Tortilla Price Spike Leads Mexico to Consider Corn Imports

(Bloomberg) -- Mexico is considering boosting corn imports and capping cooking gas prices as an inflationary spike hits tortilla prices, a staple for the country’s families.

Inflation in Latin America’s second-largest economy quickened to around 6% in the second quarter, driven by fuel and food prices. The spike led the central bank to increase the key interest rate by a quarter-point last week, surprising economists, who see inflation slowing to only 5.58% by the end of the year.

“There are different ways of keeping it under control. In the case of gas, if it’s necessary, we’ll set a maximum price, though the technocrats won’t like it,” President Andres Manuel Lopez Obrador said Friday, referring to measures to combat inflation. “For tortillas, there are other mechanisms, such as opening corn imports to have more competition.”

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The president known as AMLO had vowed earlier in his term not to allow gas and electricity prices for consumers to increase beyond the average inflation rate. But the liquefied petroleum gas used by Mexican households to cook has consistently been among the biggest contributors to inflation this year. And tortilla prices rose 2.6% in May compared to the previous month.

“Foreign investment is increasing, the economy is recovering, we’re getting more jobs. The one thing I’m concerned about is inflation. We have to make sure we keep it under control despite external pressures, since there is so much money being spent in the ,” AMLO said at his daily press briefing.

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The president argued that Mexico was not self-sufficient in producing the yellow corn needed for tortilla, leading to price swings. He added that, especially in places like Mexico City, monopolistic practices had driven up the price of cooking gas, a practice he said the government would combat.

AMLO also said he agreed with the central bank’s decision to increase borrowing costs as a way of taming inflation. On June 24, the bank boosted the key rate to 4.25%, its first hike since late 2018.

“It was appropriate,” the president said about the decision. “The high cost of living affects a lot.”

(Updates with president’s comments on monetary policy in seventh paragraph.)

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