July 10, 2008 / 10:39 PM / 11 years ago

Entrepreneurs lug cheap Mexican fuel across border

TIJUANA, Mexico (Reuters) - U.S. and Mexican entrepreneurs with an eye for a quick buck are buying subsidized fuel in bulk in Mexico and hauling it across the U.S. border to make big profits, officials say.

A sign at a gas station shows the price of premium gasoline, called magna in Mexico, at 7.53 pesos per liter, equivalent to around $2.71 per gallon, while indicating that just across the border in the United States regular gasoline costs 16.00 pesos per liter, or around $5.76 per gallon, in the border town of Tijuana, June 19, 2008. REUTERS/Jorge Duenes

With a yawning gap between the cost of Mexico’s state-subsidized fuel and record U.S. pump prices, tanker truck owners and people doing business on the border are filling up tanks or plastic barrels with Mexican fuel and selling it in the United States.

Gasoline in Mexico is around a third cheaper than in the United States. For diesel, prices are more than double — well over $4 a gallon in U.S. border states compared to just over $2 in Mexican border cities.

“It is true tanker trucks are coming from the United States to fill up with supplies in Mexico,” Mario Osuna, the head of Mexico’s consumer watchdog agency Profeco in Baja California state where Tijuana is the capital, said on Thursday.

“There is no way of sanctioning foreigners who come to Tijuana and buy gasoline to sell in their country,” Osuna told Reuters. “Mexico does not have regulations relating to that.”

Border residents who have spotted the price anomaly are jumping on the export bandwagon, taking containers of fuel over the border in pickup trucks to sell.

“We cannot deny that this type of small-scale contraband is going on,” said Joaquin Avina, president of the Association of Gas Stations of Tijuana, Tecate and Rosarito.

“The obligation of the (gasoline) companies is to sell its product — whether it’s being used to burn down a house or take it and sell it in the United States,” he added.

Low Mexican prices had already attracted U.S. motorists who are driving over the border to fill up their tanks. The extra demand has caused shortages at hundreds of Mexico’s border gas stations, some of which are rationing fuel.

President Felipe Calderon has promised to maintain fuel subsidies that are expected to cost the government close to $20 billion this year as world oil prices soar.

GUATEMALANS LUG BARRELS BY RIVER

The cheap prices have also sparked fuel hawking at Mexico’s southern border with Guatemala, people living in the area say.

Hundreds of people have been lugging fuel across a border river in plastic barrels placed on inflated inner tubes as makeshift boats. Some swim, dragging the barrels behind them.

Once across the border, the fuel is sold at roadside stalls, with the importers charging around $1.50 per gallon more than the price in Mexico, still lower than gas stations on the Guatemalan side of the border, which have mostly closed.

Carmela Mejia, a single mother in the town of Malacatan just over the border from Mexico, now sells gasoline at her fruit stall after seeing her sales would rise.

“I got a loan to buy gasoline from Mexico and this is how I earn a few cents to maintain my three children,” she said.

A lack of domestic refining capacity means Mexico has to import 40 percent of its gasoline despite being a major oil producer, but the cost of fuel imports has soared.

Deputy Energy Minister Jordy Herrera said this week the government was working on a plan to stop the Mexican subsidies going to benefit U.S. consumers.

“We are working hard with the border states and Pemex to come up with some scheme in which only Mexican consumers see the benefit of this administered price,” Herrera told the daily Milenio, noting fuel demand has jumped in Baja California.

El Semanario online newspaper said Mexican fuel can be sold legally in the United States with government permits.

Energy ministry officials were not available for comment, and the economy ministry did not return calls.

Additional reporting by Catherine Bremer and Chris Aspin in Mexico City and Herbert Hernandez in Guatemala; Writing by Chris Aspin, editing by Philip Barbara

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