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 News Around the Republic of Mexico | May 2008 
Mexico Tortilla Prices May Not Increase as Predicted
 Andres R. Martinez & Jens Erik Gould - Bloomberg
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| | A patron on a bicycle visits the "Mariscos Tatiana" taco truck while it's parked on Venice Blvd. in Los Angeles May 2, 2008. A Los Angeles institution, taco trucks roam the City of Angels selling juicy burritos and spicy $1 tacos filled with pork, beef cheeks or tongue, goat and almost any other meat that can be wrapped in a tortilla and dabbed with hot sauce. The problem is, some don't roam enough. County supervisors last month sparked a save-the-taco-truck movement by raising penalties for caterers parking in one place for more than an hour to up to $1,000 and six months in jail. Picture taken May 2, 2008. (Reuters/Danny Moloshok) | | |
Mexico's government may step in to help contain increases in tortilla prices, said Greta Villasenor, president of an industry group.
"Prices will rise, but not by the exaggerated sums mentioned," Villasenor, who leads the Business Council for Industrial Production of Corn, said in an interview today.
She spoke after Milenio newspaper quoted the head of the National Association of the Dough and Corn Tortilla Industry saying that prices will start climbing this week and increase 40 percent over the coming weeks. Local bond prices fell yesterday on concern more expensive tortillas, the biggest food component of the country's inflation index, will boost consumer prices.
Mexico's Economy Ministry has invited corn producers to meet next week to discuss an additional subsidy for the transport of corn, Villasenor said. Producers get about 190 pesos ($18.14) per metric ton of corn transported, effectively subsidizing the price of corn tortillas. The new subsidy may pay producers an extra 100 to 150 pesos, Villasenor said.
"The authorities will do what's necessary to keep prices from moving up in the near term," said Gray Newman, chief Latin America economist at Morgan Stanley in New York. "The last thing people want right now is something as politically sensitive as tortilla prices moving up."
Economy Minister
Economy Minister Eduardo Sojo yesterday said tortilla prices would remain constant.
"There is no price increase. It will not go up tomorrow," Sojo told reporters. "We are talking with the production chain to see how we can support the production chain in order to keep tortilla prices reasonable."
The Economy Ministry didn't immediately respond to a request today for additional comment. No one answered the phone at the offices of the National Association of the Dough and Corn Tortilla Industry.
Vendors in Mexico City's main business district today were selling tortillas for 8.5 pesos a kilo (81 cents for 2.2 pounds), unchanged from the day before.
"They're saying prices are going up, but I couldn't say when," said Miguel Angel Hernandez, who sells tortillas at a small shop near the U.S. embassy. "It'll be bad for me, and for the whole country of Mexico."
Baruc Davila, a 39-year-old air conditioning engineer shopping at Tortilleria Esfuerzo in the Zona Rosa neighborhood, said any price increase would be difficult financially.
"It's an outrage," Davila said. "There are people who eat nothing but one tortilla a day, and now they won't even be able to afford that."
Average Price
The nationwide average price of a kilogram (2.2 pounds) of tortillas from tortilla shops was 9.17 pesos yesterday, 3 percent higher than a year earlier, according to the Agriculture Ministry's Web site.
"Assuming 40 percent increases seems exaggerated," Sergio Luna Martinez, director of economic research at Citigroup Inc.'s Banamex unit in Mexico City, said in an email.
Mexican local-currency bonds held near a four-month low today. Investors are concerned a surge in tortilla prices may push inflation above the central bank's forecast of as much as 5 percent this year.
Yields on the 10 percent bonds due December 2024, the most-actively traded government securities, were unchanged at 8.17 percent, the highest since Jan. 11. The price was 116.54 centavos per peso at 12:17 a.m. New York time, according to Santander SA.
Peso's Strength
The peso may strengthen to 10.42 per dollar in the coming days if tortilla prices rise and increase the likelihood that the central bank will raise interest rates, said Benito Berber, a strategist at RBS Greenwich Capital Markets in Greenwich, Connecticut. The peso traded at 10.4679 per dollar at 12:18 p.m. New York time.
"If the tortilla price increase goes through, the market should rally on the expectation that inflation could get worse and Banxico could get hawkish," Berber said, referring to Mexico's central bank.
To contact the reporter on this story: Andres R. Martinez in Mexico City at amartinez28(at)bloomberg.net; Jens Erik Gould in Mexico City at jgould9(at)bloomberg.net |
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