Diesel subsidies face fiscal pressure in Mexico and Colombia

Governments in Mexico and Colombia are facing significant fiscal and economic pressures regarding diesel subsidies.

In Mexico, the IEPS tax has shifted from a revenue source to a massive subsidy, with accumulated losses potentially exceeding 108 billion pesos as of late September. Diesel accounts for 57% of this impact. To prevent immediate inflationary shocks in food and industrial transport, the Mexican government has utilized IEPS incentives and complementary fiscal stimuli to absorb international price increases.

In Colombia, the administration of President Abelardo de la Espriella is considering a gradual increase in diesel prices to address a deficit attributed to the previous administration of Gustavo Petro. Energy Vice Minister Armando Cuello stated there is no reason for the government to continue subsidizing the fuel, though officials noted that any price hike must be handled delicately to avoid impacting freight costs and the broader economy during a period of fragility.