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Internet Securities Inc.

Mexico to Implement Price and Tariff Cuts in 2005

Strategic Insights

— 1 min read

Mexico's Treasury Secretariat (SHCP) plans to reduce prices and import tariffs for key goods such as sugar, fuel oil, electricity, steel, LP gas, and cement in 2005, aiming to improve competition among companies and inflation expectations. These measures are expected to counterbalance the inflationary pressures caused by state-controlled prices like gasoline, gas, and electricity, which have been affecting the country's inflation in 2004. Analysts at Scotiabank Inverlat believe that these changes will lead to more modest salary increases, given the likely impact on union expectations.

Key Takeaways:

  • The SHCP will implement price and import tariff reductions for key goods, including sugar, fuel oil, electricity, steel, LP gas, and cement in 2005.
  • These measures aim to improve competitiveness among companies and inflation expectations.
  • State-controlled prices like gasoline, gas, and electricity, which contributed to inflation in 2004, are expected to align with the Bank of Mexico's (Banxico) inflation targets.
  • Analysts at Scotiabank Inverlat project that the salary increases in 2005 will be modest due to the expected impact on union expectations.
  • The Union is seen as a significant factor in influencing the inflation rate in 2004.
  • The bank also believes that the measures will help reduce inflation pressures and increase the competitiveness of companies that heavily rely on energy.
  • These changes will likely contribute to a reduction in the growth rate of the inflation rate in 2005.
  • The measures will particularly benefit small and medium-sized enterprises (SMEs) in Mexico.

Statistics:

  • The SHCP will reduce import tariffs for countries without Free Trade Agreements (FTA) with Mexico.
  • The cuts in prices and tariffs will cover a range of goods, including sugar, fuel oil, electricity, steel, and cement.
  • Analysts at Scotiabank Inverlat attribute the expected inflation reduction to the measures implemented by the SHCP.
  • 2004 inflation expectations in Mexico are expected to be influenced by changes in union expectations.
  • The analysts believe that the labor sector, represented by unions, will be significantly affected in 2005.

Sources:

  • Cronica
  • Corporate Mexico by Internet Securities, Inc.
  • COMTEX
  • Scotiabank Inverlat

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