Mexico Protected from Falling Oil Prices

The coronavirus that emerged in Wuhan, China, continues to impact the price of the Mexican mix, the price of which fell on Tuesday to US$44.21 per barrel in response to the uncertainty caused by the Chinese government’s insufficient containment measures. Since January 17, a few days after the first cases appeared in Asia, the Mexican crude oil barrel price has lost 19.71 percent of its value, which, on January 6, stood at US$59.35.

The current price is not welcome news for the Mexican economy that depends largely on oil. However, the price drop is not as serious as it may at first seem, since, as reported by Mexico Business News on January 10th, Mexico chose to shield its 2020 oil exports by purchasing insurance. This coverage, which cost the federal government US$1 billion, guarantees the Mexican government a price of US$49 per barrel.

Mexico began to invest in oil hedges in 2001 to protect its economy against the volatility of crude prices and exchange rates.

As of last Tuesday, the coronavirus had caused 427 deaths, with a significant global economic impact. China is in a phase of economic slowdown and the appearance of the disease could have consequences on its GDP. In addition, the measures implemented by the Chinese government have led to a decline in industrial activity and demand in one of the world’s major purchasing countries.