Despite the rise in oil prices, Mexico has not benefited

Fiscal pressures in Mexico are intensifying due to the federal government’s efforts to cushion the rise in fuel prices; as a result, the country is facing negative consequences stemming from its dependence on imported refined products and natural gas, according to a study by the Institute of International Finance (IIF).

A US$10 per barrel increase in oil prices boosts oil-related revenues from Petroleos Mexicanos’ (PEMEX) crude exports by approximately 0.5 percentage points of GDP. However, these gains are offset by policy measures aimed at limiting the pass-through of inflation, including adjustments to the special fuel tax (IEPS).

Although Mexico remains the largest crude oil exporter, its growing dependence on refined products has turned it into a structural net energy importer. Consequently, the oil crisis will accentuate the divergence among the region’s largest economies, rather than generating the widespread benefit from raw materials typically associated with Latin America.

Over the past decade, the region’s energy landscape has changed substantially, altering the way its largest economies respond to oil crises. Unlike Brazil and Argentina, which emerged as net energy exporters, Mexico has taken the opposite path, becoming a structural net importer of energy.