Sustained fuel shortages seen hurting Mexican economy

Providing testimony to Mexican lawmakers late Monday, Jonathan Heath, one of President Andres Manuel López Obrador's (AMLO) two nominees for the Mexican central bank, suggested ongoing gasoline shortages - now stretching into their second week - could impact growth and inflation should it persist much longer.

Speaking ahead of his likely confirmation, Heath pointed to secondary impacts from the gas shortages associated with AMLO's crackdown on fuel thieves, dubbed huachicoleros, including higher food prices and lower consumption at the country's commercial outlets.

With regard to the monthly economic activity indicator (IGAE), Heath said, "I could expect to see that it has a negative rate in the month of January."

"If [the shortage problem] goes on beyond February, March, who knows when, we could start to get into something dangerous, and then I would be more worried," he added in the taped testimony. "If it's a problem that lasts a week, two more weeks, and we see things starting to work themselves out, I think the effects could be minimal."

On the impact that the fuel shortages could have on inflation, Heath said the problem needs to be analyzed on two fronts, from the supply side and the demand side.

"On the supply side, the shortage of gasoline could have effects mainly on the prices of perishable foods, but all this depends on how long the shortage lasts. On the demand side, inflation could fall, since people could reduce their consumption by not choosing to go to the shopping centers, the movies and only use the car when necessary," he said.

Another potential effect is on consumer confidence, as Heath recalled that in early January 2017, when there were increases in the prices of gasoline, consumer confidence had its worst decrease in years.

The consumer confidence index hit a 12-year high in December, increasing 6.6% month-on-month and 23.4% year-on-year, with AMLO taking office at the start of the month.

Anti-theft campaign

The risks involved in sabotaging pipelines have increased, with significant army, marine and federal police personnel participating in security operations. The government has also frozen bank accounts it believes are linked to fuel theft and called on lawmakers to re-categorize fuel theft and corruption as serious crimes in order to have stiffer penalties as quickly as possible.

Some 89% of Mexicans surveyed are in favor of the government's anti-fuel theft campaign and 64% support the strategy of closing pipelines when fuel thieves strike, according to a poll by Mexican daily El Financiero.

Opinion favoring these measures was particularly strong in Mexico City, where there have been long lines at service stations in recent days as fuel shortages bite, with 75% of those polled backing pipeline closures.

Pictured: Motorists wait in line for hours to buy gasoline at a Pemex service station in Guadalajara, Jalisco state, on January 13.