Some states impose new restrictions to combat third wave of coronavirus

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July 9, 2021

Case numbers and hospitalizations are both rising.

States across Mexico are responding to a new increase in coronavirus cases and hospitalizations in a variety of ways, including the introduction of new restrictions.

Deputy Health Minister Hugo López-Gatell confirmed Tuesday that Mexico is now facing a third wave of the pandemic, with case numbers on the rise in almost half of the 32 states.

The Health Ministry reported 9,452 new cases on Thursday – the highest single-day total since February – and 266 Covid-19 deaths, lifting Mexico’s accumulated official totals to 2.56 million infections and 234,458 fatalities. The percentage of recent cases infected with the highly contagious Delta variant of the virus is unclear but the strain that first emerged in India is now circulating in many states.

Meanwhile, tens of millions of young adults across the country remain unvaccinated because the vaccine rollout hasn’t yet reached their age bracket in the place they live.

Here’s a summary of the coronavirus situation in nine of the 32 states.

Mexico City

Mexico’s capital and largest city has been the national coronavirus epicenter since the beginning of the pandemic and easily leads the country for confirmed cases and deaths with more than 701,000 of the former and 44,715 of the latter.

There are currently more than 17,000 active cases in Mexico City, according to Health Ministry estimates, far more than in any other state. However, the capital is currently at the second lowest risk setting on the federal government’s coronavirus stoplight map – medium risk yellow – and is set to remain that color until at least July 18.

Mayor Claudia Sheinbaum acknowledged Thursday that hospitalizations of Covid-19 patients have risen, explaining that the increase has been driven by serious illness among young people.

“Yes there is an increase in hospitalizations but there is sufficient capacity in all Mexico City hospitals. The age of people entering hospitals is lower [than earlier in the pandemic], the number of deaths associated with Covid in hospitals is lower … and the number of intubated people is also lower,” she said.

Despite the increase in cases and hospitalizations, no new restrictions will be introduced for the time being, Sheinbaum said. However, the Mexico City government has launched a new information campaign urging residents to act responsibly, follow health rules and get vaccinated when the opportunity arises.

Covid case numbers since the start of the pandemic.

Jalisco

Authorities in Jalisco have increased patrols of bars and other entertainment venues to ensure compliance with health protocols as case numbers rise in the western state. More than 400 new cases were recorded in Jalisco on Thursday, according to state government data, pushing the accumulated tally above 256,000.

Despite a recent increase in cases, the implementation of new restrictions is off the table for now in the green light low risk state.

“We don’t want to take restrictive measures again,” said Enrique Ibarra, the state government’s general secretary.

The official said that new cases among people aged 20 to 34 are fueling Jalisco’s growing outbreak, which he blamed on the more transmissible Delta strain.

Nevertheless, authorities are still aiming to reopen schools in late August and don’t want to interrupt the reactivation of the tourism sector and the economy more widely, said state official Alejandro Guzmán Larralde.

Jalisco currently has more than 1,300 active coronavirus cases, according to federal estimates, and has recorded 12,649 Covid-19 deaths since the start of the pandemic.

Sinaloa

Authorities in Sinaloa have also stepped up vigilance of bars, cantinas, restaurants, casinos and other entertainment venues across all 18 municipalities to enforce compliance with virus mitigation measures. Sinaloa’s epidemic curve has shown a clear upward trajectory in recent weeks and there are now more than 2,200 estimated active cases in the northern state.

Health Minister Efrén Encinas Torres said authorities are increasing the number of beds available for Covid-19 patients at hospitals across the state. He highlighted that the number of Covid beds at the Mazatlán General Hospital has been doubled to 60.

Federal data shows that Sinaloa currently has the second highest occupancy rate in the country for general care hospital beds with 44% taken.

Meanwhile, Governor Quirino Ordaz Coppel announced Thursday that he had submitted a formal request to the federal government for more Covid-19 vaccines. The aim is to roll out vaccines to people in the 30-39 age bracket starting in high risk areas such as Culiacán and Mazatlán, he said.

Sinaloa, currently yellow on the stoplight map, has recorded almost 45,000 confirmed cases since the start of the pandemic and 6,511 Covid-19 deaths.

Oaxaca

Infections among young people are also driving a growing outbreak in Oaxaca, a green light state with an estimated 826 active cases. In light of the situation, the state government has ordered the suspension of all large events and is overseeing stricter enforcement of existing health measures.

