Mexico’s Gasolinazo Ignites Public Rage
Jose Aguilar simmered with rage. The protest wasn’t supposed to start until mid-morning, but like dozens of other demonstrators, he had arrived early with a sign reading, ‘No to the energy reform!’ ‘It’s an insult,’ he said, lamenting. He felt betrayed by his own government.
Aguilar was one of hundreds of people who turned out on Saturday, 7 January in Puebla, to protest the Mexican government’s decision to deregulate gasoline prices. While President Enrique Pena Nieto has claimed deregulation is needed to help the government balance its budget, critics argue the move will hit ordinary Mexicans hard, exacerbating an already precarious economic situation across the country.
Like many the protest, Aguilar said he joined the demonstration because he felt rising gasoline prices would directly impact his livelihood. ‘I have a regular salary, but it’s going to affect my [everyday] expenses,’ he said.
A Simmering Economic Crisis?
The country’s finance ministry expects gasoline prices to rise as much as 20 per cent by the end of January; comparatively, they rose just 3 per cent over the entirety of 2016. More increases are also expected throughout 2017, and prices are set to be fully ‘liberalized’ in 2018. Dubbed by local media as the ‘Gasolinazo’, the price increases are part of a broader set of reforms aimed at deregulating and privatizing Mexico’s energy sector. For generations, the sector has been dominated by state enterprises, including the government’s oil giant Pemex. The company traditionally held a monopoly over domestic oil production, providing subsidized gasoline to Mexicans at well below market rates.
This began to change in 2008, when the government passed legislation allowing private firms to enter the oil market. The government also began the now annual ritual of hiking fuel prices. Until January’s steep increases, the annual price hikes at the gas pump were too small to garner much attention, let alone protests. According to Pena Nieto, this year’s sudden price jump was a ‘responsible measure for the stability of the economy.’
Financial analyst Luis Adrian Muniz disagrees. ‘This will have a very significant impact on inflation,’ he told Bloomberg. Even before the price hike was announced, in 2016 Mexico saw its worst inflation since 2014, according to data from the National Institute of Statistics. The spike in inflation came after the central bank rose interest rates to their highest levels in five years, and amid simmering concerns over currency instability. The value of Mexico’s peso has been on the decline since 2015, and was sent into chaos in the days after the surprise election of Donald Trump. At the time of writing, the peso was trading at below 22 per US dollar – the weakest rate since the country’s disastrous economic crisis of the mid 1990s. Now, Mexicans are again fearing their country could be plunged into economic turmoil.
Fear on the Streets
Back in Puebla, protester Euelin Flores said she was concerned about the knock on effects of the gasolinazo. ‘It’ll affect everything. Food prices will go up – even coffee, everything,’ she said. Her fears are justified, according to Muniz. His firm, Vector Casa de Bolsa, has estimated Mexicans can expect to see consumer prices spike by 0.80 per cent in January alone. ‘This will hit the consumer sector and the economy,’ he said. As prices rise across the board, Flores said it’ll be the poor who suffer most. ‘The minimum salary is 80 pesos (US $4) a day; and how much is gas going to cost? 22-24 pesos?’ She exclaimed. At the time of writing, gas prices were already at 90 cents per litre. At that rate, a minimum wage earner would have to spend nearly two weeks’ worth of wages to fill an ordinary 42 litre tank.
Responding to protesters, Pena Nieto has hit back at claims the price hikes will hurt the poor. ‘Keeping gas prices artificially low would mean taking money away from the poorest Mexicans, and giving it to those who have the most,’ he said during a televised address. He then continued, ‘If this decision had not been taken, the effects and consequences would have been far more painful.’ Flores said she wasn’t convinced. ‘The people with the least resources will be affected most, but it’ll affect all of us,’ she said. Flores continued, ‘Wages are so low, what will we do?’
Despite Pena Nieto’s assurances that gasoline price increases won’t bleed into other sectors of the economy, but there’s signs that suggest tensions are increasing. While most protests over the past month have been peaceful, more than 1,000 people have been arrested under allegations of involvement in acts of vandalism and looting, according to numbers from the Secretariat of the Interior. The National Association of Self-Service and Department Stores has warned that over 300 businesses nationwide have been hit by looters, while roads across the country have been blockaded by transport workers. Amid the chaos, at least six people have been reportedly killed. Even some police have joined in, with four officers in the municipality of Ecatepec being caught on camera piling looted goods from a supermarket into a patrol vehicle, while dozens of others looked on.
In Puebla, protesters said they opposed the violence. ‘These assaults on stores aren’t right. This is a peaceful movement, and those [attacks] were probably shock groups from the government,’ Flores said. Instead, she said the politicians are the real looters, and she wasn’t alone in holding this view. Last Thursday, internet savvy activists changed the name of the Chamber of Deputies to the ‘Chamber of Rats’. In Mexico, ‘rat’ is slang for thief. A few days earlier, Pena Nieto’s official residence appeared as the ‘Official Residence of Corruption’ on the map service. To Flores and other protesters, the gasoline price hikes are just another sign that the government doesn’t care about the people. ‘They say they represent us, but they’re all just rats,’ she said.
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