Mexico Abolishes Tortilla Subsidies, Price Controls

From Reuters

Mexico has scrapped a decades-old subsidy on tortillas, the thin corn pancakes that are the mainstay of the country's diet.

The government also abolished the longtime price control on tortillas, which Mexicans eat more than bread, the trade ministry said late Thursday.

The regulated price for tortillas before lifting controls was 30 U.S. cents per kilogram, or 14 cents per pound in Mexico City, where the minimum wage is $3.40.

The subsidy put a hunk of tortillas within the daily reach of the extremely poor. The Mexican Nutrition Institute estimates that three-quarters of Mexico's 95 million people get most of their dietary intake from corn tortillas.

Mexico used to enforce price controls for a wide range of staples, including bread, milk, rice and beans, but has gradually lifted them in recent years as the country has further liberalized its economy, meshing it with the United States and Canada under a 5-year-old free trade pact.

The trade ministry said the ending of the tortilla subsidy would allow more funds to be channeled into the Progresa welfare program for low-income people.

"The elimination of the maximum sale price of the tortilla will improve the profitability and permit the modernization of mills," the statement said.

Over the last few months, the government has gradually eased the subsidy, so economists believe the price set by the market will be only slightly higher.

The New Year's Eve announcement does not affect tortillas made of wheat, which are unsubsidized.

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