Health Minister Juan Carlos Márquez said the coronavirus situation is worsening in 47 municipalities. Oaxaca city and the Isthmus of Tehuantepec region are among the areas of concern, he said.

About one-third of general care Covid hospital beds are taken in the state and at least seven hospitals are at 100% capacity. Oaxaca has recorded more than 49,000 confirmed cases since the beginning of the pandemic and 3,841 Covid-19 deaths.

Coronavirus cases and deaths in Mexico as reported by day. milenio

Sonora

Case numbers in the northern border state have recently risen above 200 per day, with most detected in Hermosillo, where almost half of all Covid-designated hospital beds are taken.

The state ranks third in Mexico for its general care bed occupancy rate, which is currently 38%. Health Minister Enrique Clausen Iberri said that private hospitals are reporting an occupancy rate of 57%. In the Sonora State General Hospital in Hermosillo, 31% of Covid patients are in serious condition on ventilators, he said.

Sonora is currently medium risk yellow on the federal stoplight map and a range of restrictions remain in place. The state has an accumulated case tally of more than 81,000 and has recorded a total of 6,891 Covid-19 deaths.

Veracruz

The epidemic curve is also trending upwards in the Gulf coast state but Governor Cuitláhuac García ruled out imposing new restrictions because hospital occupancy levels are low “in comparison with the rapid growth in infections.”

Federal data shows that almost 29% of general care beds are occupied in Veracruz, where there are currently nearly 2,200 active cases.

The yellow light state has recorded more than 67,000 confirmed cases since the start of the pandemic and over 10,000 Covid-19 deaths.

Baja California Sur

Currently high risk orange on the stoplight map, BCS has the highest hospital occupancy rate in the country with almost 72% of general care beds taken and 55% of those with ventilators in use. The occupancy rate in some hospitals in the state is much higher, forcing authorities to introduce new restrictions, especially in the tourist hotspots of Los Cabos and La Paz.

The state government announced that beaches in Los Cabos would be limited to 30% of normal capacity between July 8 and 15 and those in La Paz would be closed. Lower maximum capacity levels were also set to take effect at retailers such as department stores.

In Comondú, Loreto and Mulegé, authorities said they would ramp up vigilance at shops, entertainment venues and beaches to ensure compliance with health protocols. All sporting events have been suspended in Loreto, and some BCS communities such as Bahía Tortuga and Punta Abreojos have introduced voluntary 10:00 p.m curfews, among other measures aimed at stopping or slowing the spread of the virus.

BCS has recorded more than 42,000 accumulated cases and 1,628 Covid-19 deaths. More than 2,700 of the cases are estimated to be active, meaning that the state currently has the third largest active outbreak in the country after Mexico City and México state.

Yucatán

The health system in Yucatán is also under pressure with 55% of beds with ventilators taken and some hospitals reporting 100% capacity in their Covid units. The state, orange on the stoplight map, has seen a recent increase in case numbers, and currently has an estimated 2,179 active infections.

Governor Mauricio Vila recently announced that some beaches in the state would be closed on weekends, including those in Progreso, located 40 kilometers north of state capital Mérida. An 11:30 p.m. to 5:00 a.m curfew is in place across the state.

Yucatán’s accumulated case tally is almost 49,000 while its official Covid-19 death toll is 4,400.

Nuevo León

Authorities in Nuevo León, a yellow light state with more than 1,800 estimated active cases, have ruled out a return to in-person classes when the new school year begins on August 30. No date has yet been set for a reopening of schools, said Governor Jaime Rodríguez, explaining that it was impossible to do so because of the growing coronavirus outbreak.

Nuevo León has recorded more than 129,000 accumulated cases and almost 10,000 Covid-19 deaths since the start of the pandemic. Covid units in the state’s hospitals are currently about one-quarter full on average.

With reports from Milenio

Arrest warrant issued for former Interjet chief for tax fraud

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MND Staff

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July 8, 2021

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A federal judge on Thursday issued a warrant for the arrest of former Interjet CEO Miguel Alemán Magnani on 66-million-peso (US $3.3 million) tax fraud charges.

The warrant was issued in Mexico City on the request of the federal Attorney General’s Office (FGR), according to court officials.

