- Title: MEXICO: As food costs surge globally Latin America fears rising inflation
- Date: 7th January 2011
- Summary: MARTINEZ' 5-YEAR-OLD GRANDSON, DANIEL DURAN MARTINEZ EATING BREAD MARTINEZ MIXING SUGAR IN A MUG FOR HER GRANDSON (SOUNDBITE) (Spanish) RETIREE, ROSA MARTINEZ, SAYING: "I go through it for my grandchildren. The kids don't know if there is a line to buy food or not. They don't know. So that they have what they need I had to rise really early." CLOSE-UP OF MARTINEZ CRYIN
- Embargoed: 22nd January 2011 12:00
- Keywords:
- Location: Mexico, Mexico
- Country: Mexico
- Topics: Economic News,Domestic Politics
- Reuters ID: LVAD0ZDH1046Z5IN9H25S03RY138
- Story Text: Surging food prices are pushing up already high inflation in much of Latin America, raising concerns across the region.
The United Nations' food agency (FAO) said on Wednesday (January 5) that food prices hit a record high last month, moving beyond 2008 levels when riots broke out in countries as far a field as Egypt, Cameroon and Haiti.
Food prices are a particular area of vulnerability in Latin America where widespread poverty means food typically makes up over a fifth of consumer price indexes.
Mexican consumers complain that food prices are on the up and the central bank has been warning about grain prices in its policy statements since October.
The country was hit hard by the world economic crisis and is in a slow recovery which will likely delay any rate hikes that could stem inflation.
While shopping at this vegetable stand, Mexico City resident Angela Zepeda said corn prices should be stabilized as families rely heavily on the grain.
"I don't agree about the hike in prices because it's (corn) a basic product. It should serve people's needs. Because it's the most consumed product," Zepeda said.
More expensive corn has led to an increase in the cost for corn meal thus corn tortillas, a Mexican staple.
Nationally, prices for the corn patties shot up a percentage point in the first half of December alone and some tortilla makers raised their prices by as much as six percent.
Tortilla makers say they have no choice but to raise the prices of their products in order to keep up with rising production costs.
"Sales have decreased but the price of maize is increasing. Gas is going up every month so we can't cheapen the cost of tortillas. We would like to, because we know families are suffering from the [economic] crisis in 2011. But we don't earn a lot after selling a kilo of tortillas," said tortilla shop worker, Liliana Garcia.
The annual pace of food inflation more than tripled here in November from two months earlier.
Though food inflation continues to rise sharply, it is well below peak levels in 2009.
In South America, unrest has already been seen in Bolivia where huge protests have broken out in the streets as people fear food, transport and consumer goods could soon be out of the reach of many of the country's poor.
The government was forced to reverse a hefty fuel price increase that had sparked nationwide protests after gas prices shot up as much as 83 percent and prices for food staples like sugar spiked.
With some food staples up as high as 50 percent many consumers are forced to wait overnight, sleeping in long lines that stretch down the street, to buy sugar and other items from government outposts at subsidized prices.
At 75-years-old, Rosa Martinez started her day at 1 a.m. in order to make it to this line by 2 a.m. to buy sugar so her husband, two daughters, their husbands and her seven grandchildren, who all live together, could have it at breakfast.
Martinez says more and more of her family's income is going towards paying for food as prices for sugar, flour, corn meal and chicken and beef constantly rise.
She hurried home with 11 kilos (24 pounds) of sugar to prepare breakfast for her family, saying she worried most for her grandchildren as she expected prices to continue to climb.
"I go through it for my grandchildren. The kids don't know if there is a line to buy food or not. They don't know. So that they have what they need I had to get up really early," Martinez told Reuters.
Though he recently backed down to pressure, President Evo Morales has defended slashing fuel subsidies that cost the state about $380 million each year saying the price increases were a vital tool to cut fuel imports and spur lagging investment in oil output.
He has signaled that at some point the government will be forced to walk away from the costly measures passing the costs onto consumers.
The uncertainty is cause for concern for Martinez and her family.
"It is hard thinking of my grandchildren's futures. It pains me to think of what could happen to them; what the future could hold. They might end up eating dirt," said Martinez.
Putting additional stress on Bolivian families and the local food market is a trend over the last five years in which the poor Andean nation increased food importation, making it more susceptible to rising world food costs despite efforts to keep locally produced foods in the country.
A former Bolivian economy minister and a World Bank and U.N. consultant, Flavio Machicado Saravia said trouble could be on the horizon if food costs continued to rise putting basic items out of reach of poor Bolivian families, 60 percent of which already live below the poverty line.
"In terms of calories and protein, people basically eat flour. Caloric intake comes from sugar and oil, grease. These products make up about 80 percent of the diet, and if this fails, things will get complicated," Machicado said.
"Along with a domestic supply policy of prohibiting the exportation of agricultural products, which stimulated an increase in production, what has happened in the last few years is that we have seen an importation of food from neighboring countries in significant quantities." Machicado added.
The World Bank has urged governments to avoid protectionist measures as food prices rise and has called upon the Group of 20 leading economies to take steps to make sure the poor have an adequate food supply.
For now, analysts don't expect the price of bread, tortillas or sugar will lead to unrest this year because the region's central banks and governments are generally strong enough to control inflation and protect consumers from severe price shocks.
Raising rates, which would strengthen currencies and hurt exporters, appears to be the default choice as memories are still fresh of the runaway inflation that plagued the region during the 1980s and 90s. - Copyright Holder: REUTERS
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