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14% increase in a year hits country's poor

January 14, 2007
BY PETER ORSI
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 in the last year, which Gov. Guillermo Ortiz of Mexico's Central Bank 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.

The government and economists also blame increased U.S. production of ethanol from corn as an alternative to oil.

''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.

On Friday, Economy Minister Eduardo Sojo said the government had authorized duty-free imports of 650,000 metric tons of corn to drive down tortilla prices. But he warned that any price relief would not be immediate, with the corn imports hitting the Mexican market in February.

Price manipulation alleged
Efrain Garcia, president of the National Confederation of Agricultural Corn Producers, said growers would not oppose the increased imports. "It's very clear to us, the producers, that [Mexico] needs a cheap tortilla,'' he said.

The federal government's antitrust watchdog said last week it was investigating allegations that companies were manipulating corn prices and making deals to limit the supply of corn to boost prices of tortillas.

Big retailers, mostly supermarkets, have kept tortilla prices steady around 55 cents a kilogram, but in Mexico City, some shops are selling them for 90 cents a kilogram, up from 73 cents.

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,'' Bonifacia Ysidro said as she wrapped an embroidered towel around a foot-high stack of tortillas to cart home. Tortillas, she added, ''you can't do without.''

AP

Mexicans stage tortilla protest
Protesters in Mexico City
Mexicans are angry at the rise in price of their staple food
Tens of thousands of people have marched through Mexico City in a protest against the rising price of tortillas.

The price of the flat corn bread, the main source of calories for many poor Mexicans, recently rose by over 400%.

President Felipe Calderon has said the government will clamp down on hoarding and speculation to ease the problem.

But some blame the rise on demand for corn to make environmentally-friendly biofuels in the United States.

Agreement ignored

The BBC's Duncan Kennedy in Mexico City says the protest was noisy, passionate and angry.

The recent tortilla price rises have been the worst in decades, sparking fears that some could face malnourishment.

For many of Mexico's poorest people the tortilla is a staple of their diet, with as much as a third of their wages being spent on the bread.

Mr Calderon has ordered his agriculture secretary to import corn to try to ease the problem.

And earlier this month he signed a pact with a number of business groups that they would cap the price of tortillas at 8.5 pesos (77 US cents) per kilogram, but many have chosen to ignore the agreement, which is not legally binding.

Under the 1994 North American Free Trade Agreement, Mexico used to get cheap corn imports from the US, but Mexico's Economy Minister Eduardo Sojo has said that with more US corn being diverted into ethanol production, supply is dwindling.