Price controls only work in the short term, so their implementation must be very careful, warned Jonathan Heath, one of the five members of the Bank of Mexico (Banxico) Governing Board.
“However, it doesn’t bother me to think outside the box in the search for policies that can help us counteract inflation,” he stressed on his official twitter account @JonathanHeath54.
As will be remembered, the President warned last week that he was working on an “anti-inflation and anti-scarcity plan” where he would incorporate the agreement with companies to obtain “fair prices.”
The central banker explained on Twitter that the fight against inflation is not exclusive to Banxico. “The federal Executive is empowered (exclusively) to determine maximum prices by decree.”
He specified in the social network that the Federal Economic Competition Commission must determine if there are no conditions of effective competition, while it is up to the Ministry of Economy to set prices in these cases.
“If the Executive decides to implement a policy in this regard (of price control) it is within its rights. The central bank can have an opinion on the matter and offer only advice.”
The banker specified that “while the priority objective (but not the only one) of the Bank of Mexico is to ensure the stability of purchasing power, the fight against inflation is not exclusive to the central bank.”
Low inflation by controls, illusory
This is not the first time that Deputy Governor Heath has pointed out the impact of price controls.
In August of last year, he gave a detailed argument on the control of maximum prices for LP gas
Fuels drive inflation
• Only in the current administration, the price of regular gasoline used by 85% of motorists has increased 3.6%, despite price containment through fiscal stimulus to reduce the IEPS.
• At the beginning of 2022, regular gasoline stood at 20.06 pesos per liter, when five years ago it cost 13.52 pesos per liter.
• The price of Premium gasoline has risen 4.8% only in this administration, with which at the beginning of 2022 it reached a level of 21.78 pesos per liter, when in 2018 its average price was 19.88 pesos per liter.
• Diesel reached a price of 21.45 pesos per liter at the beginning of 2022, rising by 1.3% in the current administration and contrasting with 14 pesos per liter in 2016.
• The national average price of LP gas in 2017, the first year in which it was sold through the free market, without limits set by the government, was 16.25 pesos per kilogram when reaching the first four months of the year, with which it has increased 47% in five years, standing at 25.19 pesos per kilogram this year, even with the weekly price cap policy in the 145 regions that the Energy Regulatory Commission has decreed since August last year.