The tension between Russia, Ukraine and the member countries of the North Atlantic Treaty Organization (NATO), could affect Mexico’s public finances.
According to analysts consulted by El Economista, the tensions in Europe could have effects on the collection of the Special Tax on Production and Services (IEPS) as well as on fuel prices.
“In the increase in oil prices there is an elasticity that the Ministry of Finance itself calculates when it gives the Economic Package, and it is around 15,000 million pesos for each dollar that the price of a barrel rises,” said James Salazar Salinas, deputy director of economic analysis at CI Banco.
Oil revenues could leave more than estimated this year as the levels of the price of a barrel have increased in recent days due to tensions in Europe. Yesterday the Mexican mix closed the session at 90.52 dollars.
In the General Criteria for Economic Policy for 2022, it was estimated that the Mexican oil mix would trade, on average, at 55.1 dollars per barrel with which they expect to obtain 1.08 billion pesos, in case the price per barrel is exceeded, each extra dollar would represent 13,588 million pesos additional to what was projected.
However, Salazar Salinas added that the inconvenience for Mexico would be the importation of gasoline due to the fiscal stimulus that Mexico grants to them, which could become a subsidy.
The Tax Administration Service (SAT) revealed that the fiscal stimulus for imports of automotive fuels reached 64,347 million pesos in 2021, that is, 62,006 million more than in the same period of 2020, when incentives were only given for 2,340 million of weights.
“It is difficult to evaluate which of the two effects could dominate more, but it is not necessarily good news because if it is considered that more is imported than what is being exported, it could be thought that public finances would be diminished”, commented the executive of CI Bank.
Salazar Salinas recalled that the deficit in the oil trade balance is close to 25,000 million dollars and added to the policy of not increasing, in real terms, the price of gasoline, this would mean that at a certain moment the stimuli can be converted into subsidies. .
Janneth Quiroz Zamora, deputy director of economic analysis at Monex, agreed that the positive side of the European tension is the high price of a barrel of oil and that it has been above 100 dollars, however the collection of the IEPS would be affected.
“The IEPS stimulus can cause an expense because it is already at maximum, this means that there may not be income for this concept,” he said.
A few days ago, it was published in the Official Gazette of the Federation that the tax incentive for Magna gasoline was, for the first time, 100 percent. It should be remembered that this measure helped 80% of the vehicle fleet.
The Monex executive explained that the action of the President of the United States, Joe Biden, to use oil reserves to export it and, thus, face a cut in supply by Russia, could generate a greater supply of the Product, which would affect lower costs in hydrocarbon prices.
Adrián García Gómez, coordinator of income and taxes of the Center for Economic and Budgetary Research (CIEP), commented that before 2014 the IEPS stimulus became a de facto subsidy for the government, therefore there was a negative collection of this special tax .
Meanwhile, the other side of the coin would be that the value of crude oil exports will increase considerably and therefore the IEPS collection will be offset since the fiscal stimulus is given.