On the evening of June 5, police in Prados Tultitlán and Unidad Morelos Segunda, in Mexico City, responded to calls regarding the looting and vandalism of several businesses in those localities. Several individuals, many with their faces covered, appeared on camera breaking windows and running off with valuable merchandise. Many of them were caught and arrested. Now, authorities are working to determine total property losses following the ravages.
Certainly these events, taken on their own, are minor: just the actions of a few criminal actors. The fear, however, is that they are harbingers of a return to the nationwide wave of lootings and vandalism that afflicted the country last January, as a result of a sharp hike in gasoline prices. This would be a nightmare scenario for President Enrique Peña Nieto, who is already extremely unpopular. Meanwhile the 2018 national elections loom on the horizon.
The price hike, known as the “gasolinazo”, took effect on January 1 of this year. Gasoline prices shot up an average of 20% nationally, the largest increase in twenty years. It was the result of Peña Nieto’s government decision to privatize the national oil company – Petróleos Mexicanos, or PEMEX – in 2015. PEMEX was government owned for almost eighty years. The populist president Lázaro Cárdenas nationalized the oil industry in order, he claimed, to bring it in the hands of the Mexican people.
Since then, PEMEX has risen to become one of the largest corporations in Latin America. But the government argued that PEMEX could not keep up with the country’s surging energy needs.
Moreover, officials claimed that the government had been forced to keep gasoline prices artificially low to support the company. The plan is to gradually remove government price controls and let market forces determine how much people pay at the pump. Moving from north to south, the various Mexican regions are transitioning to the new free-market system throughout this year.
More freedom and market competition will mean lower prices for consumers in the medium to long term, argue proponents of the plan. Gone will be the days in which all Mexicans fill up in identical PEMEX gas stations, when politicians and government bureaucrats decide the price of gasoline in place of the rational forces of the market. This is the theory, at least. The fact is that market-driven prices are not necessarily going to mean lower prices, as speculation on the international price of oil affects costs at the national level.
In the meantime, prices have risen significantly; and the price of gasoline affects the economy as a whole. If the price of gas goes up, then the cost of transporting goods and people goes up. Who ends up paying for those increases? Why, regular people, of course.
The expectation is that, at least during the transition period, the cost of living for ordinary Mexicans will go up appreciably.
Hence the massive protests, lootings, and vandalism that followed the coming into effect of the gasolinazo on January 1 of this year. In the weeks that followed, massive demonstrations took to the street decrying the government’s policies. Looters vandalized and destroyed dozens of PEMEX filing stations. Eventually the demonstrations turned violent. A small number of people died in clashes with police, and thousands more were injured. Then the lootings began, and with them chaos.
Lootings make it impossible for business as usual to go on. The targets are usually large businesses, perceived to be rich and in cahoots with the callous politicians. But in reality plenty of small, family-owned stores and restaurants were also attacked. Private losses were massive. Thousands of people were arrested for vandalism and theft, until eventually things cooled down.
This is why the new reports of looting are so worrisome. Security officials have tried to minimize the most recent events, suggesting that they are simply evidence of criminals taking advantage of the shaky national situation. On the other hand, they may be evidence that people are still angry. Gas prices remain high, affecting prices of many other goods, and it’s not clear at all whether Mexicans will ever see a respite. Can they really trust that private interests (including foreign interests) will think about the needs of ordinary people when it comes to setting prices? This doesn’t seem very likely. In any event it will be years before the Mexican gasoline market stabilizes. By that time President Peña Nieto will be out of office (there is no reelection in Mexico). Someone else will have to clean up the mess.