“So that there is no abuse”: AMLO recommends that the Treasury not apply the inflationary adjustment on January 1

Archive image.  A sign for the state-owned company Pemex shows its prices at a gas station in Monterrey, Mexico.  June 17, 2019. REUTERS / Daniel Becerril
Archive image. A sign for the state-owned company Pemex shows its prices at a gas station in Monterrey, Mexico. June 17, 2019. REUTERS / Daniel Becerril

Faced with questions about the possible increase in gasoline prices, the Mexican president, Andrés Manuel López Obrador, assured during his morning conference that It is not a petrol, but an adjustment according to inflation.

One of the president’s campaign promises was to avoid “gasoline bumps,” the name given to the significant increase in gasoline prices during the government of former President Enrique Peña Nieto. Given his promise that he will not increase the price of energy, It drew attention that in social networks, according to a journalist during the conference, they begin to talk about a petrol as of January 1.

Given this, the president declared: “They are, really, very nervous. They do not calm down, they do not calm down. They would like to say that there are no changes, that we are the same […] We are consistent. If it was said: there will be no increase in taxes, no increase in taxes. It was said: there will be no gasoline, no gasoline. They will not increase energy prices, as you can see here, in real terms. That is to say, they will never rise above inflation.”

Mexican President Andrés Manuel López Obrador gestures during a press conference at the National Palace in downtown Mexico City, Mexico, on November 13, 2020. REUTERS / Carlos Jasso / File photo
Mexican President Andrés Manuel López Obrador gestures during a press conference at the National Palace in downtown Mexico City, Mexico, on November 13, 2020. REUTERS / Carlos Jasso / File photo

He also commented that he will speak with the Ministry of Finance and Public Credit to arrange that the increase in gasoline prices, adjusted for inflation, does not take place from January. This, as stated, to avoid excessive increases in the price of energy consumers.

On the way in which the price readjustment is calculated, the Chief Executive explained: “There is no tax increase, what there is is an adjustment according to inflation […] What do you do? It is added. If inflation is 3%, that is what must be added throughout the year ”.

Although the price increase does not imply new taxes, it is an increase in the Special tax on production and services (IEPS). However, as López Obrador explained, this is only a readjustment that is carried out annually by the SHCP.

(Photos: Pixabay)
(Photos: Pixabay)

The IEPS is not only applicable to energy, but also it also affects the price of cigarettes and sugary drinks like soft drinks. In this sense, the IEPS for cigarettes will be 3.32%, for sugary drinks it will be 3.3% and for fuels 3.3% for Magna type gasoline and 3.33% for Premium.

In such a way that, due to the adjustment, the price per liter of gasoline Magna will go from 4.95 pesos to 5.1148. Regarding gasoline Premium, instead of paying 4.18 pesos, consumers will have to pay 4.3192 pesos per liter of fuel.

This adjustment is not about a “petrol hit” like the one seen during the administration of former president Enrique Peña Nieto. On that occasion, the sudden increase of up to 20% in the price of fuels had to do with the behavior of the market after the energy business was opened to private investment as a consequence of the Energetic reform.

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This reform, raised as an achievement of the administration of the former president by the Institutional Revolutionary Party (PRI), according to the former president himself, was going to promote a reduction in gasoline prices. However, at the beginning of 2017 the situation was very different.

The discontent caused by the increase in the price of energy caused signs of disagreement and protests that led to the closure of several gas stations, road closures and later, fuel shortages in various regions of the country.

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