Last updateFri, 22 Jan 2016 2pm

Oil price drop could affect police funding in provinces

The drop in global oil prices may force Mexico to make cuts to sensitive areas, including security funding, that will delay essential anti-crime reforms, geopolitical intelligence firm Stratfor said Thursday.  

Although noting that the country will manage the oil price drop “relatively well” because of its robust domestic manufacturing sector, Stratfor said maintaining solvency could lead to further federal security funding cuts, especially to states that were hoping to beef up their regional forces but have seen their budgets pared back by US$160 million for 2016.

Mexico’s Finance Minister Luis Videgaray told El Financiero newspaper Thursday that further budget cuts were not necessary at this time even though Mexico’s export crude price fell to US$20.02 a barrel earlier in the week.  

The oil price plunge put further pressure on the peso, which fell to 18.8 to the dollar Thursday, another record low. Mexico’s currency has now lost around eight percent since the beginning of the year.

Videgaray said the peso was undervalued and expected it to recover once the current international market volatility had stabilized. He also stressed that Mexico was not in a financial crisis.

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