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Page last updated at 12:08 GMT, Wednesday, 4 June 2008 13:08 UK

Tortilla prices put pressure on poor

By Duncan Kennedy
BBC News, Mexico City

A basket of tortillas
Tortillas are a staple for some 40m Mexicans surviving on little

One is never enough. Fill them with meat, with beans, with rice, with nothing, but one tortilla is never enough.

The size of a small plate, this soft, thin, unleavened corn bread is present at nearly every Mexican meal you eat.

Few people can make do with just one of them - a good half a dozen is about average.

That is, if you can afford it.

About 40m Mexicans live on $5 (2.50) a day, or less.

cost of food graphic
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Tortillas are what these people live on, so they are much more than just bread. And when the price of tortillas rises, it is big news.

That is why a recent announcement by Mexico's National Chamber for the Tortilla and Dough Industry made such an impact.

The chamber predicted that tortilla prices would rise by about 18% in the next month because of rising costs of fuel and corn.

It said the average price for a tonne of milled corn had gone from 3,000 pesos in January to 3,650 pesos now and that those rises would have to be passed on to consumers.

In simple terms, that would mean the price of a kilogram of tortillas would go up from about 8.5 pesos (80 US cents) a kilo now to around 10 pesos a kilo in June.

Protest marches

If you live on $5 a day, that kind of increase is a big deal - and the government knows it.

A demonstration against tortilla price rises in Mexico City, 2007
Tens of thousands marched in protest at tortilla price rises last year

Last year, tens of thousands of people marched in protest at similar price rises for tortillas. People were angry and there were scuffles.

Many blamed American corn farmers for diverting their crops away to produce bio-fuels.

For a time the situation looked volatile.

The government stepped in to peg prices and it is making the same soothing noises now.

"My government won't remain with its arms crossed in the face of this problem," Mexico's President Felipe Calderon said recently.

His economy minister, Eduardo Sojo, added that the government was working with the tortilla industry to keep a lid on prices.

"There is no price increase," he said. "It will not go up tomorrow."

And, to some extent, he is right.

Go to any street-corner vendor around Mexico City's central Zocolo Square and prices appear stable - for now.

The government does not directly subsidise tortilla prices, but it offers help for transport and warehousing, which, in effect, helps keep the price at tolerable levels.

Record crop

But, with other forecasters predicting tortilla prices will shoot up by as much as 40%, to 12 pesos a kilo, the government's ability to deal with those market forces may not be so great.

A price label in a shop
The government has tried to help keep prices at reasonable levels

That is because inflation is already at a three-year high. Growth is down in the past quarter and oil production is running at 400,000 fewer barrels than at the same time last year.

The situation has left the government's bank balance short of 100bn pesos, according to Mr Calderon.

One bright note is that Mexico is on target for a record 2008 corn crop, which would mean two good harvests in a row.

But it is starting from a low base.

Even the president has admitted that the country's ability to produce more grain is limited, because so many farmers have abandoned their fields in recent years to find better paid work in the neighbouring US.

"For many years, developing countries, in particular Mexico, faced the problem of very high subsidies in the United States and Europe, and this drove a lot of producers out of the competition," Mr Calderon said.

"This has meant that when we see this rise in world demand for food, the reaction from the supply side is not as fast."

Daunting reality

The irony is that this is happening in Mexico, the land where corn was first domesticated some 7,000 years ago.

A protest over tortilla price rises
If tortillas become too expensive for the poor, stability could be threatened

Everyone has a favourite target to blame for all this.

Whether it is rising demand for food and fuel from India and China, or the North American Free Trade Agreement (Nafta) between Mexico and the United States, there are arguments to be made for cause and effect.

But countries like Mexico have to live with the daunting reality now, that prices of the core-of-life food so many millions rely on may soon start to rise beyond their reach.

And that could cause problems - a staple that may make a country unstable.

One tortilla may not be enough, but it may soon be all that many can afford.



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