The FGR has been investigating the ex-chief of the beleaguered airline since the beginning of the year. Interjet faced a slew of problems in 2020, including cash flow shortages and flight cancellations, before ceasing operations in December. The airline announced earlier this year that it was filing for bankruptcy.

The issuing of the arrest warrant comes five months after the Office of the Federal Tax Prosecutor filed a complaint against Alemán with the FGR for allegedly failing to pay almost 66.3 million pesos in taxes owed by Interjet. The money the company should have paid but allegedly didn’t was income tax it was required to withhold from employees’ salaries in December 2018.

Court officials told the newspaper El Financiero that an Interpol red notice against Alemán, who is a part owner of Interjet, could be issued in the coming days.

“The Interpol red notice would be issued if it’s proven he’s out of the country … but that would take a few days,” they said.

Alemán is the son of businessman and former governor of Veracruz Miguel Alemán Velasco and the grandson of former president Miguel Alemán Valdés.

Interjet said in April that it intended to resume operations as soon as possible, but whether it will be in a financial position to do so is unclear. The budget carrier owes 47.6 million pesos to airport operator Pacific Airport Group and has other large debts to tax authorities and creditors.

With reports from Milenio and El Financiero

Family rescued after their vehicle swallowed by sinkhole in Tamaulipas

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MND Staff

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July 8, 2021

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A month and a half old baby was rescued with its parents after their vehicle was swallowed by a sinkhole Tuesday in Matamoros, Tamaulipas.

The family had been driving to take the baby to daycare when their vehicle suddenly nose-dived as the road gave way.

Video footage shows passing drivers going to the family’s aid and arms extending from the vehicle to pass the baby to safety, before the father and mother emerge unscathed.

The mother said she feared for the life of her baby and thanked God that the accident resulted in nothing more than damage to the vehicle. No injuries were recorded.

Meanwhile, in the nearby city of Nuevo Laredo three sinkholes are reported to be disrupting the flow of traffic.

Sinkholes have become a prominent talking point of late. An 126-meter chasm near Puebla city, which first appeared in late May, has become a tourist attraction, sparked an animal welfare debate, and has inspired a cake, a floral arrangement and cumbia song.

Other smaller sinkholes have since emerged in Hidalgo, Mexico City, Yucatán and Tabasco.

With reports from Milenio, El Universal and MVS Noticias

The time for Mexico to be talking about earthquakes is now

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Shannon Collins

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July 8, 2021

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Every year on September 19, Mexico holds a nationwide public drill to mark the anniversary of the 1985 earthquake that killed an estimated 9,500 people and devastated families across the country. In 2017, a mere two hours after the commemorative drill, Mexico City trembled again in a magnitude 7.1 earthquake, which killed more than 200 people in the capital and the states of Puebla, Mexico and Morelos.

The Mexican republic is located in a highly seismic region on the planet, as it is crossed by the Trans-Mexican Volcanic Belt, a part of the Pacific Ring of Fire. Additionally, along the west coast of Mexico, the Cocos and North American tectonic plates meet in a subduction zone that creates frequent earthquakes.

Just offshore, the Guerrero Gap presents a particular concern to scientists due to its proximity to Mexico City, which has already suffered multiple devastating earthquakes. Located over a sinking aquifer, Mexico’s capital is particularly susceptible to earthquakes as a result of the compacting of the ancient lakebed on which the city was built.

There are debates amongst seismologists about which parts of Mexico are most likely to yield the next big earthquake. It could be from off Michoacán coast, where, according to the National Seismologic Service (SSN), minor earthquakes occur daily.

It could also be from southeast of the Guerrero Gap, or indeed in the Gap itself, which could produce an earthquake of catastrophic magnitudes.

Pacific Ring of Fire — The Ring of Fire is characterized by active volcanoes and frequent earthquakes. United States Geological Service

Some of the poorest states in Mexico are among those most prone to earthquakes, including Oaxaca, Chiapas, and Guerrero. They are additionally often subject to hurricanes and floods.

Historically, families in these states have some of the lowest income rates in the country and some of the highest illiteracy rates, which are aggravated by economic and personal losses as a result of natural disasters.

The exacerbation of social disparities as a result of these disasters is in many ways much more difficult to repair than the physical destruction, and it continuously affects everything in a cyclical way.

