What is happening in Mexico to explain the gasolinazo?

Hundreds of thousands of Mexicans are protesting today and have been since the start of the year. The trigger that set off the protests is the gasolinazo, the almost twenty percent hike in the price of petrol which the country endured on New Year's Day. Since then the protests have turned into riots, with supermarkets being stripped, and petrol stations being taken over by armed men who then distribute the fuel free to anyone who wants it. My family in the Tlahuac district of Mexico City report that in the early hours of this morning, the police were forced to start shooting into the air to try and clear a vast crowd away from the local Walmart. An area that includes petrol station and car showrooms.

YouTube is rapidly filling up with videos of the pillage, such as this one shot on the 3 January in the Nicolas Romero district of Mexico City

As is so often the case with events such as this, the gasolinazo is the trigger, and not the cause of the unrest. That said, by its actions the government of President Enrique Peña Nieto could not have chosen a better trigger than this, as it is one that was almost guaranteed to enrage the Mexican population.

The petroleum industry was nationalised in 1938, and since then Pemex, the state oil company has had a total monopoly over all petroleum products right down to the petrol stations where it is sold to the public.

What this meant was that the old dictatorship had enough money available to subsidise a whole range of basic goods, as well as provide cheap petrol and oil products to its local market. Foreign exchange was magicked out of thin air by selling Mexican crude oil to the rest of the world, especially the USA.

The country worked on an autarkic system of near monopolies, so if you were a smoker you had plenty of brands to choose from, but they were all produced by just two companies. Photographers could choose between Kodak and Fuji film for their cameras, and motorists could choose between five companies, each one making and selling in Mexico a few models of car and truck. It was a closed economy where almost everything that was sold in Mexico had to be made in the country by companies that had strong links to the government, otherwise they were not allowed to set up shop.

Then came liberalisation in the early 1990s. Having flogged off many state assets, and allowed foreign companies in to compete in the local market, the only way that the government could keep control of the system was to give the people more and more democracy. In the past they could buy them off with jobs and subsidies, but those economic wells no longer existed as the government withdrew  from the economic field, so political rights were offered up as a bargaining chip to keep the people quiet.

It worked rather well, until it stopped working, which is the situation that the country faces today. Opposition parties control large swathes of the country, especially Mexico City which has all the powers of a state, but without actually being called one. That means that there are sub-federal centres of power where opposition to the federal government can be organised, and they are.

The years 2000 to 2012, when the presidency was controlled by the opposition just made a bad situation worse. Then the government tried to suppress the drug dealing cartels who control between them the supply of nose powder and wacky-baccy to the USA. Before 2000 the cartels had been linked to the government, via the old system, but once the opposition took control they were treated as outlaws, so not unnaturally they began to behave like that, with the result that tens of thousands of people died in an undeclared civil war between the federal government and the cartels.

It is against this background that we need to look at the gasolinazo. It is the final straw that breaks the last hegemonic link between governors and governed. The people know that the government will allow foreign companies in to sell imported petrol later on this year. They know that when that happens the price, which is still subject to a price cap, but won't be then, will go through the roof. 

The government now has a choice. It can resort to an autogolpe, which is to say a type of coup where Peña Nieto would  keep control with the support of the army and the constitution is suspended, or it can find a way to appease the rioters. As I write there are reports coming in that at least one amparo, or injunction, has been accepted by the courts, which may buy some time, if both sides want that. If they don't, then the rioting will worsen and we are into autogolpe territory.