Posted on 01/12/2007 11:19:50 PM PST by FLOutdoorsman
MEXICO CITY — Soaring international demand for corn has caused a spike in prices for Mexico's humble tortilla, hitting the poor and forcing President Felipe Calderon's business-friendly government into an uncomfortable confrontation with powerful monopolies.
Tortilla prices jumped nearly 14 percent over the past year, a move Mexico's Central Bank Gov. Guillermo Ortiz called "unjustifiable" in a country where inflation ran about 4 percent. Ortiz pinned the blame on companies monopolizing the market and blocking competition.
"We clearly have a problem of speculation," he said.
Economists also blame increased U.S. production of ethanol from corn as an alternative to oil. The battle over the tortilla, the most basic staple of the Mexican diet especially among the poor, demonstrates how increasing economic integration is felt on the street level.
"This is direct evidence of the way globalization is affecting all walks of life in Mexico and all over the world," said David Barkin, an economics professor at the Xochimilco campus of the Autonomous Metropolitan University in Mexico City.
The federal government's antitrust watchdog announced this week it was investigating allegations companies were manipulating corn prices, and making deals to limit the supply of corn to boost prices of tortillas.
Officials from the world's largest tortilla maker, Monterrey, Mexico-based Gruma SA, were not immediately available for comment. The company has 89 tortilla plants worldwide and sells tortillas in the U.S. under the Mission brand.
Big retailers, mostly supermarkets, have kept tortilla prices steady around $0.55 a kilogram, but in Mexico City, some shops are selling them for $0.90 a kilogram, up from $0.73.
For low-income Mexicans, who earn about $18 a day on average, the increasing prices have hit hard. According to the government, about half of the country's 107 million citizens live in poverty.
"When there isn't enough money to buy meat, you do without," said Bonifacia Ysidro as she wrapped an embroidered towel around a foot-high stack of tortillas to cart home.
Tortillas, she added, "you can't do without."
Ysidro said she paid $2.27 — about a sixth of her household's combined daily income — for enough tortillas to feed her family of six.
"If I don't have that much, I'll have to buy less," she said.
Leticia Balino, who runs a tortilla shop behind the U.S. Embassy in Mexico City, said many are complaining, especially those with large families.
"They say, 'How is it possible that the price could rise so much in such a short time?'" she said.
The U.S. Agriculture Department said today that ethanol plants and foreign buyers are gobbling U.S. corn supplies, pushing prices as high as $3.40 a bushel, the highest in more than a decade.
Nationwide in the United States, supplies of corn are expected to drop to 752 million bushels, a drop from last month's forecast of 935 million bushels and a steep decline from last year's supply of 1.967 billion bushels.
Responding to the outcry, Mexican lawmakers are demanding the government impose price controls, but Calderon instead has vowed to watch out for tortilla sellers who gouge consumers. He also asked his agriculture secretary to import corn from anywhere.
"I don't care if it's brought from thousands of kilometers away, the most important thing is that this (shortage) is not used as an excuse to raise prices," he said Thursday.
Mexico's Economy Department said it will expand its white corn quotas under the 1994 North American Free Trade Agreement to drive down tortilla prices, while the federal consumer protection agency has launched an inspection campaign to ensure tortilla sellers post their prices.
On Thursday, the Federal Competition Commission said it was looking into allegations the major companies were price gouging and reaching deals that were contributing to the shortage.
"If we detect monopolistic practices, we could impose fines of up to $6.4 million," the agency's director, Eduardo Perez Motta, said in a news release.
The agency said that since 2004 it has applied sanctions in six cases against anticompetitive practices in the corn and tortilla markets. Last year, the agency blocked Gruma's takeover of Mexican corn processor Agroinsa, saying it would have given it too much control over the market.
Many consumer goods are expensive in Mexico, but historically government subsidies and price controls have kept basic foodstuffs within reach of even the poorest Mexicans.
The government eliminated its decades-old subsidy for tortillas in 1999 just as cheap corn imports were rising from the United States under NAFTA.
Mexican consumers also are coping with higher prices for other staples. The cost of white bread and fresh fruit and vegetables all rose more than inflation in 2006, according to the central bank.
The tortilla increase outpaced inflation and minimum wage hikes of about 4 percent for the past year.
Grains traders forecast tortilla prices will rise by 20 to 25 percent during the first quarter of 2007.
That prospect worries Ysidro, who said: "If it goes higher, what am I going to give my children?"
Another reason for Mexicans to "head for the border' to borrow a theme from Taco Bell.
Let them eat oil!
Some of our enlightened celebrities ought to put on "Tortilla Aid" concerts to help them out.
I remember reading a story from India, that many people were killed in "Onion riots". The price of onions went too high so people rioted and killed each other
Another idiot leftist with no clue about how the market works. I suppose he thinks those workers who truck all that corn in don't deserve to be paid or that the trucks will simply miracle fuel into their tanks.
L
Mexico normally blocks ALL importation of white corn (from the US).
"free trade"?
crickets.........crickets........
Cry away Mexico.
I guess they will have to raise their minimum wage to 15 cents an hour.
"pushing prices as high as $3.40 a bushel"
Oh man, there goes the price of Fritos again!:)
The decline of the dollar is partly to blame.
If they have no tortillas, let them eat cake
Maybe you should read the article?
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
"That prospect worries Ysidro, who said: "If it goes higher, what am I going to give my children?""
I guess she shoulda had an anchor baby or three.....
She should come to the land of the free......tortillas (like so many of her fellow Mexicans)
If Mexico really wants to, they could become an economic powerhouse by opening the country to foreign investment. Mexico is one of two nations (North Korea being the other one) that has shut out the rest of the world.
I would suggest that more people grow corn there in Mexico, but all their people are up here.
I did... this is "temporary" until they can get back to their embargo. Maybe you should check second sources.
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