Earthquakes alone, however, do not cause deaths. Rather, it is the failure to prepare for the eventuality that an earthquake will occur that continues to make them devastating. Structural preparation and a culture of preparedness has been shown to be the way to mitigate disasters, but this is only effective where there is the political will to make it happen.

Take Chile, for instance, which has historically been subject to a large number of high-magnitude earthquakes, including, in 1960, the Valdivia quake, the largest one recorded in the 20th century. Today, the nation is held up as a model of earthquake preparedness.

In 2014, Chile experienced an 8.2 magnitude quake that resulted in proportionately few casualties. And why? Because there were rules and guidelines in place to prepare for it.

1985 earthquake Mexico City — Victim being rescued from debris in Mexico City’s disastrous 1985 earthquake.

More than one million people were evacuated from coastal areas in a matter of hours, and the country has strict building codes which now require new buildings to withstand a 9.0 magnitude quake without collapsing.

This was not always the case. After the 2010 earthquake and tsunami, which killed thousands, reform of Chile’s national strategies to deal with disasters was not only possible but also popular. The failure to prepare for the 2010 quake exposed the need for a dialogue between the people on the ground in coastal communities and the legislators in government whose policies determine how risks are mitigated and disasters are managed.

Chile’s example offers up some big-picture solutions for countries across Latin America, and indeed for earthquake-prone regions across the globe.

Earthquakes in countries along tectonic boundaries are an unavoidable part of nature’s law. Notwithstanding the fact that these events are necessarily going to happen, they do not have to be devastating to communities, and to nations, if widespread structural change is made.

In Mexico, this means opening a dialogue between the people in power who are responsible for disaster risk management and those living their day-to-day lives in constant apprehension of the next catastrophe.

Ultimately, earthquakes are far from mysterious acts of God. They are natural disasters that nations can, and must, prepare for in order to not simply maintain a damaging status quo with regards to their disaster response (or lack of). The real question at hand is not whether Mexico is awaiting another earthquake of the magnitudes of 1985 and 2017, or whether the country must get used to smaller earthquakes occurring consistently over time.

2017 Earthquake victim Oaxaca — Three years after Mexico’s 2017 earthquake, Marión Angélica Ferra of Juchitán de Zaragoza, Oaxaca, was still living in her home with no roof, lost in the quake.

The real question is whether the powers-that-be have an interest in fighting the legislative battles necessary to ensure that when the next earthquake does strike — as it certainly will — a safety net will have been fixed in place.

It is already too late to be talking about earthquakes when they occur; instead, discussions must happen during the gaps in between — when there is the time and the space to do something about them.

The time to be talking about earthquakes is now.

Shannon Collins is an environment correspondent at Ninth Wave Global, an environmental organization and think tank. She writes from Campeche.

GMO crops issue muddied by differing views among senior agricultural officials

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MND Staff

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July 8, 2021

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The federal agriculture minister and his deputy are divided over whether corn used as animal fodder will be exempt from Mexico’s move to ban imports of genetically modified corn by 2024, according to a report by the news agency Reuters.

President López Obrador published a decree on the last day of 2020 stating that GMO corn imports for use in the food industry will be phased out by 2024.

But ambiguity in the wording created uncertainty as to whether genetically modified corn used as livestock feed would also be banned. Mexico imported some 16 million tonnes of GMO yellow corn last year, almost all of which came from the United States and was used as fodder. The uncertainty is a concern for U.S. corn growers who export to Mexico and farmers who work in this country’s US $12 billion livestock industry.

Reuters reported that “if liberally interpreted and successfully implemented,” the decree could end that dependence entirely. If there is “a more restrictive interpretation,” the animal feed exports could continue.

A source close to Agriculture Minister Víctor Villalobos told Reuters that the minister believes that fodder will be exempt from the ban on GMO corn. Villalobos, who has long advocated biotech crops, told United States Agriculture Secretary as much earlier this year.

But Reuters said “there are signs that Villalobos and his moderate allies have not yet won that battle and may be losing.”

Deputy Agriculture Minister Víctor Suárez, a former federal deputy for the leftist Democratic Revolution Party, is opposed to the importation of all GMO corn, whether it’s used as fodder or not.

