With a barrel of oil going for $120 on world markets, emerging economies are suffering from the growing strain of fuel subsidies. The IMF estimates that fuel subsidies reached $250 billion in 2010, up from $60 billion in 2003. Compared to Asia, Latin America is fairing rather well. Mexico and Venezuela certainly have high fuel subsidies. Venezuela spends $1.5 billion a year to keep domestic fuel prices the lowest on earth, according to the Wall Street Journal.
Fuel subsidies have become a part of the “social contract” with the poor, and while Mexico–until PEMEX inefficiencies make the country a net importer, which could happen before the end of this decade–and Venezuela can afford lavish subsidies, other countries will find it more difficult, as Evo Morales recently find out.