Management of Oil Windfalls in Mexico : Historical Experience and Policy Options for the Future
The macroeconomic impact of commodity windfalls has provided fertile ground for research since the 1970s. Particularly affected are developing countries that rely heavily on commodity exports. in the case of oil windfalls, cross-country experience...
| Main Authors: | , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2001/04/1089582/management-oil-windfalls-mexico-historical-experience-policy-options-future http://hdl.handle.net/10986/19677 |
| Summary: | The macroeconomic impact of commodity
windfalls has provided fertile ground for research since the
1970s. Particularly affected are developing countries that
rely heavily on commodity exports. in the case of oil
windfalls, cross-country experience is vast: Indonesia,
Kazakhstan, Mexico, Nigeria, the Russian Federation, and
Republica Bolivariana de Venezuela have all been buffered by
such windfalls. The authors investigate Mexico's
experience. They provide an overview of oil's impact on
the Mexican economy and of the management of oil rents
engineered by the government from the 1970s to date. A third
of government revenues come from the hydrocarbon
sector--especially oil exports. The reliance of public
finance on a single commodity means that shocks threaten the
economy's fiscal balance and stability. Policy options
for protecting the economy from volatility in oil revenues
without eliminating the benefits from rising prices include
a stabilization fund and hedging strategies on international
markets, which the authors discuss. The stabilization fund
smoooths consumption and reduces the costs associated
volatile spending. The fund and hedging strategies can
complement each other--the fund working as the main
recipient of revenues, and the hedging strategies managing
short-lived movements in prices. This joint strategy would
also reduce the size of the fund and the probability of its
going bankrupt. |
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