Tuesday, November 29, 2022

Government unveils 6-month, production-focused anti-inflation plan

The federal government on Wednesday presented a six-month plan to curb inflation without resorting to price controls.

President López Obrador announced that the government has reached an agreement with the private sector to ensure fair prices for 24 products in the canasta básica, a selection of basic foodstuffs including beans, rice, eggs and sugar.

“A decision was taken to act on food-related issues, convincing, persuading, calling on producers, distributors and retailers to act together [with the government], without coercive measures. It’s not about price controls, it’s an agreement, an alliance to guarantee that the canasta básica has a fair price,” he told his morning news conference.

Without being subject to price controls, the agreement seeks to keep a lid on the prices of products such as cooking oil, tuna, beef, chicken, onions, milk, potatoes, toilet paper and tortillas. It could be renewed if inflation remains high at the end of the year.

Inflation hit a 20-year high of almost 8% in the first half of April.

Finance Minister Rogelio Ramírez de la O revealed a range of other measures that are part of the anti-inflation plan, which seeks to boost production of staple foods and stabilize fuel prices, among other measures.

“We’re now proposing an increase in the production of grains, … [the plan] is focused on corn, beans and rice,” Ramírez said, adding that the government will establish a strategic reserve of corn.

Among the other measures he outlined were an embargo on highway toll increases and the removal of tariffs on a range of imports including many basic products.

The finance minister also said that Carlos Slim – Mexico’s richest person and the owner of telecommunications companies Telmex and Telcel – had committed to not raising internet prices this year. López Obrador said Slim also committed to not increasing the cost of telephone service.

Liliana Mejía Corona, an executive with baked goods company Grupo Bimbo, told the president’s press conference that the price of white bread wouldn’t go up this year, while Alberto Manuel Sepúlveda, a Walmart executive, said that supermarket chains were committed to working with the government to curb inflation and promote citizens’ wellbeing.

Representatives of many other retailers as well as food producers and business organizations attended the press conference in a show of support for the anti-inflation plan.

Finance Minister Ramírez
Finance Minister Ramírez said an embargo on highway toll increases is among the measures in the anti-inflation plan.

Ramírez said the government’s expectation was that the plan would have a rapid impact on the prices of canasta básica products. Farmers’ efforts to boost production will be supported by the government’s provision of fertilizer and other incentives.

“We believe that [increasing] supply and the reduction of costs stimulates the competitiveness of the [agriculture] industry,” Ramírez said.

“… We think that we’re going to have a rapid impact on … the price of the canasta básica, that’s the objective,” he said.

With regard to the plan’s six-month duration, the finance minister remarked that it was unclear how long international pressure on prices would last but stressed that the government is giving itself time to hold further dialogue with companies and deal with shortages of certain products.

López Obrador emphasized that the government is “doing something” rather than “standing idly by,” asserting that the anti-inflation plan will help drive inflation down but other measures must be taken as well.

He thanked the private sector for its willingness to collaborate with the government for “the good of our people and country” and addressed the possibility of the central bank increasing its benchmark interest rate – currently 6.5% – due to the high levels of inflation.

An interest rate rise wouldn’t be a good thing for the country, López Obrador said, before stressing that he will be respectful of any decision the Bank of México makes.

“Of course the Bank of México is autonomous, they have to decide and we’ll be respectful of the [bank’s] autonomy … but the less interest rates rise the better so there is investment and we have economic growth. If there is economic growth, there’s employment. If there’s employment, there’s wellbeing. If there’s wellbeing, there’s peace and tranquility,” he said.

With reports from Reforma and Milenio

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