Many congratulations to Agustín Carstens, who, according to Javier Blas, has managed to make Mexico $8 billion by putting on some smart oil hedges last summer:
Traders joked on Monday that Mr Carstens was probably 2009’s “most successful, but worst paid, oil manager”.
Of course, it helped that Carstens had $1.5 billion lying around last summer to pay for the hedges in the first place. But really all this financial cleverness only puts off the day of reckoning: Mexico is running out of oil revenues fast, and has no visible means of replacing the taxes currently paid by Pemex.
The tax burden on Mexican individuals and companies is low in theory and lower still in practice, and the kind of tax hikes which would be needed to even partially compensate for falling government oil revenues are politically impossible to pass. No one is more aware of Mexico’s coming fiscal crunch than Carstens, and if anybody can do something constructive, he can. I suspect, however, that no one can do anything constructive, and Mexico will be in serious fiscal pain sooner rather than later.