Authors:
José Alberto López Rafaschieri and Luis Alberto López Rafaschieri
www.morochos.net
It is a fact that the budgets of oil-exporting countries are subject to the vagaries of international prices of this product; however, nations like Mexico are betting on a new way to protect them against sudden drops in the price of crude oil: Financial hedging instruments.
Because 40% of the Mexican government's revenue depends on oil exports, President Calderon's administration took a short position in the financial markets equal to a number of oil barrels which amounts to 20-30% of exports. So if oil prices fall, the profits of this operation will go up. And if the price rises, the amount of money coming into Mexico for traditional exports of crude will be still greater, although the losses from the short position in the oil derivatives markets.
But our argument against using such strategies is that the government always have to keep large amounts of money trading against the export product, funds that could well be used for other productive sectors in order to diversify the nation's dependence on the oil industry. For example, instead of resorting to the above described strategy, the Mexican government could put these millions of dollars in programs that support domestic industry, thereby promoting a more developed and less dependent country.
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