Citibanamex recently stated that the liberalisation of gasoline prices in Mexico has increased the probability of achieving a primary surplus in 2017.(1) Further, in its note published in El Economista, Citibanamex stated that the liberalisation will likely maintain macroeconomic stability in the existing complicated environment.

Although the short-term effects of the price liberalisation are significant, it will increase the stability of the Mexican economy in 2017. Citibanamex believes that the government's decision to set the price of hydrocarbons to reflect their real cost was responsible, despite being unpopular.

For decades, the public price of hydrocarbons has been administratively determined in accordance with:

  • global oil market conditions;
  • political considerations; and
  • public finances.

This approach occasionally generated significant distortions in the market and Mexico's public finances.

Citibanamex also stated that, following the liberalisation, Mexico's economy will become a free market in which retail prices will reflect demand and supply, thus encouraging investment in the sector.

In the long term, this is arguably a positive measure for everyone. The government, the Mexican population and national and foreign investors can all benefit from infrastructure investments, as logistical improvements will ensure greater competitiveness with regard to hydrocarbon prices. This will likely enhance economic stability and strengthen the Mexican currency, thus making it a great business opportunity.

For further information on this topic please contact Luis Roberto Ruiz Munguía at Ibáñez Parkman y Asociados SC by telephone (+52 55 5250 5912) or email (roberto.ruiz@iparkman.com.mx). The Ibáñez Parkman y Asociados SC website can be accessed at www.i-parkman.com.

Endnotes

(1) Further information is available here.

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