Fynsa
Choosing a topic for this column is no easy task, especially since my goal is to offer something fresh and insightful rather than just another take on a topic that’s already been overanalyzed. Basically, it’s about putting into practice what economists always recommend: adding value.
I mention this because I had almost finished this week’s column. The 2025 National Accounts offered plenty to work with, especially since the upward revisions to GDP for 2023, 2024, and 2025 could initially be seen as a tailwind for the incoming administration. However, the more detailed figures told a different story, as the most recent data—including that from January 2026—actually showed downward revisions, shifting the analysis slightly. But anyway, I’ve already told you everything interesting that could come out of that.
However, one recurring theme—which cannot be a coincidence—is the constant questioning from the board and sales teams regarding the potential impact on inflation should the elimination of the MEPCO materialize, at least as we know it today. This fund, through adjustments to the specific fuel tax, is designed to smooth out abrupt fluctuations in the prices of gasoline, diesel, and automotive LPG, whether they rise or fall. Therefore, it is not a tool for keeping prices low or a subsidy, as some—likely out of confusion—assume.
We have thus simulated what would happen to fuel prices and the CPI if this mechanism were to disappear completely overnight. Readers will likely view this scenario as unlikely, but it is useful to be able to estimate in advance the magnitude of the impact such a measure would have. Initially, gasoline prices would rise by an average of roughly $380 (based on current parity prices), while diesel prices would increase by $280. Given the INE’s methodology for measuring fuel prices in general, this would result in an 8.1% increase in the CPI for diesel and an 8.8% increase for gasoline in March, compared to the 2% and 2.4% we currently project. Thus, our March projection would rise from 0.5% to 0.8% m/m.
However, based on the methodology mentioned above, the most significant impacts would be seen in April. In this context, fuel prices would rise by 25.8%, which would contribute 1.0 percentage point to the CPI change for the month. Thus, our estimate would rise from 0.4% to 1.4% month-over-month due solely to this effect.
With the new government having been in office for less than a month, how do you think the public would react to this? How do you think it would affect the executive branch’s agenda and negotiating power to implement measures that it considers essential to its platform?
I feel the same way. So, even if the minister doesn't want to, there's nothing wrong with asking for a little bit of luck every now and then.
