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Is price freeze an option?

Inflation rates and high gas prices are no justification to go back to obsolete practices
Is price freeze an option?
Gas station in Mexico – Photo: Juan Carlos Reyes García/EL UNIVERSAL
26/04/2018
08:45
Mexico City
Newspaper Leader by EL UNIVERSAL
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There are millions of people in Mexico – mainly those under 35 – who know little of price control or price freeze. They have lived an era in which Mexican economy has had to compete with the world with openness and equality before the rest of its partners.

Since the mid 80's, Mexico began to change its economy little by little. Single prices were becoming a thing of the past and terms such as competitiveness, added value, and innovation entered our language.

The energy industry was one of the last to open and adapt to international standards. In 2017, gas price was deregulated – a very unpleasant experience for the population as gas price hikes early this year caused social protests.

As part of the election times we're living in, candidate Andrés Manuel López Obrador (AMLO) announced a few days ago that if elected president, he would set a gasoline price freeze during the first three years of his administration.

Now, gas station owners warn that if the above comes to pass, the measure will hinder expected investments for USD$ 16 billion – aimed to build new gas stations and infrastructure to store and transport fuel.

Proposing price control is an outdated measure. Establishing limits to the price of articles doesn't encourage production. Why should we put effort into offering a better service or product if the producer is unable to set their own prices? In this case, price control leads to a reduced option of products.

We cannot deny, however, that for end consumers, the only relevant information is that gas prices have decreased in the United States while in Mexico they increase; that these increases have gone even above other products and even generated inflation rates which hadn't been seen in almost two decades but this is no justification to go back to obsolete practices.

Last month, the Federal Commission on Economic Competition announced it is investigating possible practices by gas station owners which go against competitiveness and are detrimental to clients.

This has to be the role of the government: beyond imposing price control, regulate the market and prevent large consortia from plotting to carry out abuses. The government needs to promote investment, not set obstacles for it.

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