| | |  News Around the Republic of Mexico | August 2008 
Mexico Sees Cheaper Electricity by Year End
 Luis Rojas Mena - Reuters
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 |  | There are no immediate plans to change the fundamental policy for setting gasoline prices. For the moment, there is no intention of abandoning the subsidy.
- Agustin Carstens |  | | | |
Guadalajara, Mexico - Mexican Finance Minister Agustin Carstens said on Wednesday that electricity prices in Mexico could drop significantly by year end and pledged not to abandon subsidies on gasoline anytime soon.
Economists follow fuel and electricity prices - largely controlled by the government - closely because they weigh heavily on general inflation, which is running at its highest in more than three years.
Persistently high inflation has led many investors to bet that Mexico's central bank could raise its benchmark overnight interest rate for the third straight month on Friday, from the current 8.0 percent to 8.25 percent.
"We expect that by year end there will be a reduction in the price of electricity that could be significant," Carstens told lawmakers in the western city of Guadalajara.
The government is expected to spend close to $19 billion this year to subsidize gasoline, diesel and household cooking fuel to shield Mexicans from high world oil prices.
"There are no immediate plans to change the fundamental policy for setting gasoline prices," Carstens said. "For the moment, there is no intention of abandoning (the subsidy)."
Still, the government has gradually pushed up prices at gas pumps in recent weeks.
Carstens also told lawmakers that the government's 2009 budget proposal will include an oil price forecast of $80 per barrel for exports.
Mexico depends on oil revenue for about a third of the federal budget. President Felipe Calderon must submit a budget proposal to Congress by Sept. 8, and lawmakers must approve the budget by Nov. 15.
"We are going with a price of $80," Carstens told lawmakers.
Mexico's government normally lowballs the expected price of oil in its budgets to avoid shortfalls in case prices drop.
This year Congress set the forecast price at $49 per barrel, though Mexican crude exports have brought in an average of about $94 per barrel between January and June.
Mexican crude MEX-OSP fetched $108.72 on Wednesday.
(Writing by Jason Lange; Editing by Jonathan Oatis) |
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