Changes in fuel subsidies in Mexico for this week: will it affect your wallet?

During the first week of summer vacation in Mexico, the Ministry of Finance and Public Credit (SHCP) announced changes to fuel subsidies that will directly impact consumers' wallets. Starting on July 20th, diesel and Premium gasoline will no longer receive a subsidy on the Special Tax on Production and Services (IEPS) rate, while Magna gasoline will experience a reduction in the discount previously applied. For the week of July 20th to 26th, the IEPS rate per liter of diesel will be 6.78 pesos, while for Premium gasoline it will be 5.21 pesos. On the other hand, Magna gasoline will enjoy a small discount of 4.23%, equivalent to 0.26 pesos per liter, meaning consumers will pay an IEPS rate of 5.91 pesos at service stations. The objective of granting these discounts on IEPS rates is to soften the impact of increases in oil prices, mainly in the United States, Mexico's main fuel supplier. When prices remain stable or do not experience significant increases, the Ministry collects the IEPS rates in full or with minimal reductions, thus contributing to tax revenue collection. It is important to note that these rates are updated weekly and published in the Official Gazette of the Federation. Additionally, they have a limit set at the end of each year for the following fiscal year. For example, at the end of 2023, the applicable rates for the entire year 2024 were published. The change in fuel subsidies coincides with the average gasoline price in Mexico, which on Friday, July 19th was 23.89 pesos per liter for Magna, 25.49 pesos for Premium, and 25.56 pesos for diesel, according to data from the agency PETROIntelligence. The measure taken by the Ministry has raised concerns among consumers, who fear that the increase in IEPS rates will translate into a rise in the final price of fuels. This situation could impact not only families' expenses but also the country's overall inflation. On the other hand, some experts point out the importance of maintaining a balance in fuel subsidies to avoid market distortions and ensure a steady flow of income for the State. However, they also recognize the importance of protecting the population's purchasing power, especially in a context of economic uncertainty. Given this scenario, it will be crucial to closely monitor the evolution of fuel prices in the coming weeks and analyze the impact of the decisions made by fiscal authorities on the market and the economy in general. Consumers should pay attention to how these changes will affect their budget and seek alternatives to mitigate any potential negative impact on their personal finances.