 |
|
|
 Business News | February 2007 
The Tortilla Indicator
 Laurence Iliff - Dallas Morning News
| | For Mexico's new president, the rising price of food staples is among troubling economic signs. |
As President Felipe Calderón marched across the nation unveiling social programs and touting the military-led crackdown against drug lords, a round shadow followed him, darkening his sunny message.
It was the ubiquitous tortilla, rising rapidly in price and reminding Mexicans that all is not well with the once-humming economy.
At public events, angry women intercepted the new president, who faced his first mini-crisis since taking office Dec. 1. Hundreds of thousands of protesters took to the streets in the Mexican capital Wednesday, demanding an emergency wage hike to counter surging prices for sugar, onions and tortillas.
"There is no doubt that the biggest challenge is going to be the economy," said economist Rogelio Ramírez de la O, who served as an adviser to losing presidential candidate Andrés Manuel López Obrador.
"The issue of insecurity is important and gets a lot of media attention," said Mr. Ramírez de la O. "But the economy is a huge challenge because the government believes it can resolve everything through continuity, and if they continue insisting on this path, it will not solve the real issues and there will be many small crises."
Mexico, which has been gobbling up U.S. goods and exporting record amounts to America, may face the end of a charmed period during which it grew rapidly with low inflation and managed to generate budget surpluses.
More serious economic problems would mean fewer Mexican shoppers in Dallas malls and more illegal immigrants, analysts say. In addition to the specter of higher food prices and higher inflation, a drop in oil prices for Mexican crude exports could push the government's budget into a deficit. Likewise, oil production is falling. And officials acknowledge a coming economic slowdown and, with it, a possible increase in unemployment.
"The real challenge to Mexico is the same it's been for the last decade: to have enough economic growth to create jobs for young people," said Bernard L. Weinstein, director of the Center for Economic Development and Research and a professor of applied economics at the University of North Texas in Denton.
U.S. Commerce Secretary Carlos M. Gutierrez said after meeting with Mr. Calderón on Thursday that Mexico is on its best financial footing in many years, but, like all developing nations, it faces stiff global competition.
"This is a very important commercial relationship, and my whole purpose in being here is to make it bigger, to make it grow," Mr. Gutierrez said. Despite growing U.S.-Mexico trade, China has taken Mexico's place as the United States' No. 2 trade partner, he noted. Mexico remains Texas' biggest trading partner.
The head of Mexico's central bank, Guillermo Ortiz, predicted late last month that economic growth will fall to about 3.5 percent in 2007 from 4.8 percent in 2006.
Meanwhile, inflation could run as high as 4.5 percent in coming months, well above the government's 3 percent goal, Mr. Ortiz said. The bank was worried that isolated price hikes could "contaminate" the larger economy, but, he said, the central bank would step in quickly to tame inflation if necessary.
Mexico's stock market remained a strong performer, and many economic analysts don't see serious danger in the short term.
But they also don't see the types of structural reforms in the energy industry or other sectors that would bring new dynamism to the economy.
"The great problem is the lack of competition," said Raúl Feliz, an economist at the Center for Economic Research and Teaching in Mexico City. "The first thing we must understand is that because of the close presidential election, this is not a president who has a big mandate" to push through controversial reforms.
"The great problem with the Mexican economy is that while it has had macroeconomic stability, its performance has been very mediocre," said Mr. Feliz, who sees more of the same under the new president.
Tortilla pact
Mr. Calderón's limited choices were made clear as he tried to get a handle on tortilla prices.
The price hike varied greatly from region to region, but a kilo (2.2 pounds) nearly doubled to 10 pesos (92 cents) in some communities over the course of a year, with December particularly bad.
Producers blame higher international corn prices. The issue has caught the attention of average Mexicans because the tortilla remains the greatest source of calories for the poor.
In mid-January, Mr. Calderón quickly convinced many producers and distributors to hold prices or lower them, with a cap at 8.5 pesos (78 cents) per kilo. But the accord was voluntary, many small tortilla makers ignored it, and some even used the 8.5-peso cap to raise their prices.
And the "tortilla pact" expires in three months.
The Mexican government also raised limits on imports of tariff-free corn from abroad, mostly from the United States.
Consumers remained skeptical of the new deal.
"I don't think it's going to work," said María del Carmen Santiago López, 49, a Mexico City secretary. "What does not rise in price now is going to rise once their famous pact is over. I would have liked to see an agreement that raised prices on luxury cars. This hits the poor directly."
Homemaker Inés Martínez, 41, was holding on to hope that the tortilla would remain stable but already finds Mr. Calderón inferior to his predecessor, Vicente Fox, although both hail from the conservative National Action Party.
"I don't think he's better than Fox because everything is going up in price," she said. "We have tortillas and beans to eat now, but if the tortilla rises, what are we going to do?"
Mr. López Obrador, the losing leftist presidential candidate who calls himself the legitimate president, has called for the government to set tortilla prices at 6 pesos per kilo and order an emergency wage hike.
He has also said that Mexico should renege on its promise to the United States and Canada to allow open markets for corn and beans in 2008 as part of the North American Free Trade Agreement.
Less noticed by average Mexicans was the drop in oil prices on international markets at the end of 2006, just as the Mexican Congress passed a budget heavily dependent on oil revenue. State-owned oil giant Petróleos Mexicanos, or Pemex, has long provided about a third of the government's budget, limiting its own investment.
The oil price drop in the first two weeks of the year put Mexico's heavier mix of oils hovering around the budgeted price of $42.80 per barrel and rang financial alarm bells. Since then, global oil prices have recovered, but the issue remains a wild card for the government, given its dependence on oil revenue.
Pemex may not enjoy the $27.6 billion it received from sales abroad in 2006, and some analysts predict production will fall as its big offshore wells decline after decades at full capacity.
"This powerful stimulus [to the economy] is no longer there, and the government does not have a shock absorber," Mr. Ramírez de la O said.
Emergency fund
Mr. Calderón, in an interview last month with the Mexico City newspaper El Universal, characterized the coming economic environment as "adverse" and "complex" but also said the government does have several tools at its disposal, including a contingency fund in case oil prices fall.
During a late January speech in Britain, Mr. Calderón said the future of the Mexican economy is bright. He cited an analysis by Goldman Sachs, published in The Economist, predicting that Mexico will have the fifth-largest economy in the world in 2040.
"Mexico is not the promised land, but it is the land of the future," Mr. Calderón said during the investment seminar.
Back home, Mr. Calderón's office said that the president respected people's right to protest against price increases and that the government would lead the way toward promoting a healthy economy that creates jobs and reduces poverty.
liliff@dallasnews.com |
| |
|
Vallarta Weddings
Tell a Friend
Site Map
Print this Page
Email Us