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 Business News | April 2007 
Mexican Government Renews Tortilla Price Accord
 Adriana Barrera - Reuters
| | Maria Luisa Rodriguez weighs corn tortillas at a shop in Mexico City. Mexico's government renewed a deal with retailers and producers on Wednesday to cap prices of the food staple tortilla to control inflation and placate angry consumers. (Henry Romero/Reuters) |
Mexico's government renewed a deal with retailers and producers on Wednesday to cap prices of the food staple tortilla to control inflation and placate angry consumers.
Prices for corn, the main ingredient in tortillas, surged in December and January to their highest in a decade because of increased demand for the grain from U.S. ethanol fuel producers.
Many retailers agreed to keep tortilla prices at 8.50 pesos ($0.77) per kilogram, with key producers committing to hold the price of corn flour at 5 pesos per kilogram, Economy Minister Eduardo Sojo told reporters.
Wednesday's deal extended an accord from January that helped stymie an inflation spike but was set to expire on April 30.
Mexico is widely considered the birthplace of corn, but imports millions of tons from the United States every year. Most Mexicans eat tortillas on a daily basis.
The renewed accord, which includes Wal-Mart de Mexico (WALMEXV.MX), bread maker Bimbo (BIMBOA.MX), corn flour producer Gruma (GRUMAB.MX) and other companies, will last until August 15.
Mexico's peso and bonds gained on news the deal would be renewed as investors bet inflation would become less of a threat.
INFLATION IMPROVING
While Mexico cannot directly fix corn or tortilla prices, the government has tried hard to persuade companies to sell their products cheaper.
Mexican consumer prices fell an unexpected 0.21 percent in the first half of April, bringing 12-month inflation back below the central bank's 4-percent danger zone and reducing chances of interest rate hikes.
The bank has urged the government to continue the tortilla price caps that have acted as a buffer against inflation.
In January, tens of thousands of Mexicans marched in protest against rising tortilla prices, many accusing conservative President Felipe Calderon of failing to protect them from foreign market forces.
The government says unscrupulous players in the industry have used high corn prices as an excuse to overcharge.
Agriculture Minister Alberto Cardenas said farmers could produce up to 15 percent more corn this year, raising his estimate from 10 percent growth.
He also said areas planted with corn would double in 2007 to 1 million hectares (2.5 million acres). |
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