Tuesday, January 16, 2007

Mexico City: Tortilla prices - you can't have it both ways

Allan Wall sends me an article from Mexidata about the controversy over rising tortilla prices. The article points out, without Allan belaboring the point, how politics and clear-headed economic analysis just don't mix.

Now, Allan lives in Mexico and likes to be a polite guest, which I wholeheartedly respect. His article is to-the-point and filled with logical, however polite, economic and political analyses. Mark in Mexico labors under no such self imposed restrictions.
Note: Here in Oaxaca we are now paying 10 pesos per kilo (about $0.91 or $0.41 per pound US) for white corn tortillas. The price for yellow corn tortillas is the same but should not be. I won't touch yellow corn tortillas because I don't like the taste. Many places claim they produce their tortillas from white corn but in fact use yellow corn meal or a mixture of the two. It is easy to detect the difference just from the smell if they are using all yellow corn. It is more difficult, at least for me, to discern the difference between pure white corn tortillas and those made with a blend of yellow and white corn meals. You buy once and don't return if you discover from the taste that the lower quality corn meal has been used.
Mexico cannot produce enough cheap yellow corn, used for animal feed in the USA but ground into meal and processed into tortillas which are eaten by poorer people here. Nor can Mexico produce enough white corn which is preferred by most people here, even if they cannot afford it. When a country cannot produce enough food to feed itself, especially when that food is and has been the number one staple for more than a thousand years, then the food must be imported from someone who can. It is really pretty simple.

Additionally, when that basic foodstuff becomes more and more rare, buyers must bid more to acquire it. The sellers can hold out for the highest bid before shipping their white or yellow corn to the tortilla makers. When the price they pay for corn increases, the tortilla makers have to increase the price they charge for the tortilla. That is pretty basic economics. There is nothing spooky or magical or mysterious about it.

Case in point: Pay a visit to two new car dealers. At the Ford dealership, you can wheel and deal and negotiate, seemingly for hours, over almost every new Ford on the lot. Then cross the street to the Toyota dealer. You will find a completely different ballgame. In fact, there's no ballgame there at all. The Toyota dealer is selling every vehicle his factory can ship him. The Ford dealer is not. The Toyota salesman will negotiate over delivery date and that's about it. You pay the sticker price. If you don't, the next buyer will.

That's what Mexico is up against. And the president and his economic team know this. To get the prices for tortillas down, Calderón must allow the importation of more corn. In fact, he has to encourage it. The state of Iowa alone is capable of burying Mexico in a mountain of cheap and quite affordable corn meal, be it yellow, white or any other color.

When that cheap corn meal hits Mexico, the country's own producers, in most cases the small. already dirt poor farmers, will be out of business. They cannot survive on their sales at their current higher prices, let alone compete against American producers at much lower prices. So, something's got to give.

If Mexicans want to enjoy lower tortilla prices, they'll have to buy corn meal from Iowa. There is no other way. I use the word "enjoy" loosely. For millions of Mexico's poor, the tortilla is about all they've got and all they've ever had. And now they cannot afford even that.

So, what says the opposition? They are demanding that the new president's new Secretary of the Economy resign. They want his head because he and Calderón, at least so far, have refused to follow the time honored Mexican procedure of immediately shifting billions of pesos to stopgap this problem and away from another serious problem somewhere else where those billions were initially destined.

It's a shell game. If you move the shells quickly enough the people cannot ever find the peanut and you make it through your six year term and you get monuments, streets, parks and maybe a pier or two named after you. And, 25 years hence, people will still fondly remember what a great president you were because HE LOWERED THE PRICE OF TORTILLAS, DISALLOWED THE IMPORTATION OF THE GRINGO'S DIRTY CORN AND KEPT THEIR VORACIOUS HANDS OFF OF PEMEX!!!!

The opposition is demanding a halt to the programmed elimination of protective tariffs on corn imports. The opposition is demanding government price supports for Mexico's poor and inefficient corn producers. The opposition is demanding lower tortilla prices fer everbody.

The opposition is demanding "nutritional sovereignty" to go along with their "energy sovereignty" which has created the nightmare in the oil, gas and electricity sectors, their "political sovereignty" which has led to Chavez, Fidel and, well, whomever, operating freely inside the country to feed money and weapons to whatever guerilla army and their "law enforcement sovereignty" which has led to at least six Mexican states falling under the control of one drug cartel or another. What a bunch of incompetent morons.

It kind of reminds me of our own incompetent morons. At least they understand basic economices, even if they ignore it in pursuit of their own feathered nests. Nancy Pelosi and her nanny state Democrats just raised the minimum wage from $5.15 to $7.25. Now, Nancy and her minions understand that by raising this minimum wage, tens of thousands and maybe hundreds of thousands of jobs will be lost. They just don't say so -- openly.

Especially in American Samoa where Del Monte and Star Kist maintain their tuna canning plants and are, by far, the largest employers in the islands. And Nancy, remembering her 17 million dollars in Del Monte stock, proposed and had exempted American Samoa from the new minimum wage. That is, until she got caught. Being a native Spanish speaker is no requirement whatsoever for being a four-flushing, two-timing, snake-in-the-grass liar.

And, uh, oh yeah, Star Kist is 75% owned by Del Monte which is, in turn, 75% owned by Heinz, whose largest single stockholder is Teresa Heinz Kerry, wife of failed presidential candidate and highly successful buffoon, Senator John Kerry.

And in the end, who has to pay for all of this "sovereignty"? PEMEX, of course. You remember PEMEX, don't you? The state owned oil company which has and continues to create environmental disaster areas in the states of Veracruz and Tabasco. The state owned oil company that is sitting by as its oil wells dry up because it doesn't have enough money to explore for more. The state owned oil company that supplies Mexico with 70% of its total anual operating budget. The state owned oil company that watches helplessly as 58 pesos of every 100 it collects from its customers get skimmed and sent off to Mexico City. The state owned oil company that loses a cool 1 billion dollars per year to internal corruption that no one has as yet the courage to step in and stop.

The state owned oil company that the politicians in Mexico City will never allow to be tainted by foreign investment or threatened by foreign competition. No, they'd rather its destruction be 100% Hecho en Mexico.

The morons in the PRD and the PRI and the PVEM (who threaten all manner of trouble if genetically engineered corn is allowed into the country) want cheap corn, cheap tortillas and no competetion from imports. In their pea-sized brains, it is as easy as a presidential decree. Presto, Change-o! Cheapy-cheapy tortillas forever in Aztlan.

Sorry, boys. Your president knows better even if, in the end, he is forced to start shifting around the shells so no one can follow the peanut. And I really don't think he much gives a damn whether there is ever a Parque Calderon.

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