Gas Prices and Economics in Mexico

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I was watching the news last night here in Mexico City, and was reminded of something that we’ve become keenly aware of…prices continue to go up. Not only that, the dollar, which historically has constantly grown stronger against the Mexico peso, is currently at its weakest point since 2016. For several years the peso:dollar ratio was around 20:1; now it has dropped to 17.4:1. That’s a decrease of over 15%.

Why, you may ask?  Most economists that I’ve listened to attribute it to several factors. One is high interest rates in Mexico, which attract international investors. The going rate for a mortgage here is 12-14%. An across the board  Value Added Tax (here in Mexico it’s called IVA–impuesto de valor agregado) on everything but some foods and medicine is 16%. Credit card rates are crazy…38.84% (last June, anyway, they likely have gone up since them).

Secondly, energy costs, which ultimately benefit the government-controlled energy sector, are high.  I recently paid 23.29 pesos for a liter of gas. Take that amount, times 3.78 for the amount of liters in a gallon (88.04 pesos), divided by the exchange rate (17.4) and the cost of gasoline comes out to $5.06 a gallon. Diesel is comparatively priced, at $5.21 a gallon.

Finally, Mexico’s handling of the COVID pandemic (not shutting borders, generally less restrictions) enabled them to be paying back the International Monetary Fund during the pandemic, when many other countries were taking out big loans.  The current president’s increased control over the formal economy has undoubtedly increased overall tax income for the Federal government. An accountant friend likes to call it “fiscal terrorism.” Immigration is no longer an issue in Mexico. Wanna guess why?

That’s not to say that all is peachy here. Insecurity continues to increase. Mexico has had to import massive amounts of natural gas and LP gas from the U.S., as well as basic grains, like corn and wheat. Corruption plagues every sector of society.  And the traffic!  During a recent return from northern Mexico City to our home, a normally 90 minute trip took over 2 1/2 hours. (see picture).  An airport run, about 18 miles from our house, often takes two hours. And everywhere you go, you’re paying tolls, not to mention an annual road tax, and a bi-annual emissions inspection. It’s not cheap to have a car here.

Merging on to Zaragoza from Viaducto at 7 p.m. Simply insane.
A trip into the city to eat lunch with old friends…yes, I guess we are getting older! Thanks, Erik and Patty Morga

 

 

4 thoughts on “Gas Prices and Economics in Mexico”

  1. Rod/ Mayra, thanks for continuing to send the Mexico updates. I really enjoy them and can better articulate prayer for the work there. Tina & I are doing well, WOLC is adapting to Aaron as pastor but we never have an excuse not to trust God, ever!

  2. I thank God that you and Myra have been obedient to his call to plant churches in Mexico. I often daydream of spending time with you both. Thank you for giving me a glimpse into the community in which you live. I can’t imagine the cost of living there, but God does provide!

    We are commissioning and praying for the missions team that will be joining you on 6/4. I look forward to hearing their testimonies of God’s faithfulness and seeing the pictures of our team working with you and Myra.

    I love you and look forward to seeing you again!

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