps the rise in gasoline prices at a maximum, as President Andrés Manuel López Obrador presumed, in a social media video released over the weekend, recognizing Pemex and its workers.

However, with this policy, the price for public finances of having one of the cheapest gasolines in the world is almost 18,000 million pesos, according to calculations by the energy consultant Ramses Pech.

Since by stopping charging the IEPS on all fuels, the Mexican government stops collecting 7,217 million pesos for regular gasoline; 1,734 million pesos for the premium and 4,299 pesos for taxes that are not charged on diesel consumption.

To this must be added the complementary stimulus (indirect subsidy), equivalent to 5,078 million pesos, according to the specialist’s calculations.

The sum is around 17,932 million pesos that the government will ‘lose’, in a single week, due to its gasoline price control policy.

In 2021 alone, gasoline subsidies cost the Mexican government 104 billion pesos, compared to 3,466 the previous year, the newspaper recently noted. The country: “It is a huge amount that is equivalent to what was budgeted for national security in 2022.” And it is also more than half of the budget that will go to the Plan to strengthen the health system presented this Tuesday by the government of López Obrador.