Tortilla Price Stabilization Pact
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The Tortilla Price Stabilization Pact was an agreement between the Mexican Federal Government, headed by President Felipe Calderón, and several tortilla producing companies in Mexico to limit the volatility of price in tortillas in early 2007.
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[edit] Background
The international price of corn had been rising dramatically throughout 2006, leading to the inflation of tortilla prices in the first month of Calderón's term. Because tortilla is the main food product consumed by the Mexico's poorest, national concern over the rising prices immediately generated political pressures for Calderón's administration.
[edit] The Pact
The President opted for using price ceilings for tortillas that protect local producers of corn.[1] This price control came in the form of a "Tortilla Price Stabilization Pact" between the government and many of the main tortilla producing companies, including Grupo Maseca and Bimbo, to put a price cieling at $8.50 pesos per kilogram of tortilla. The idea of the agreement is that having these producers ceiling their prices would incentive the market to lower the prices nationally.
[edit] Criticism
The Pact has been heavily criticized by both the right and the left. Critics argue that the Pact was both non-binding and a de facto acceptance of a 30% increase in the price of that product (from $5.95 pesos per kilogram to $8.50 pesos per kilogram). [2][3][4] Many tortillerias ignored the agreement, leading to price increases in well in excess of the $8.50[5]. Government opposition see this as an indication of the failure to protect the economy of poor consumers. In response to this, PROFECO, a consumer protection government organization, has also threatened with jail those tortilla producers who charge "excessive" prices.
However, some major supermarkets such as Soriana, or Comercial Mexicana sell the tortillas at a lower price than the one in the agreement,and even 14% lower than the original price, reaching even $5.10 pesos per kilogram.[6] That is interpreted by liberals as evidence that price controls, and the Tortilla Price Stabilization Pact, were unnecessary.
[edit] References
- ^ Calderon signs accord to contain tortilla prices "The accord limits tortilla prices to 8.50 pesos ($0.78) per kilogram and threatens prison sentences of up to 10 years for companies found hoarding corn."
- ^ http://www.proceso.com.mx/noticia.html?sec=0&nta=47675
- ^ http://www.elporvenir.com.mx/notas.asp?nota_id=108600
- ^ http://www.jornada.unam.mx/2007/01/20/index.php?section=capital&article=034n1cap
- ^ http://mx.invertia.com/noticias/noticia.aspx?idNoticia=200701291845_INV_30357057
- ^ PROFECO, "Quien es quien en los precios / Tortilla" Soriana $5.10 (pesos per kilogram of Tortilla), Comercial Mexicana $5.80 (pesos per kilogram of tortilla), Chedraui $5.90 (pesos per kilogram of tortilla).
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