Ambiguity in the decree was the result of behind-scenes wrangling between factions in the agriculture ministry, one led by Villalobos and one headed by Súarez, according to Reuters, which cited three sources with knowledge of the matter.

Súarez is an advocate of “agroecological” farming, a frequent critic of big agribusiness and has said that animal feed GMO corn imports will be covered by the ban.

López Obrador has failed to provide clarity on the issue and it is not known when he will commit one way or the other. Meanwhile, the uncertainty for U.S. exporters and Mexican importers remains.

Sources close to health regulator Cofepris say that its leadership shares Suárez’s view that imports of GMO livestock feed should be prohibited, Reuters reported.

The regulator, formally known as the the Federal Commission for Protection Against Sanitary Risks, has not approved any new GMO corn varieties since late 2018, when López Obador took office. The approvals have been sought by leading GMO seed companies such as Bayer of Germany and the United States’ Corteva.

In addition, Cofepris is delaying new import permits for the crop, National Farm Council president Juan Cortina said last month.

Reuters said it was unable to arrange an interview with Villalobos despite multiple requests and Suárez was unwilling to discuss any differences with his boss. More than a dozen farm sector leaders consulted by the news agency said they were increasingly worried that imports of GMO corn used as fodder would be banned despite the agriculture minister’s assertions they wouldn’t be.

“The text of the decree specifies that the agriculture, environment and health ministries as well as [the science council Conacyt] will interpret it, and officials in charge of the latter three are all believed by several industry leaders to be sympathetic to Suarez’s views. None of the agencies involved responded to requests for comment,” Reuters said.

Cortina, the farm council chief, said there is no certainty about what will ultimately be decided. Assuming fodder imports will be exempted is “totally wrong,” he said.

The agriculture industry is right to be worried, Reuters said, because “López Obrador has a track record of confounding critics and taking drastic steps in line with his nationalist, big business-skeptic views.”

The issue is a highly sensitive one in Mexico – the birthplace of modern corn – where anti-GMO activists say that genetically modified corn has already contaminated fields where native, organic varieties of the grain are grown.

With reports from Reuters

Humpback whale rescued on beach in Puerto Peñasco, Sonora

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MND Staff

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July 8, 2021

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The whale spent about four hours on the beach before the tide came in.

A 10-meter-long, five-tonne humpback whale was discovered on Playas del Mirador beach and rescued Wednesday in Puerto Peñasco, Sonora.

The navy and Civil Protection were called out at about 5 a.m. and found the whale stranded among rocks.

Authorities reported the mammal was 200 meters from the water so about 50 police, firefighters, naval personnel and local residents responded to a call to help it return to the water.

The rescuers worked to keep the mammal hydrated until the tide rose to take it back out to sea. The plan proved effective and the rescuers celebrated as the whale returned to its habitat, having spent about four hours on the beach.

Local head of Civil Protection, Captain Alan Josué Ontiveros López, explained what might have brought the whale to shore. “It was a male juvenile humpback whale, which very possibly was nearby looking for food and unfortunately the low tide” left it stranded, he said.

Rescatan a ballena varada entre rocas en Puerto Peñasco, Sonora

Watch this video on YouTube

He added that conditions favored the rescue effort. “Fortunately with the help of the military officers, volunteers and the good wave conditions, we were able to return it [to the sea],” he said.

The whale is being monitored to ensure it doesn’t fall victim to another low tide.

With reports from UnoTV and El Universal

Newborn left in hands of young mother begging in the street

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MND Staff

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July 8, 2021

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The young mother feeds the baby that was left in her care in downtown Monterrery.

A newborn baby was abandoned in the city center of Monterrey, Nuevo León, Monday after being left in the care of a woman who was begging in the street with her four children.

The person presumed to be the mother asked the woman, identified only as Alicia, to look after the baby, telling her that she couldn’t enter the store with it and complaining of pain in her arm. She left the newborn with a bag with diapers, a can of powdered milk and a baby bottle with prepared formula.

After waiting about three hours for the baby’s mother to return, Alicia was assisted by passersby to contact the police.

Red Cross paramedics diagnosed the baby with a fever and it was transferred to a maternal and children’s hospital in Guadalupe City. The infant was reported Wednesday to be in stable condition.

Authorities have taken DNA samples from the baby, requested video footage from security cameras and interviewed owners of local businesses to try to identify the mother.

