Mexico Clamps Down on Tortilla Prices

Price controls in Mexico were phased out gradually during the 1990s, without much protest, for items as diverse as razor blades, notebooks, eggs, beer and light bulbs.

But if anyone needed reminding that the tortilla is another matter, outraged consumers provided it this week.

Just four days after the government lifted the last controls on tortillas, prices surged and the national outcry sent producers, retailers and the government running for cover.

After a series of emergency consultations, they agreed Wednesday on a “voluntary” scheme to force prices back down, at least until the dust settles.

The anguish over ending tortilla subsidies and price controls--the last holdout from the interventionist decades of Mexican governments--is a particularly acute example of the hard sell that economic reformers have had to make in recent years to get Mexico to move into a harsher world.

The tortilla, whose importance in Mexican life can scarcely be overstated, was the last major item remaining under a long-standing system of price controls. On New Year’s Day, when the price stood at 3 pesos per kilo, the final controls were lifted.

Though that was thought to be close to the true market price, some shops immediately raised prices by 50%. In remote areas such as Baja California Sur and the Yucatan Peninsula, prices were reported to have doubled. With 50% of Mexico’s 95 million people formally considered poor, the end of subsidies and price controls meant a heavy burden. Mexico City’s minimum wage is 34.5 pesos ($3.52) a day.

Gabriela Marquina, a 32-year-old tortilla shop clerk in the posh Polanco neighborhood, said her store raised the price earlier this week to 4 pesos but lowered it Wednesday to 3.5. She said the price rise would especially hurt “those with five, six, seven children [who] buy 5 kilos at a time.”

“Tortillas are what one eats most,” she said. “If there’s nothing else, if there’s no money, at least you could afford a kilo of tortillas.”

Consumers protested, newspapers editorialized and politicians sermonized. On Wednesday, after jawboning cornmeal producers and tortilla retailers, the Mexican government declared that prices for the near-sacred staple food would stay close to previous levels for the next few months.

Commerce Secretary Herminio Blanco said the government would watch tortilla prices throughout the country to make sure the industry sticks to a verbal agreement reached Tuesday night to minimize the price surge.

In that deal, supermarkets agreed to hold tortillas at the previous legal limit of 3 pesos a kilogram (31 cents for a 2.2-pound stack), while neighborhood tortillerias--shops that make them--could charge up to 3.5 pesos (36 cents).

Valentin Solis, an advisor to a tortilla retailers group in Mexico City, said the sharp retail price run-ups since Friday were distortions of the market that he blamed on a lack of accurate information among producers.

“We don’t believe this will last very long because the marketplace has clear rules,” Solis told reporters.

Last year, the government gradually phased out subsidies to the tortilla industry that had helped keep down prices, a program dating back to 1951. Those maize industry subsidies were worth more than $400 million a year until they ended in September.

The tortilla subsidy was replaced with programs such as one that gives the 1.2 million poorest Mexicans free tortillas each day.

The soft, flat disk made from traditionally ground corn dough or from a more modern technique using cornmeal is consumed with virtually every meal here. For some of Mexico’s poor, it is the whole meal.

“Corn has made possible the survival and reproduction of Mexican society,” declared a 1982 government book, “Corn: The Foundation of Popular Mexican Culture.” The author also wrote: “It can be said that in our country there is a near-total symbiotic relationship between the society and corn.”

Alfonso Cebreros, president of the National Chamber of Corn Industries, said the average Mexican eats 117 to 120 kilos (257 to 264 pounds) of tortillas a year. The commercial market sells more than 9 million tons of tortillas a year. An additional 2 million tons are made in the home.

Commerce Undersecretary Israel Gutierrez, who brokered the informal agreement with the industry, said Mexicans support 40,000 local tortilla shops employing 160,000 people, and the industry accounts for 0.5% of Mexico’s annual gross domestic product.

“The dough and tortilla sectors need to modernize and capitalize themselves,” Gutierrez said, and ending price controls will help tortilla shops to attract badly needed investment and force them to become competitive. Already, many Mexicans buy cheaper tortillas from supermarkets and larger stores rather than directly from the neighborhood tortilla factories.

The major cornmeal manufacturers such as Grupo Maseca and Grupo Minsa stand to benefit substantially in the long term from the lifting of subsidies and price controls as the industry modernizes, according to industry analysts. Increasingly, tortillas are made from mass-produced cornmeal rather than the labor-intensive traditional dough.

Mexico City bureau researcher Greg Brosnan contributed to this report.