The loudest guffaw of the weekend among Mexican consumers was caused by the gasoline price reduction issued by Treasury and Public Finance Secretary (SHCP) José Antonio Meade Kuribreña. The price per liter of magna, premium and diesel went down by two centavos; by current exchange rates, it’s about one tenth of a U.S. penny.
The best signal that Secretary Meade Kuribreña is not quite sure what experiment he’s carrying on was his own statement last Wednesday when in a veiled statement he pointed that “we’re checking out” the announcement to be made last Friday which finally was the two centavos reduction. “We’ll keep on revising the price to better reflect international conditions”, whatever that meant to Meade Kuribreña.
Since the Jan. 1 20 percent increase to fuels, President Enrique Peña Nieto seems to have lost the helm in dealing with the problems he wrought, to begin with, with his attempts at liberating fuel prices. Indeed whatever it is that the SHCP will do from now on is anyone’s guess.
In theory, this new “reduction” Meade Kuribreña is maneuvering has more to do with politics than controlling prices or slowly releasing the price of fuels to consumers who have forever been accustomed to fixed fuel rates. It is precisely the uncertainty caused by the Peña Nieto policy of tinkering with fuel prices and failed Energy Reforms what sent his popularity rolling downhill and still plunging.
For the mean time the two centavo reduction is only temporary as it is expected to last only until Feb. 21 when Meade Kuribreña is bound to announce another price change, either up or down. The tactic seems to be to get the public used to constant price changing – as it is in the United States –to make it look like there is competition.
Make it look is correct because with a small zigzagging of prices one or two centavos up and down people will not feel the pinch at the pump the way it was last month and that inevitably destabilized the economic plans of Mexico’s Central Bank (Banxico) to contain inflation for 2017. The fuel hikes unavoidably spiked prices of consumer goods up but as much as 1.7 percent, the highest January increase in the past 18 years.
The decision announced Friday is, according to SHCP officials a “fiscal tax decision,” because “at no moment were the basics of price determination altered.” The price fix will be, said Guillermo Zuñiga of the Price Regulatory Committee at SHCP, that “the formula” for establishing prices nowadays is the oil quotations at the international market, the dollar-peso exchange rate as half of the fuel used in Mexico is imported, cost of logistics and the profit allowed to filling station operators and of course, the taxes slapped on consumers which is about five pesos per liter.
Just as a side line, Zuñiga refused to say what is the profit permitted to pump vendors and the amount is kept as a state secret. What many a Mexican consumer wants to know is if filling stations concessionaires do have a profit, or is the government looking the other way as they shortchange customers selling “900-milliliter liters” as they are infamous for.
What we know for sure is that SHCP awarded a “fiscal stimuli” to filling station operators of about 200 million pesos per day to keep prices down.
After the January fuel hike walloping the government was supposed to increase prices again last Feb. 3 but the people’s reaction throughout the nation – virulent and irate – was a warning to Peña Nieto and his team of financial “experts” to watch their step because now they are walking on politically slippery turf.
Let’s see how this new experiment of daily price reviewing works for the SHCP and Petróleos Mexicanos (Pemex). Zuñiga said that the regulatory committee will meet on a daily basis to determine the different prices applying to the subdivision of 90 different economic regions they split the nation into.
But in the end this new “policy” shows Mexicans that the Peña Nieto Administration got shook up by the January violence and it is indeed politically damaging not just to the President and all his men, but to the people’s pockets who for now – for lack of a solid direction – can’t budget the cost of fuels.