In an interview with Televisa Alicia said she had considered continuing to look after the baby, and even thought a name for him, but was advised to call the police.

Meanwhile, in a separate incident a newborn baby was found lifeless outside a house in the north of the city Wednesday inside a plastic bag and wrapped in a blanket.

With reports from El Universal, Televisa and Debate

Mexican historian receives prestigious award from King of Spain

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MND Staff

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July 8, 2021

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Mexican historian Enrique Krauze has received a prestigious Spanish award in recognition of his long career in the academic discipline of history.

King Felipe VI of Spain presented the Ordenes Españolas History Award to Krauze at a ceremony held Wednesday at a historical royal residence near Madrid.

The award, which was first presented in 2018 and comes with a 60,000-euro (US $71,000) prize, recognizes the 73-year-old’s “broad career as a historian, essayist, editor and thinker,” the king said.

The jury that selected Krauze as the winner said his work “covers the entire history of Mexico as a nation from a broad perspective that considers both its actors and institutions.”

“… He offers an independent vision of Mexican history in which indigenous elements combine with the Christian culture received from Europe.”

Among the more than 20 books Krauze has authored are Mexico: Biography of Power, History of the Mexican Revolution: The Economic Reconstruction and Century of Leaders: Political Biography of Mexico.

He was nominated for the award by the National Autonomous University of Mexico, of which the historian is an industrial engineering graduate.

In his acceptance speech, Krauze said he has “many affectionate links to Spain” and that receiving the award in 2021 was “a very high honor” accompanied by “the responsibility to remember the fifth centenary of the conquest of Mexico.”

The historian, who was highly critical of President López Obrador’s request that the King of Spain apologize for the conquest, said the civilization conquered by the Spanish was neither the “Arcadia,” or utopia, depicted by Mexican indigenous historiography nor the “hell” depicted by its “Hispanicist counterpart.”

Krauze also said that the discipline of “history is not a tribunal,” meaning that historians don’t have to establish a definitive version of events.

“… The duty of the historian, especially in the face of such a distant drama [such as the conquest] is not to judge but rather … document, explain and understand,” he said.

Krauze highlighted the importance of the mixing of Spanish and indigenous blood – the mestizaje – in forging a new culture and identity in Mexico, asserting that it was the greatest legacy of the conquerers and colonizers.

“The indigenous influence dominated in diet, both cultures came together in medicine and herbalism and in language, despite the dominance of Spanish … indigenous languages survived and pervaded Spanish with a variety of mexicanismos, tonalities and accents,” he said.

Krauze said that Mexico and Spain should commemorate the conquest together and not allow hate to impede dialogue, as occurred after the former won independence from the latter in a bloody war at the start of the 19th century.

“In that way history will be able to achieve its highest mission, that of being a path of understanding and harmony,” he said.

British historian John H. Elliot won the 2018 Ordenes Españolas History Award, while Spanish historian Miguel Ángel Ladero triumphed in 2019. The prize wasn’t presented last year due to the pandemic.

With reports from El País and El Universal

3 National Guardsmen are suspects in Oaxaca kidnapping

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MND Staff

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July 8, 2021

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One of those wounded in a gunfight Wednesday in Oaxaca.

Two members of the National Guard are in custody on kidnapping charges and a third is dead after they engaged in a gunfight with state police in Oaxaca on Wednesday.

The clash occurred Wednesday afternoon on Federal Highway 190 in San Pablo Etla, a municipality just north of Oaxaca city.

One of the guardsmen was shot by state investigative police and subsequently died in hospital. Two police officers were wounded.

A young man from Miahuatlán de Porfirio Díaz who was allegedly kidnapped by the three guardsmen was rescued from a home from which the security force members fled before opening fire at police to aid their escape. Relatives of the man said the National Guard members had asked for 200,000 pesos (US $10,000) and a pickup truck as ransom.

The Oaxaca Attorney General’s Office said it would carry out a “diligent and exhaustive” investigation into the incident between police and the members of the National Guard, a two-year-old security force created by the current federal government.

It also said it would seek to gather evidence to support the accusation that the detained guardsmen committed the kidnapping.

With reports from Milenio and Reforma

Analyst questions wisdom of LP gas plan, suggests price will have to be subsidized

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MND Staff

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July 8, 2021

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lp gas tanks — LP gas is widely used by Mexican consumers.

