NUEVO LAREDO, Tamaulipas – A week of uncertainty ended for residents and gas station owners in this border city, after officials announced an agreement to make gas prices accessible.
The price of gas has shot up over the past couple of weeks in Mexico. President Enrique Peña Nieto says the action was necessary because “avoiding it will only take us to put in risk the stability reached during these past years.” As many as 57 out of 70 gas stations in Nuevo Laredo were deemed at risk of closure.
Representatives from Tamaulipas State and the City of Nuevo Laredo held different meetings through Friday and Saturday, and as a result of those, the closure of gas stations was avoided. Not only that, the fuel supply was guaranteed, with the price established at 13.26 pesos (around $0.62) for a liter of gas.
“We sent a bulletin expressing our strongly disapproval of the price increases which are a result of a toxic fiscal reform, and which at the end didn’t generate the benefits (planned). Neither was a push to development,” said Nuevo Laredo Municipal President Enrique Rivas Cuellar.
In October 2016, the Mexican Government approved a plan to free gas prices by region starting January 2017. This meant that instead of having one price, there would be a maximum price scheme by region. The measure was published as official on December 2016. Before January 1, 2017, the Mexican Government would adjust the gas prices in Nuevo Laredo to take into account those in Laredo, Texas.
The country was divided in 90 regions of which seven are at the border and 83 in the interior of Mexico. Though in the interior, the maximum price set will continue until February 3, for the border it was to be applied only until January 10, according to a document published by the Energy Regulatory Commission.
So, in Nuevo Laredo the price per liter was set at 16.03 pesos (around $0.76) for the Magna (Unleaded); 17.80 pesos (around $0.84) for Premium (Super Unleaded); and at 17.10 pesos ($0.81) for the diesel. But, in the border area the government granted permission to set a price of 13.26 pesos thanks to an incentive from the federal government. The benefit was at the gas station owner’s discretion. He or she could apply it or not.
“There are some owners that have enough capital to apply it, but there are many others that can’t, and their decision is valid,” Representative Yahleel Abdala Carmona, PRI-Nuevo Laredo, said.
According to the official document, the incentive would be returned to the owners by the Secretary of Finance in around 60 days, but many of gas station owners decided to close their businesses because they couldn’t carry the expenditure and neither wanted to affect the citizens.
Jose Luis Palos Morales, President of Gas Station Owners Association in Nuevo Laredo, explained that they had two options. The first option was to buy at 15.45 pesos the liter of gas from Petroleos Mexicanos (Pemex), and to subsidize 3 pesos of it to sell it at 13.26 pesos.
“Option two was to sell it at 16.03 pesos per liter when in the United States it’s sold at 11 pesos per liter,” Palos Morales said.
Abdala Carmona was involved in a series of meetings and during the weekend she was able to get a grant from Pemex, and reimburse the incentive in 15 days (instead of 60).
“This way all gas station owners will be able to apply the incentive and offer the gas at a lower price in the border,” she said.
The gas increase opened the door to generating an inflationary spiral.
“An increase in gas costs will develop an inflationary spiral because of an increase in the cost of goods and services, which will put a complexity in the economic development, not only for Nuevo Laredo but the whole country,” Rivas Cuellar said. “It has a budget impact, it generates an inflation, that it will end in price increases.”
The agreements were reached at a meeting with the Governor of Tamaulipas, Francisco Garcia Cabeza de Vaca, and officials from Finance, the Economic Competence Federal Commission, the Energy Regulatory Commission and the Secretary of Interior.
“I want to state this very clearly, we guarantee that we will have all the gas stations open on Monday,” Rivas Cuellar said.
This week, authorities hope to meet again with the Secretary of Finance to determine if the incentive for gas station owners will be permanent or to decide how to establish a similar system to reflect the prices along the border in the United States.
Similar cases to Nuevo Laredo were reported in border cities such as Piedras Negras, Ciudad Acuña, Matamoros and Reynosa.
Rivas Cuéllar said the solution is still not permanent, but there is a guarantee that the gas price for residents in Nuevo Laredo will be set in 13.26 pesos per liter this week.