Farm losses surge in Mexico as fuel crunch likely to hit economy

[January 15, 2019]   MEXICO CITY (Reuters) - Agriculture losses caused by Mexico's ongoing fuel shortage are estimated at nearly $300 million, a sector leader said on Monday, and overall economic growth is also likely to be hit as the government struggles to stabilize gasoline distribution.

Losses of at least 5.5 billion pesos ($290 million) have been reported by major farm and ranching businesses as delayed shipments and spoiled supplies have accumulated due to shortage of motor fuels that are required to transport products, Bosco de la Vega, who heads Mexico's National Farm Council, told Reuters.

Berries, avocados and tomatoes are vulnerable and have relatively short shelf lives, and the situation will worsen if fuel supply and distribution are not normalized soon, De la Vega explained.

"In the next 10 days, if this issue isn't resolved, I think we will have a serious shortage of perishable food," he added.

Meanwhile, Mexico's economy could contract in January due to a slowdown in activity caused by the fuel shortage.

Late last month, President Andres Manuel Lopez Obrador began cutting supply from major fuel pipelines that have been tapped for years by thieves, a move that has led to long lines of frustrated motorists waiting hours to fill their tanks.

Criminal groups have tapped pipelines and stolen tanker trucks carrying diesel and gasoline in the oil-producing country for years, costing the government billions of dollars.

Lopez Obrador's offensive against fuel robbers marks the leftist's first attempt to tackle entrenched corruption since taking office on Dec. 1.

Jonathan Heath, one of Lopez Obrador's nominees to serve on the central bank board, told a congressional hearing on Monday that shortfalls stemming from the government crackdown on fuel theft could become a serious risk if they go on for weeks.

An employee fills a vehicle with fuel at a gas station in Mexico City, Mexico, January 14, 2019. REUTERS/Henry Romero

"For January, right now I'd think that we could see a negative rate (of growth)," Heath said. "If it goes on beyond February and March, who knows when we could start to get into something dangerous, and then I would be more worried."

"If it's a problem that lasts a week or two more weeks, and we see things starting to work themselves out, I think the effects could be minimal," the economist added.

Industry groups say the economy could suffer if the bottlenecks in supply are prolonged.

Several states complained they were given no warning by the government that it was about to shut down major pipelines in order to stop the theft that has caused billions of dollars worth of losses to Mexico in recent years.

The government launched its crackdown on theft on Dec. 27, and traders started to feel the crunch about a week later.

($1 = 18.9821 Mexican pesos)

(Reporting by Adriana Barrera and Sharay Angulo; Editing by Chris Reese and Sherry Jacob-Phillips)

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