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Mexicans fight tortilla price spike

MEXICO CITY --Soaring international demand for corn has caused a spike in prices for Mexico's humble tortilla, hitting the poor and forcing President Felipe Calderon's business-friendly government into an uncomfortable confrontation with powerful monopolies.

Tortilla prices jumped nearly 14 percent over the past year, a move Mexico's Central Bank Gov. Guillermo Ortiz called "unjustifiable" in a country where inflation ran about 4 percent. Ortiz pinned the blame on companies monopolizing the market and blocking competition.

"We clearly have a problem of speculation," he said.

The government and economists also blame increased U.S. production of ethanol from corn as an alternative to oil.

The battle over the tortilla, the most basic staple of the Mexican diet especially among the poor, demonstrates how increasing economic integration is felt on the street level.

"This is direct evidence of the way globalization is affecting all walks of life in Mexico and all over the world," said David Barkin, an economics professor at the Xochimilco campus of the Autonomous Metropolitan University in Mexico City.

On Friday, Economy Minister Eduardo Sojo said the government had authorized duty-free imports of 650,000 metric tons of corn to drive down tortilla prices. But he warned that any price relief would not be immediate, with the corn imports hitting the Mexican market in February.

Sojo said the quotas include 450,000 metric tons of white corn from the United States under the North American Free Trade Agreement, and 200,000 metric tons of white or yellow corn from anywhere else in the world.

White corn is favored in Mexico for tortillas, while yellow corn is reserved for livestock and industrial uses.

Efrain Garcia, president of the National Confederation of Agricultural Corn Producers, said growers would not oppose the increased imports, saying "it's very clear to us, the producers, that (Mexico) needs a cheap tortilla."

The federal government's antitrust watchdog announced this week it was investigating allegations companies were manipulating corn prices, and making deals to limit the supply of corn to boost prices of tortillas.

The Federal Competition Commission's director, Eduardo Perez Motta, said Friday the investigation would extend to "the whole chain of production, all the way to the consumer." Violators could face fines up to $6.4 million.

Since 2004, the agency has applied sanctions in six cases against anticompetitive practices in the corn and tortilla markets. Last year, it blocked Gruma's takeover of Mexican corn processor Agroinsa, saying it would have given it too much control over the market.

Officials from the world's largest tortilla maker, Monterrey, Mexico-based Gruma SA, were not immediately available for comment. The company, which has 89 tortilla plants worldwide and sells in the U.S. under the Mission brand, holds an estimated 70 percent share of the Mexican market for tortillas and cornmeal.

Big retailers, mostly supermarkets, have kept tortilla prices steady around $0.55 a kilogram, but in Mexico City, some shops are selling them for $0.90 a kilogram, up from $0.73.

For low-income Mexicans, who earn about $18 a day on average, the increasing prices have hit hard. According to the government, about half of the country's 107 million citizens live in poverty.

"When there isn't enough money to buy meat, you do without," said Bonifacia Ysidro as she wrapped an embroidered towel around a foot-high stack of tortillas to cart home.

Tortillas, she added, "you can't do without."

Ysidro said she paid $2.27 -- about a sixth of her household's combined daily income -- for enough tortillas to feed her family of six.

"If I don't have that much, I'll have to buy less," she said.

The U.S. Agriculture Department said Friday that ethanol plants and foreign buyers are gobbling U.S. corn supplies, pushing prices as high as $3.40 a bushel, the highest in more than a decade.

Nationwide in the United States, supplies of corn are expected to drop to 752 million bushels, a drop from last month's forecast of 935 million bushels and a steep decline from last year's supply of 1.967 billion bushels.

Mexican lawmakers are demanding the government impose price controls, but the federal consumer protection agency instead has launched an inspection campaign to ensure tortilla sellers post their prices and do not gouge customers.

Juan Camacho Gomez, president of national tortilla industry group, said if the price continues to rise and people buy fewer tortillas, it could mean "death for the small" sellers.

The country's tortilla sellers have proposed creating joint import companies to bypass intermediaries and cut costs.

The government eliminated its decades-old subsidy for tortillas in 1999 just as cheap corn imports were rising from the United States under NAFTA.

The tortilla increase outpaced inflation and minimum wage hikes of about 4 percent for the past year.

Grains traders forecast tortilla prices will rise by 20 to 25 percent during the first quarter of 2007.

That prospect worries Ysidro, who said: "If it goes higher, what am I going to give my children?"