No siesta for inflation

Arnulfo Barrientos canceled his Internet service after his food bill jumped 50 percent. Jose Luiz Nunez and his wife, Mayela, drive their car two or three times a week instead of every day.

Barrientos and Nunez are coping with Mexico's fastest inflation in more than three years. Like other Mexicans, they're cutting back on extras and thinking twice about buying meat or cooking oil, two staples that have driven the rise in prices.

"If before you could get two kilos of something, today you can only get one," says Barrientos, 69, who had just bought some mangos with his daughter, Aracely, at the San Joaquin food market in Mexico City. "I have had to cut back. We are living more economically."

President Felipe Calderon says the poorest citizens in Mexico, where the minimum wage is 52.59 pesos ($5.11) a day, are suffering the most as inflation accelerates, especially for food. He has responded by removing import taxes on grains, brokering a deal to have producers freeze processed-food prices, and boosting government aid to the most impoverished families.

Consumer prices rose 5.28 percent in the first half of June from a year earlier, the most since December 2004. Electricity, food and natural gas costs drove inflation, the central bank said on June 24.

Record grain prices have had an outsized impact on Mexico because the country imports so much of its food, said Merritt Cluff, a senior economist at the United Nations Food and Agriculture Organization in Rome.

"Mexico prices could go up a lot more this year," he said at a conference in Mexico City in June.

The cost to import grains soared 62 percent to $1.6 billion in the first four months of the year, according to the national statistics agency.

Mexico subsidizes gasoline, keeping the cost lower than it is in the US Consumers are paying more for propane gas and natural gas used to heat water and food, as well as electricity.

Ten percent of the corn sold on world commodity markets is bought by Mexico, where it's used to feed livestock. Shortages of yellow corn have forced farmers to divert white corn, which is used to make tortillas, a staple food, to feed animals. Corn futures have almost doubled in the past year.

Domestic prices are likely to rise along with international prices, the central bank said after it unexpectedly increased its benchmark rate by a quarter of a percentage point to 7.75 percent to fight inflation.

Barrientos, who says he depends on a pension to pay for chemotherapy, canceled Internet service costing 600 pesos a month, trimmed the number of calls on his phone plan, and stopped using taxis, instead traveling by the subway and bus.

Nunez, 41, says he spends about 1,400 pesos a week, 40 percent more than a year ago, on food for his family of five. In addition to eliminating the daily use of their car, he has switched to a less-expensive cable TV package.

Mexico's government announced an accord with industry groups on June 18 to freeze the price of canned tuna, coffee, beans and more than 150 other items through the end of the year.

"There has been a significant rise in food prices worldwide," Calderon said in making the announcement. "The government has been working and will continue working hard to prevent this from affecting the pockets of Mexicans."

Calderon removed import tariffs on corn, wheat, rice and beans in May. He also eliminated import taxes on nitrogen-based fertilizer, and cut in half the tax on imported powdered milk.

"We have made clear that these are insufficient measures that Calderon proposed," says Carlos Navarro, a lawmaker for the opposition Party of the Democratic Revolution. "Families are cutting their meals from three to two to make due."

The price of a liter of cooking oil has jumped as much as 85 percent in the past six months to 37 pesos at the San Joaquin market, in the capital's Venustiano Carranza district. A kilo (2.2 pounds) of chicken breasts now cost 60 pesos to 80 pesos, says Lucia Reyes, a homemaker who adds that she spends about 100 pesos a day on food. She says she buys vegetables, fruits and only enough meat to make broth for her family of three.

Josefina Cruz, who runs a stall that sells processed food, rice and liquor, says her sales have fallen 70 percent in the past year. Cruz, who started working at the market when it opened 50 years ago, says she now sells orange soda to friends at nearby stalls to make a few extra pesos.

Agencies

(China Daily 06/30/2008 page11)