Despite strong opposition, this month Mexico’s government hiked taxes on gasoline in an effort to boost revenue following reforms of its state oil company Pemex.

The gasolinazo, as the tax is called, will increase rates by a little over 5 percent. It is designed to offset the government’s loss in revenue from Pemex, which will be allowed to retain up to $3 billion more per year thanks to recent reforms.


Not surprisingly, the tax increase has been controversial. Former presidential candidate Andres Manuel Lopez Obrador of the PRD party has protested the tax hike and is calling for a left-wing coalition to defeat it. Critics say the gasolinazo will accelerate inflation, a concern in Mexico as the prices of corn and other staples have increased in recent months. The government, which froze gasoline and diesel prices in the second half of 2007 to help stem inflation, believes the tax’s impact on Mexico’s economy will be minimal.