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Mexico’s state-owned oil company Petróleos Mexicanos (Pemex) benefitted the most from the tax returns on fuels from the Special Tax on Production and Services (IEPS), according to the Center for Economic Research and Budget (CIEP), in a report by Mexican daily newspaper Reforma on Wednesday, March 1.

In March of last year, the Secretariat of Finance (SHCP) decreed a “complimentary fiscal stimulus,” which was essentially a subsidy on gasoline and energy, after an international surge in gas prices — in large part caused by the Russian invasion of Ukraine on Feb. 24 — jacked up Mexico’s price per barrel of gasoline from $47.12 at the beginning of January to $103.71 on March 3.

The energy subsidy was justified by President Andrés Manuel López Obrador (AMLO),  who at that time promised that his administration will not raise gas prices despite the soaring price of crude oil in the global market.

Pemex, which likewise benefitted the most from López Obrador’s stimulus in 2022, was identified by an IEPS report titled “Fiscal Stimuli on the IEPS for Fuels: Collection Implications” as the largest beneficiary of the tax returns from Mexico’s Tax Administration Service (SAT) — to the tune of 139 billion pesos.

In addition, the gasoline subsidy meant a loss of income for the Mexican Treasury — close to 136 billion below estimated figures, in addition to a fiscal expense of 397 billion pesos, 78 billion pesos more than the original estimate.

Back in March of last year, when the gasoline subsidy was approved, the CIEP already warned that Mexico could lose as much as 554 billion pesos — 2 percent of the country’s gross domestic product (GDP) — as a result of the policy.

“The fiscal stimulus could cause the resources available to finance public policies to decrease, leaving the FEIP (Budget Revenue Stabilization Fund) at very low levels,” said the CIEP in a  statement.

The CIEP added that the subsidy actually benefitted the country’s higher-income population more than others, as they contribute a greater share to the IEPS collection on gasoline and diesel, and thus the policy would exacerbate Mexico’s wealth inequality even more.

“In a society as unequal as ours, the fact that there is a very clear difference in income means that the subsidy favors consumers with higher incomes more,” said energy sector expert ​Arturo Carranza at that time.

Pemex imports up to 71 percent of gasoline and 57 percent of diesel in the country, according to Juan Pablo López, a researcher at the CIEP.

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