Citizens furious over fuel price hike

pulse

December 31, 2016 7:01 AM

The government plans to end subsidies and let the market dictate prices in March, but Mexicans will feel the pinch at the pump before they start falling.

On January 1, 2017 the price of gasoline in Mexico will increase by 20.1% and for diesel by 16.5%, the Ministry of Finance has announced

President Enrique Pena Nieto has promised that fuel prices will fall thanks to his landmark 2014 energy reform, which ended a seven-decade-old monopoly held by the state-run firm Pemex.

The finance ministry announced Tuesday that the price of gasoline would increase by as much as 20.1 percent to 0.88 dollars per liter on January 1, while diesel would rise by 16.5 percent to 0.83 dollars.

The price ceiling will be adjusted daily from February 18, before letting supply and demand determine them in March.

Around 100 protestors blocked a service station in the Pacific resort of Acapulco on Friday, while Jalisco authorities investigated reports that a drug gang threatened to set fire to service stations.

A protest is planned in the capital on Sunday while Mexicans were urged on social media to block service stations on Monday. People were also encouraged to boycott fuel for three days.

Before the price announcement, fuel shortages had already angered Mexicans in several states.

"The fuel price increase causes outrage. People are right: it's not fair. I support each family, I share their outrage and anger," Aristoteles Sandoval, the governor of western Jalisco state, wrote on Twitter.

Sandoval's criticism drew particular attention because he is a member of Pena Nieto's centrist Institutional Revolutionary Party (PRI). Furious opposition governors plan to meet with federal government officials next week to discuss the price hike.

"We just had a security meeting (between governors and Pena Nieto) days ago and there was not one comment about this situation," said Mexico City's leftist Mayor Miguel Angel Mancera.

Competitive prices

The protests are the latest headache for Pena Nieto, whose popularity has plummeted below 25 percent this year due to his government's failure to curb drug-related violence, disappointing economic growth and his unpopular decision to host Donald Trump before the anti-immigration Republican won the US presidential election.

Finance Minister Jose Antonio Meade defended the fuel price increase, saying it would not trigger more inflation and that eventually the "final price for consumers will be among the most competitive in the world."

Mexican energy industry expert David Shields voiced doubts that the demonstrations will force the government to change its mind.

"After such a blunt announcement, it's very hard for the government to back down because it has a very small margin. The country's fiscal situation is terrible and you can't keep subsidizing gasoline," Shields told AFP.

The fall in global oil prices in recent years has forced the government to cut its budget and slash spending at Pemex.

And the peso has fallen to historic lows due to Trump's protectionist rhetoric against Mexico.

Fewer tips?

The liberalization of gasoline prices was supposed to begin in 2018, but the government decided to start it now.

"An immediate drop in prices was an unreal expectation. We have seen a very strong depreciation of the peso," Shields said.

In Mexico City, service station worker Maria de la Luz Lopez worried that the price increases could hurt her.

"I'm afraid that to compensate for the increase, (customers) will no longer give us tips," said Lopez, who like many in her field does not earn a wage and depends on the generosity of drivers.

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