SHCP to Maintain Fiscal Stimulus on Gasoline

For the second week in a row, the Ministry of Finance (SHCP) announced that it will apply a tax incentive of 100 percent on the three different types of gasoline. Consumers will not pay the Special Tax on Production and Services (IEPS) next week.

The fiscal stimulus was set at 100 percent for Magna, Premium and Diesel from March 12, 2022. However, SHCP cut the stimulus to Premium on Aug. 5, 2022, and to Magna on Aug. 2022. Two months later, the Ministry returned to fully support all fuels as of Oct. 15, 2022, and this Friday, it ratified the decision for next week. The Treasury has maintained the full stimulus on Diesel since March 2022.

The fuel subsidies were implemented to keep fuel prices stable in a rocky market environment, as reported by MBN. The drop in the international price of oil caused the treasury to soften the tax incentives for Premium and Magna, returning the costs to the customer. However, fiscal stimuli during those weeks remained over 94 percent, with customers paying the remaining IEPS.

The stimuli provided on Oct. 22-28, 2022 is: MX$0.26 (US$0.013) per liter of Magna fuel, MX$0.07 (US$0.0035) for Premium and MX$4.13 (US$0.21) for Diesel. Last week’s stimuli amounted to: MX$0.57 (US$0.029) per liter of Magna fuel, MX$0.06 (US$0.003) for Premium and MX$4.85 (US$0.24) for Diesel.

Fiscal stimulus of IEPS on gasoline and the complementary fiscal stimulus can lead PEMEX’s tax contributions to decline, according to Victor Gómez Ayala Economy Professor, the Instituto Tecnológico Autónomo de México (ITAM), as reported by MBN. As of May 2022, PEMEX’s contributions to SAT experienced an annual contraction of 43.3 percent, with the oil company delivering MX$61.45 billion (US$2.9 billion) less than what was recorded in the same period last year.

2023 Economic Package Contemplates Dip in Oil Prices

Deputy Minister of Finance Gabriel Yorio discussed the risk of falling oil prices in 2023 but highlighted oil hedges, which will shield the 2023 budget, reported MBN. “There may be a global slowdown and then the price may fall, but we have an oil hedge that allows us to shield the budget. Cuts in our spending may not be necessary; we can shield the budget and isolate the impact of the drop in oil prices,” Yorio said at the Finance Commission meeting.

Oil hedges for Mexico generated about US$2.38 billion when COVID-19 hit and US$6 billion in 2015, according to a report by Bloomberg.