The federal government’s plan to create a new state-owned company to distribute LP gas directly to consumers at low prices is concerning for several reasons, according to a leading economic analyst.

President López Obrador announced Wednesday that state oil company Pemex will establish the new utility within three months. Gas Bienestar (Well-Being Gas), as the new company will be called, is needed to create additional competition in the LP gas market because it is dominated by five large companies and gas prices have been rising “unjustifiably” above inflation, he said.

In a series of Twitter posts, the director of economic and financial analysis at Banco Base questioned the wisdom of the plan.

Gabriela Siller noted that Mexico is not self-sufficient in LP gas and therefore Pemex/Gas Bienestar will have to import a certain quantity of it at a price determined by the international market. (Pemex is already an LP gas importer and also produces gas.)

“There will also be transport, storage and commercialization costs, so it is not clear how they will offer gas at a lower price,” she wrote.

Siller cited data from the Federal Economic Competition Commission (Cofece) that showed that domestic gas production was meeting less than 30% of demand at the end of 2017.

“This means that increases in international prices are absorbed by importers and distributors in the country, as well as sellers and finally consumers,” she wrote.

Siller noted that international LP gas prices have risen 45.7% annually as of late June and domestic prices were up 17.8% in the first half of last month compared to the same period a year earlier.

“The discrepancy between the rise in the international price and the local price is because several sellers have absorbed part of the increases,” she wrote.

“The creation of ‘Gas Bienestar’ also implies investment in tanks to sell [gas], employees, etc., so there are initial costs like in any company. The question is: who will absorb these costs, Pemex or [the Ministry of Finance]? (Which for practical purposes are the same),” Siller wrote.

The extra burden on government resources could have implications for Mexico’s sovereign credit rating, she continued.

International LP gas prices have risen 45.7% annually as of late June, says Gabriela Siller of Banco Base.

“Creating the [state-owned] company doesn’t guarantee that gas will be offered at a lower price. The only way for that to occur would be to incur the cost of creating the company, operating it and then selling gas at a subsidized price,” Siller wrote.

López Obrador said Wednesday that Gas Bienestar’s prices would not be subsidized by the government but rather the company will have very low profit margins that allow it to keep prices low.

But Siller maintains that creating and operating the company will be a costly exercise for the Ministry of Finance or Pemex, which already has debt in excess of US $100 billion.

“Creating Gas Bienestar will be doubly onerous for public finances because 1) gas will be sold below the market price and 2) [the government] will incur the operation costs,” she wrote.

Siller said it would make more sense for the government to subsidize consumers’ purchases from existing private companies, perhaps via a voucher scheme, rather than create a new state-owned one, although she acknowledged that would come at a cost as well.

“But we [would] save the cost of creating a new company and operating it,” she wrote.

“In summary, there are five concerning things about the creation of Gas Bienestar:

Additional costs for the public sector.
Investment costs for commercialization…
Risks of credit rating cuts.
Risk of a fall in fixed investment in the sector …
Risk of [the government] wanting to limit import permits, which could generate shortages.”

Meanwhile, Cofece responded to López Obrador’s criticism that it has done nothing to stop the increase of LP gas prices.

The competition watchdog said in a statement that it shares the desire of citizens and the president for fuels to be offered at the best possible prices in Mexico.

“In fact the commission has been emphatic and vocal [on the issue], … undertaking actions to investigate and … sanction anti-competitive behavior and promoting greater competition in the gasoline, diesel, LP gas, aviation fuel and electricity markets,” Cofece said.

With regard to LP gas in particular, the watchdog noted that it has investigated to determine whether there is “effective competition” in the market and if there is collusion between LP gas distributors.

“… In the case of collusion being proven, economic sanctions of up to 10% of the income of the companies involved can be imposed,” Cofece said.

A final determination of the investigations is awaiting response from the gas companies themselves.

The commission also noted that it published a study in 2018 that warned that the LP gas market was dominated by a small group of companies and made recommendations to reduce the impacts of the market concentration.

Among the recommendations were to allow the sale of LP gas cylinders at gas stations and supermarkets, to sell gas to vulnerable sectors of the population at state-run Diconsa stores and to eliminate obstacles to the installation of new distribution plants. None of the recommendations was implemented by the federal government, Cofece said.

Mexico News Daily