LADB Article ID: 80207
By: Carlos Navarro
The Mexican government announced at the beginning of February that the price of gasoline would remain unchanged for the first half of the month, a welcome development for consumers who were reeling from a hike of up to 20% in some areas at the beginning of the year. The increase, a function of the government’s efforts to tie the retail price for gasoline in Mexico to the free market, was one of several price hikes anticipated for 2017. The move to free up prices was linked in part to the elimination of subsidies. In announcing the decision, officials initially insisted that prices were responding to market conditions and not to pressure from consumers and opposition political parties. The initial round of increases in January was met with intense and sometimes violent demonstrations in many parts of the country to protest what critics described as the gasolinazo. Officials at the finance ministry (Secretaría de Hacienda y Crédito Público, SHCP) later acknowledged that some subsidies were injected into the market to keep the price stable for Feb. 4-17. By lowering the tax on production and services (Impuesto Especial sobre Producción y Servicios, IEPS), the SHCP was able to keep gasoline prices from increasing.
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