However, as a counterpart, Mexico will see a significant increase in oil revenues, since the Mexican export mix would be located at more than 90 dollars per barrel, around 35 dollars above the forecast in the 2022 Revenue Law.
Assuming that the price of oil is sustained during 2022 (or that it increases more), at the same exchange rate and exports of this energy, Mexico would be receiving around 500,000 million additional pesos only for the oil bonus, that is, a 7 % of income above the income law.
What should Banxico and the Treasury do to mitigate the inflationary shock?
Let us remember that a higher price of oil also implies an increase in the price of gasoline for consumers. Although the IEPS stimulus for Magna gasoline is at 100% since February 2022 (5.5 pesos per liter), if the government wants to keep its current price unchanged, it would have to implement a subsidy, that is, put out of its pocket, to that the price of gasoline will not increase given the expected oil prices.
On the other hand, although Banxico foresees a decrease in inflation during the second half of 2022, in part due to the effect of the comparison base with 2021, the conflict in Ukraine and the increase in energy prices, it will be hitting Mexico again. global supply chains, causing a new cycle of global inflation.
The new supply shock, which would come via energy prices, would be impacting the 300 generic products that make up the national price index in Mexico, as happened in the 2017 gasoline boom.
It is a fact that Banxico’s bet on inflation falling to 4% in the last part of 2022 will no longer happen, on the contrary.
Given that the monetary policy continues in an expansionary territory, to avoid a new inflationary escalation, Banxico would have to implement a restrictive rate in the year, this time, surely, higher than 8%, which implies injecting less money into the system, which is inflationary fuel.
Is the plan announced by the government enough?
The president of Mexico announced that the government is prepared to face these new shocks, with various palliatives in the production of energy, to prevent prices from escalating and generating more inflation. The question is, is this enough? And the answer is no, since Mexico is not self-sufficient in energy production, so it is subject to international market prices and their movements.