Sunday, January 14, 2007

How Mexico's tortilla is becoming a casualty of globalization

An earlier post made reference to the inevitability of globalization and Joseph Stiglitz's proposals for reforming free/fair-trade policies so that they uplift the lives of the poorest of the poor and enhance (rather than undermine) the integrity of Earth's critical ecosystems. In the absence of such reforms, the process of globalization will continue to advance the agendas of the richest nations at the expense of those most in need. The increasing demand for corn (in part triggered by an increase in corn-based ethanol production) is a case in point. (GW)

Poor in Mexico feel pinch of rising demand for corn

MEXICO CITY -- Soaring international demand for corn has caused a spike in prices for Mexico's humble tortilla, hurting the poor and forcing President Felipe Calderon's business-friendly government into an uncomfortable confrontation with powerful monopolies.

Tortilla prices jumped nearly 14 percent over the past year, a move Mexico's Central Bank Governor Guillermo Ortiz 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.

Economists also blame increased US production of ethanol from corn. The battle over the tortilla, the most basic staple of the Mexican diet especially among the poor, demonstrates how increasing economic integration is felt on the street level.

"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 Autonomous Metropolitan University in Mexico City.

Yesterday, 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 come before February.

Sojo said the quotas include 450,000 metric tons of white corn from the United States under the North American Free Trade Agreement.

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

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

Officials from the world's largest tortilla maker, Gruma SA, based in Monterrey, were not immediately available for comment. The company has 89 tortilla plants worldwide and sells tortillas in the United States under the Mission brand.

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.

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

Ysidro said she paid $2.27 -- about a sixth of her household's combined daily income -- for enough tortillas to feed her family of six. "If I don't have that much, I'll have to buy less," she said.

The US Agriculture Department said yesterday that ethanol plants and foreign buyers are gobbling US corn supplies, pushing prices as high as $3.40 a bushel, the highest in more than a decade.

Nationwide in the United States, supplies of corn are expected to drop to 752 million bushels, a drop from last month's forecast of 935 million bushels and a steep decline from last year's supply of 1.967 billion bushels.

Responding to the outcry, Mexican lawmakers are demanding that the government impose price controls, but Calderon instead has vowed to watch out for tortilla sellers who gouge consumers.

He also asked his agriculture secretary to import corn from anywhere.


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