AMLO chief of staff: Mexico will not freeze fuel prices

Mexico's new government will continue the current strategy in fuel prices, and will even pursue further private investment in the energy sector, said president-elect Andres Manuel Lopez Obrador's chief of staff.

"We will not use subsidies, we will not control, we will not do anything that is not subject to market forces, everything is market-based," Alfonso Romo said following a speech at Mexico's Economic Forum 2018 organized by the Institute of International Finance (IIF).

The comments contradict statements made by the president-elect shortly after election in July.

Mexico's government prices domestic fuel based on international fuel prices, adding logistics costs and taxes to reach a final retail price. An excise tax is included in the price, known as IEPS which is used to limit volatility.

A complete liberalization of fuel prices in January 2017, mandated by the energy reform, increased retail prices by 14-20pc. The policy led to strong protests and to foster increasing dissatisfaction with current President Enrique Pena Nieto's government.

President-elect Lopez Obrador said in July just after winning the election that fuel prices would be frozen, increasing only every year according to inflation.

Romo denied that AMLO or anyone on his team — which will take power on 1 December — ever spoke about freezing prices, and blamed the media for misunderstanding the president-elect.

"In the last 18 months [since presidential pre-campaigns started] we have never talked about controlling fuel prices," Romo said. "That is a distortion in headlines, because when reading the actual paragraphs of the articles you can see the reality."

Romo argued that the North American Free Trade Agreement (Nafta) — now a verbal understanding between US and Mexico — would never have moved forward if Lopez Obrador's transition team, which was part of the negotiations, had plans to freeze fuel prices.

The pro-market strategy in the left-wing party will be valid for the rest of the energy sector as well, Romo said.

"[In the past 18 months] we went from rejecting the reform, to saying we will not back it down and that we will review contracts," he said. "We now feel pretty comfortable with the contracts we have reviewed."

Lopez Obrador's team will meet with oil companies next week to talk about why investments have not come as fast as companies promised. The new government's policy will be to reduce bureaucracy and foster private and foreign investments in the energy sector, he said.

"We will question companies to know what kinds of problems they are having," Romo said. "If there are any problems with permissions or paperwork we can help and they will proof that the reform works and that crude production will rise."