Mexico: soaring tortilla prices hurt poor

From El Universal, Jan. 10 via Chiapas95:

Soaring tortilla prices have touched off a budding crisis, threatening the traditional affordability of the nation’s most politically sensitive food product.

Consumers are paying an average of 8 pesos per kilo – with predictions of a 15-peso ceiling being reached by March.

The high prices could ripple through the food economy, affecting the taco, “comida corrida” and fonda-style restaurants that are so prominent culturally as well as economically.

The Calderon administration has firmly ruled out a return to government price controls on corn tortillas, which were lifted on Jan. 1, 1999.

But on Tuesday, the Economy Secretariat said the government will speed up the granting of white corn import quotas to confront a shortage that has pushed up the price of tortillas.

They began climbing noticeably last year as the cost of corn went up. But the most recent increase, with families paying at least 10 pesos per kilo in the populous State of Mexico and as much as 15 in rural Guerrero, has elevated public concern.

In Pachuca, the capital of Hidalgo, some 500 members of the National Agricultural Workers Union on Tuesday protested the new tortilla prices, as high as 12 pesos in some areas of the state.

Union leader Rau’l Espinosa pointed out that a 15-peso-per- kilo price for tortillas would mean that Hidalgo workers earning a typical 47.30-peso daily salary would have to pay one-third of what they take home for their daily tortilla ration.

Espinosa criticized the administration for backing off on a price increase (via special tax) on soft drinks, which are a proven health risk of little nutritional value, while accepting higher prices for tortillas, which play a major role in Mexican nutrition.

With price controls ruled out, Economy Secretary Eduardo Sojo is proposing a major corn production push, which could include government support for growers and more imported corn from the United States. Of the 32 million tons of corn consumed in Mexico annually, about 9 million comes from abroad.

Sojo said high international corn prices – about double what they were a year ago – “are here to stay.” Boosting the supply side, he said, would at least ensure an inventory and streamline distribution, helping stabilize the price of corn products such as tortillas.

Sergio Ruiz Olloqui of the Mexican Institute of Finance Executives agreed with Sojo that tortilla prices will settle down soon well below the 15-peso plateau, and that across-the- board price controls are undesirable. But along with labor leader Espinosa and others, he proposed a government tortilla subsidy targeted at the poorest sectors.

Another strategy to put downward pressure on tortilla prices, already implemented, is an agreement reached Tuesday through the federal consumer protection agency (Profeco) for the large supermarkets to sell tortillas for no more than 6.50 pesos per kilo.

The big chains have been able to undersell the mom-and-pop fresh tortilla makers because of high volume and sometimes an acceptance of a loss leader that brings customers into the store.

The agreement means government policy is encouraging Mexicans to purchase a staple thousands of years old at Wal-Marts rather than traditional outlets.

High corn prices are most often blamed on a supply shortage due to a huge increase in cornfield acreage in the United States being dedicated to corn grown for producing ethanol, an alternative fuel. But Carlos Salazar Arriaga, of the Mexican National Confederation Corn Growers (CNPAMM), said there’s more to it.

“There are intermediaries – we call them coyotes – who are speculating,” Salazar said. He said he has seen recent cases of corn being sold at 2,000 pesos a ton and then resold at 3,800 pesos.

See our last posts on Mexico and the impacts of NAFTA.