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26 May 2005
The liquid petroleum market has an estimated value of $7 billion and is one of Mexico's biggest employers, responsible for 60,000 direct jobs and 180,000 indirect jobs.
For 59 years the Mexican government fixed prices in this market but in August 2000 allowed the market to determine prices. However, from March 2001 price controls were re-established. At present the Department of the Economy determines the price of liquid petroleum for the public, its priority being to ensure access at an affordable price.
On May 5 2005 Mexican liquefied petroleum business associations demanded that prices be determined by the market, not the government, in order to improve producer operating margins. The Energy Department under-secretary of hydrocarbons stated that the government would not agree to the proposal as long as suppliers continued with monopolistic practices and fuel prices remained high. According to the under-secretary, allowing prices to be established by the market without introducing market reforms would prejudice final users.
The under-secretary also said that two essential conditions first need to be fulfilled: significant market competition and lower reference prices.
Neither of these conditions is currently met, even though free competition is present in some sectors.
The president of the National Association of Liquefied Petroleum Suppliers has stated that 42 months have passed without any increase in operating margins and asked the Energy Department to establish a new methodology in order to increase margins.
It is hoped that the market might be left to establish prices itself in the second half of the year.
For further information on this topic please contact Amílcar Peredo at Basham Ringe y Correa SC by telephone (+52 55 5261 0400) or by fax (+52 55 5261 0496) or by email (email@example.com).
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