In Mexico, it is not just the government and the central bank that are trying to keep a lid on rising food inflation. So, too, is a drug cartel in the Pacific state of Guerrero.
The price of tortilla, the iconic staple in Mexico that is consumed in myriad forms, flavors and colors, is on the rise. And that is likely to be a major cause of concern for the Mexican government. Despite his continued high approval ratings, President Andrés Manuel Lopéz Obrador (aka AMLO) will no doubt recall that when prices of the mainstay spiralled in 2006, it sparked nationwide food riots.
The average price of corn tortilla has already increased 13% so far this year, to just over 20 pesos (roughly one dollar) per kilo. But in some parts of the country prices have reached as high as 30 pesos. With inflation reaching 8.62% in July, its highest level in 21 years, and food inflation reaching 14%, its highest level since records began in 2004, the strain on many consumers’ pockets is becoming unbearable.
“Whatever It Takes” to Keep Inflation At Bay
Inflation has continued to rise even as Mexico’s central bank has hiked rates on an almost monthly basis. The Bank of Mexico was one of the world’s first largish central banks to embark on a rapid tightening of monetary policy, back in June 2021. Since then it has raised its benchmark rate ten times, to its current level of 8.5%. Borrowing costs are now at their highest since November 2005, yet inflation continues to surge, mainly because today’s inflationary pressures are predominantly supply side-driven as well as global in nature, and as such far beyond the control of a middling-sized central bank.
Last month, President Lopéz Obrador unveiled a raft of anti-inflation measures that will, according to El País, set the country back some 574 billion pesos ($29 billion). But it is not just the government and the central bank that are trying to keep a lid on rising food prices. So, too, is the Sierra drug cartel, also known as Los Tlacos, in the southern Pacific state of Guerrero, as the Mexican daily El Excelsior reported (translation my own) last week:
Members of the Sierra Cartel imposed a discount on the price of tortillas in Iguala, Guerrero, by putting up notices in various places from Monday.
On social networks, photographs were shared of the messages… bearing the new recommended per-kilo prices of tortilla, dough… [The message was] signed off by “La Sierra”…
The price of a kilo of tortilla dropped to 21 pesos, that of corn dough to 12 pesos and the special price for taco vendors to 19 pesos…
As can be seen in the messages,… the lower prices [imposed by the cartel] is to help support families…
It is not the first time that the Sierra Cartel has set tortilla prices in Iguala. On October 11 of last year they imposed a 3-peso discount on tortilla and dough, pushing prices down from 26 to 23 pesos and from 15 to 12 pesos, respectively.
One reason why tortilla prices are above the national average in Guerrero is the higher transportation costs due to the prevailing insecurity in the state, which is primarily a result of the drug cartels’ criminal activity and constant territorial disputes. The town of Iguala may sound familiar to readers, since it was the scene of the brutal massacre of 43 students in 2014. Another reason for the high prices is that vendors must pay the cartels what have come to be called “derechos de suelo” (floor rights) — weekly or monthly fees for the right to operate a business in the locality. Businesses that don’t pay up tend not to prosper.
So, on the one hand the Sierra cartel is trying to keep a lid on rising tortilla prices, ostensibly to help out struggling local families, while at the same time helping to fuel rising prices by shaking down local tortilla vendors. In fact, according to the news website Noventa Grados, in June of this year the same criminal group ordered tortilla shops to increase their prices, in order to make enough money to pay their extortion fees.
Rising Tortilla Prices, Falling Global Corn Prices
There is, however, something rather strange about the latest rise in tortilla prices, in that it follows a three-month period of largely falling prices of corn on global commodity markets. Despite rebounding in recent days, corn prices are still down around 20% since mid-May. Yet during that time, tortilla prices in Mexico have continued to rise…
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