Mexicans Get Price Hikes for Christmas

The capital’s stylish Santa Fe mall was packed this week, its boutiques and department stores jammed with Mexicans buying Gucci, Piaget, Sony and Chanel in a last-minute Christmas shopping rush by the nation’s rich.

The downtown Tepito market was jammed too. But there last-minute shoppers were picking through bargain stalls piled high with used clothes and toys, as members of Mexico City’s lower- and middle-class majority struggled to fill their Christmas lists on budgets that seemed ever smaller to most.

The two scenes were timely illustrations of the split-screen imagery that is Mexico’s much-touted economic recovery. And on the night before Christmas Eve, the government released figures that appeared to confirm the continuing disparity between Mexico’s rich and poor.

They were the official inflation rates for the first half of this month, and their aggregate effect took most financial analysts by surprise: a 2.34% overall increase between Dec. 1 and Dec. 15--nearly double what the government had predicted.

On Thursday, the government dropped the other shoe, announcing that, as of Monday, the price of tortillas, a staple of the Mexican diet, will go up an additional 21%, and milk will increase 11%. The prices of both commodities are fixed and subsidized by the government, although Monday’s price hike will be the first step in removing federal controls over milk.

An itemized breakdown, which showed that prices are still soaring more than two years after the sharp peso devaluation that started Mexico’s worst economic crisis in modern history, indicated that it is the poor who continue to shoulder most of the nation’s economic burden. And some analysts said that trend will continue into next year.

Many of the price increases came in the basic basket of consumer goods: milk, fruit, vegetables, fresh meat and medicine. Basic transportation--a staple of life for the majority of Mexicans--soared more than 8% during the first half of this month.

“In the overall Mexican recovery, the average consumer clearly has been lagging behind,” said Ken Kim, a financial analyst covering specialized markets for the Princeton, N.J.-based Stone & McCarthy Research Associates. “We’re seeing the recovery because of the industrial sector, the growth of exports . . . but the consumer is not much better off than at the time of the devaluation.”

The new figures came on the heels of other government economic indicators that documented such positive trends as still-soaring exports, declining unemployment, growing international cash reserves and a steadily increasing overall growth rate. But the main short-term beneficiaries of those statistics appear to be Mexico’s well-established industrialists and wealthy business elite.

At a time when most of the small- and medium-sized businesses that were bankrupted during the first year of the crisis remain closed, luxury stores reported healthy Christmas profits.

A manager at one pricey Sante Fe jewelry shop said this was the best Christmas season since 1993, and luxury car manufacturers such as BMW predicted record sales in Mexico in 1997.

Because financial analysts projected that inflation next year will run between 15% and 18%--after annual 1996 inflation of about 27%--some viewed the early December figures as a “blip.”

“Mexico may be trying to let some of the remaining pent-up inflation through the system in 1996, so a burst of inflation at the end of 1996 may actually help the inflation outlook for early 1997,” said David Malpass, a Latin American markets specialist with Bear Stearns & Co. in New York.

Mexico’s ruling-party leaders are hoping for just that.

In 1997, Mexico will elect a new lower house of the National Congress. A third of the nation’s 31 states will hold local or gubernatorial polls, and Mexico City will have its first mayoral election.

The future of the country’s long-ruling Institutional Revolutionary Party, which has controlled Mexico since 1929, is at stake in those elections, and the economy is central to its political fortunes.

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Mexico’s Rising Cost of Living

Mexico’s two-week inflation rates--which include consumer price increases--for the first half of December, compared to those for the last half of November:

* Transportation: 8.28%

* Living expenses [rent, electricity, phone, natural gas, etc.]: 1.81%

* Food, beverages and tobacco: 1.21%

* Health and personal care: 1.17%

* Furniture and household goods: 0.86%

* Clothing and shoes: 0.82%

* Education and recreation: 0.36%

* Other services: 1.70%

* General index: 2.34%

Sources: Mexico Central Bank, national index of consumer prices