Taxing matters

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The decision of Mexico’s federal government to raise gasoline taxes here by 5.5% has drawn fierce criticism from the public. Now President Felipe Calderon is catching flak from some analysts for his decision to put off that hike until next year.

Calderon is trying simultaneously to raise revenue, control inflation and manage public opinion — a delicate balancing act that so far is pleasing no one.

Mexico desperately needs more tax money to fund infrastructure and other social spending to spur economic growth. But its inflation rate has been running near 4%, significantly higher than the 3.5% upper limit preferred by the nation’s central bankers.

By stalling the increase in the pump tax, as well as some previously scheduled increases on electricity and natural gas, Calderon is helping to keep a lid on inflation. Moreover, he’s trying to mollify a public that’s already fuming over rising prices for basics like tomatoes, milk and tortillas.

But critics say he’s undermining the potential of his new fiscal reforms to speed economic growth by postponing the very increases his administration fought hard to get through Congress.

Calderon would do well to heed an old Midwestern expression: If you’re going to be a bear, be a grizzly.

Posted by Marla Dickerson in Mexico City