Mexico Freezes Food Prices Till End of Year
In an announcement earlier today, Mexico President Felipe Calderon announced a freeze until December 31 on prices for 150 staple food products in an effort to stimulate the economy and offset food prices that have reached historic highs in Mexico and most other countries of the world.
Saying he expects the move to be a measure to benefit millions of Mexican citizens in ways that are positive and direct, Calderon attributes the staggering prices in the global food supply to the rapidly rising cost of energy, the diversion of corn from a food crop to biofuel, and the extreme demand for food exports to India and China.
The Mexican price freeze comes only in collaboration with the nation’s leaders in the food and agricultural industries. Since his 2006 election, Calderon has orchestrated a series of measures to help offset the rising cost of food in Mexico. Last May, import tariffs on some food products were eliminated and an agreement was stuck with rice farmers to sell their crops nationally at a rate 10% below that of the international market. And he successfully imposed a price cap on the single most defining food product of the entire country - the tortilla.
Since Calderon’s election, approximately 26 million impoverished Mexicans, or about 25% of the country’s population, receive monthly subsidies of 120 pesos, or about 11.6 US dollars, at a national cost of nearly $433 million. The daily minimum wage in Mexico is about 50 pesos, or 4.8 US dollars, making the government subsidy equivalent to just less than three days’ pay.
Some Mexican citizens voice the complaint that the price freeze comes too late, that prices have already skyrocketed out of reach for too many Mexican families.
In the United States, a spokesperson for the Center for Strategic and International Studies in Washington says the voluntary agreement between government and the business sector could possibly spare many of the problems associated with mandatory price controls. The success of the price freeze will be put to the test, however, when the Mexican food industry can no longer function under a system of fixed prices.
Source: Associated Press