Mexico's 2016 budget considers liberalizing gasoline prices in 2016

Mexico's expenditure cut in budget proposal for 2016 is relatively small but centered on investment. The proposal considers a 20% reduction in oil revenues, partially compensated by a 20% increase in tax revenues (15% higher resources from income tax). 

The government is proposing to liberalize gasoline prices in 2016, putting downward pressures on inflation in that year. Originally, the government plan was to implement this liberalization of prices in 2017. However, the government is pushing this date forward to next year.

However, most of the expenditure adjustment would be done in public investment, as the budget proposal considers a 21% reduction with respect to 2015. This will likely put downward pressure on growth, although recently the effect of public investment on growth has declined. 

"Finally, the budget does not consider new taxes and includes some measures to promote investment, particularly for small and medium-sized firms. Major changes are not expected in the Congress. The deadline to finish the discussions on taxes is October 31", says Barclays.