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Mexico’s Gas War: A Rejection of Neoliberalism?

New Year’s Day is usually a moment of peace in the chaos of Mexico City — but not this year. For Mexicans, 2017 began with nationwide protests against the government’s plans to deregulate petrol prices, a move opponents say will hurt everyone from the poor to middle class.

Since January 1, protests have only continued to spread, with almost daily demonstrations in nearly every large city. Major highways have also been blockaded by furious transport workers, who say they can’t keep up with rising prices at the bowser.

Already, a minimum wage earner can expect to spend about two weeks’ worth of wages to fill up an average family vehicle. At the time of writing, fuel prices were at US$0.90 a litre, with a minimum wage of about $4 a day.

However, it is not the petrol prices themselves causing the most anxiety.

Inflation

“Everything — all the prices in the shops — will go up,” one protester called Lorenzo in the central city of Puebla told Green Left Weekly.

President Enrique Pena Nieto has dismissed such claims, but most economists agree protesters like Lorenzo probably have a point.

“Inflation might rise sharply in January,” Barclays Plc chief Mexico economist Marco Oviedo told Bloomberg. “We might see some second round effects later.”

Meanwhile, a report from Citibanamex found a petrol price rise could push up this year’s annual inflation by as much as a percentage point, with consumer prices expected to rise by 4.8% by the end of the year. All this comes amid growing nationwide anxiety over the state of the country’s stagnant economy.

The value of the Mexican peso has been anaemic since global oil prices collapsed in 2015, but things really took a turn for the worse late last year. In the days after Donald Trump’s November 8 victory in the US, the peso was plunged into chaos. At the time of writing, it was trading at a record low of less than 22 to the dollar.

The peso hasn’t fared this badly since the economic turmoil of the mid 1990s, when Mexico was crippled by hyperinflation, capital flight and widespread fears of default. Now, old fears are again emerging.

“It’ll affect us all,” another protester said in Puebla. “Obviously, it’ll affect the most vulnerable the most, but we’ll all be affected.”

Neoliberal policies

The deregulation of petrol prices is actually just the latest phase in Mexico’s decades-old experiment with neoliberalism. Since the crisis of the 1990s, successive Mexican governments have sought to liberalise what was once a heavily state-centric economy.

This project has been lauded by economists as successful in terms of growing the economy, but not in terms of improving the lives of the poor.

World Bank data shows the economy grew from $364 billion in 1992 to a height of $1.2 trillion in 2012. However, during that same period the percentage of Mexicans living in poverty remained mostly static at about 50%, according to data from the government’s National Council for the Evaluation of Social Development Policy (CONEVAL).

The picture gets worse when population growth is taken into account. According to CONEVAL’s data, the number of Mexicans living in poverty increased from 46.1 million in 1992 to 61.4 million in 2012. In the most impoverished regions like Chiapas, 78.8% live in poverty.

Nonetheless, governments have long argued the solution to Mexico’s stubborn poverty problem is more neoliberal reform, such as 2015 legislation allowing for the privatisation of municipal water companies. At the time the legislation was passed, the government said privatisation would lead to cheaper prices, and cleaner water.

Puebla was one of the first states to privatise its water supply. Today, it has the most expensive water of any major city in Mexico. Its prices are about 10 times higher than neighbouring Mexico state, according to the National Water Commission. Meanwhile, the city’s tap water remains undrinkable.

Now, the government is turning its focus to the oil sector, where state firm Pemex has held a monopoly for more than seven decades. Energy reforms began in 2008, and initially focused on opening extraction and refinement to private competition. WikiLeaks cables reveal that behind closed doors, the reforms were pushed by the US government, though a leaked 2010 embassy document indicated this connection was being kept quiet.

Instead, Pena Nieto has justified the privatisation drive on grounds it will pave the way for an influx of foreign investment. Since 2008 however, the global price of oil has collapsed. Repeated attempts to auction offshore leases have largely failed to coax investors as promised, with the notable exception of a successful round of auctions late last year.

Nonetheless, the government remains dedicated to its vision of rolling back the state’s role in the oil sector, this time at the consumer end.

Technically, the government has been incrementally increasing the regulated petrol price for years. However, until now the rises have been of just a few pesos each year.

That changed in December, when the government announced price rises that the finance ministry says will likely reach 20% by the end of January. The government says it will continue to raise prices throughout the year, before allowing prices to float at market rates in 2018.

Impact

The latest round of unrest appeared to have caught the government by surprise. As the public outcry began, Pena Nieto was busy playing golf in an exclusive resort. The president remained silent for the first days of protests, even as looting broke out in some cities.

Since then, more than 1000 people have been arrested in connection to protests, mostly under allegations of vandalism and looting. This figure includes a group of four police officers who were detained after footage surfaced of them loading a patrol vehicle with looted goods from a nearby supermarket.

At least six people have been killed in clashes and more than 300 businesses have been ransacked. Protesters themselves argue most of the cases of violence have been sparked by agent provocateurs, and point to the tens of thousands of people who have marched peacefully.

During a march in Puebla, one protester told GLW: “This is a movement of peace.”

Meanwhile in Mexico City, Pena Nieto broke his silence almost a week after protests began. In a televised address, he said he understood the “anger and irritation felt by the general public”, but that the price rises were needed to stave off cuts to welfare services.

On the streets, protesters said Pena Nieto did not understand their plight at all, arguing he has lost touch with ordinary Mexicans.

“As usual, corruption has played a role in this,” said one activist. “Corruption affects everything here.”

Even before the current protests, nine out of ten Mexicans viewed all political parties as corrupt or extremely corrupt, according to a 2013 study by Transparency International. Meanwhile, Pena Nieto’s approval rating remains at about 25%, making him one of the Western Hemisphere’s least popular heads of state.

With the protests growing, Pena Nieto’s popularity seems unlikely to bounce back any time soon. This could spell trouble for the ruling Institutional Revolutionary Party (PRI) in next year’s federal elections.

Polls indicate the frontrunner for next year’s presidential race remains the leftist Andres Manuel Lopez Obrador, who narrowly lost the 2006 presidential election by fewer than 250,000 votes. If the polls hold up, Obrador would be the first leftist president in Mexico for generations.

Meanwhile, the radical left Zapatista movement is also planning on endorsing its first presidential candidate in history, saying the candidate will be an indigenous woman.

First published by Green Left Weekly.

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