In this regard, the existing evidence for Latin America suggests that, in general, oil exporter countries allow limited pass-through from oil price to gasoline prices, whereas oil importer countries tend to allow higher levels of pass-through to final consumers. Table 7 summarizes the results of two studies that have explored the degree of (international oil prices/domestic gas prices) pass-through over past 10 years in a selected number of countries in the region.

For example, Bacon and Kojima (2006) compute the ratio between the change in domestic prices (gasoline, diesel) and the change in oil prices -both measured in dollarsover 2004-2006 for 8 Latin American countries. They find that Venezuela, Argentina, and Mexico have negligible pass-through; Bolivia and Honduras would have passthroughs of around 60 percent for gasoline and 80 percent for diesel; finally, Guatemala, Nicaragua and Chile have the highest pass-through of their sample with coefficients ranging from .95 to 1.15.

These findings are to a large extent consistent with those in World Bank (2006). In this case, the degree of pass-through is estimated as the coefficient from a regression of the overall price index of gasoline prices on energy prices. World Bank (2006) concludes that in Argentina, Mexico and Venezuela there is no pass through. This would also be the case in Ecuador. On the contrary in Brazil, Colombia, Dominican Republic, El Salvador, and Guyana the pass through would be complete.

Artana et al. (2007) adopt a different approach and estimate the level of “cushioning” of gasoline prices in Central America (net-oil importer countries) as the taxwedge in end-user prices. A negative tax-wedge means that governments are cushioning consumer prices, reducing the impact that oil prices have on final prices. They find a strong cushioning in Costa Rica and Guatemala (diesel), a neutral cushioning in El Salvador, Nicaragua and Panama –where neutral means that the tax-wedge for gasoline is smaller than the value-added tax, and a weak cushioning in Guatemala (gasoline) and Honduras (table 8).

On the whole, the picture that emerges from these studies is somewhat mixed, with some countries passing oil price fluctuations (at least to some extent) to final consumers (typically net importers) and some others showing a clear disconnect between domestic and international price changes (typically net exporters).

Does this conclusion still hold today where crude oil prices are reaching record levels? To address this question we have collected data for 13 countries covering the period January 2005 to December 2007 in most cases, and longer periods for Argentina, Bolivia, Colombia, Mexico, and Peru.<sup>7</sup> Table 9 provides the average price of three derivatives: premium gasoline, regular gasoline, and diesel in each country, measured in dollars per gallon.<sup>8</sup> Net oil exporter countries appear with lower prices than net oil

> 7 We also estimated all the models for the 2005-2007 balanced panel, and for the individual countries with longer series. The results remained unchanged.

> 8 The octane varies by country. Nonetheless, we classify as premium and regular gasoline following international standards.

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