(Adds government comment)
By Luis Rojas Mena and Jason Lange
MEXICO CITY, July 7 Mexico is quickening the
pace of gasoline price increases, fanning worries about
inflation, as the rising cost of subsidizing imported fuel
weighs on the government's finances.
The price of Mexico's standard grade gasoline, known as
Magna, jumped 6 centavos on July 1 to 7.23 pesos a liter, a
spokeswoman for state-run oil monopoly Pemex said on Monday.
It was the sharpest increase in at least 2-½ years by the
government, which sets fuel prices.
Concern that the price increase could fuel inflation hit
government bonds, which were already under pressure from news
of a hike in cement prices.
A spokesman from the finance ministry said the increase was
part of the government's normal price fixing-scheme.
"This is within the same policy, there is no intention of
raising the price outside of our plans," Rodrigo Brand from the
finance ministry told Reuters.
But some consumers were surprised by the price hike.
"They should let us know before they make any changes,"
said Argelia Lozano, a 37 year-old housewife, adding that the
price changes made it more difficult to cope with rising food
Mexican inflation rose to 4.95 percent in May, its fastest
rate in more than three years on rising global food prices.
"The inflation outlook hardly needs another source of
pressure," Pedro Tuesta, a U.S.-based analyst at 4Cast
consultancy, said in a report.
President Felipe Calderon promised last month to keep fuel
subsidies in place that are expected to cost the government
close to $20 billion this year as soaring world oil prices jack
up the cost of imported fuel to Mexico.
A lack of domestic refining capacity means Mexico must
import about 40 percent of its gasoline, despite being the
world's No. 6 producer of crude oil.
Yet government subsidies mean fuel prices at Mexican pumps
are far below U.S. levels.
The price of the benchmark government 10-year bond
MX10YT=RR fell 0.704 of a point to bid 90.371, pushing its
yield up 12 basis points to a two-year high at 9.29 percent.
Mexico's Congress approved a bill in September to gradually
increase gasoline prices by 5.5 percent over 18 months, but to
calm a public outcry over the move, Calderon put off applying
the increases until January.
The price of Magna was raised by 2 centavos in January to
7.03 pesos per liter. It was lifted by another 2 centavos in
both February and March before rising 3 centavos in April and
then 4 centavos in June.
Keeping gasoline cheap prevented the government from
posting windfall oil profits during the first quarter, even as
the price of Mexican crude soared well above budgeted
(Additional reporting by Catherine Bremer)
(Editing by Kim Coghill)
($1 = 10.3335 pesos)