Mexico freezes prices on food items to battle inflation Agreement aims to steady costs as nation reels from rising inflation

MEXICO CITY — Moving to stem rising inflation and civil discontent, President Felipe Calderon and Mexican industrialists announced an agreement Wednesday to freeze prices on more than 150 food items.

The pact, which will be in effect through the end of the year, comes amid escalating costs of corn and other staples of the Mexican diet.

Companies agreed to hold prices steady for cooking oil, tomato sauce, canned soups and tuna, beans, chili sauces and other staples of the Mexican table.

"In recent months a significant increase in the price of food has been felt worldwide," Calderon said in announcing the deal. "Maintaining the maximum prices of these products fixed will truly permit an enormous support for the household economy."

Calderon last month ordered the easing of restrictions on imported corn, wheat and rice to stabilize local prices of those grains.

He has also announced measures — criticized as insufficient by farm groups — to boost agricultural production and lower farmers' costs.

Worldwide rioting

This year's sustained price spikes for oil, grains and other commodities have sparked riots across the developing world and parts of Europe.

Food riots forced the resignation of Haiti's prime minister earlier this year.

Though Mexico's mostly urban population has remained calm, Calderon's government has been maneuvering to keep food and gasoline prices low.

The price freeze on some items will hold until December only if "there aren't indiscriminate increases in these prices, specifically of raw materials," said Ismael Plascencia, president of the Concamin, a national organization of various manufacturers associations.

But increasing raw material costs are as likely for Mexican manufacturers as they are worldwide, said economist Rogelio Ramirez de la O, whose firm advises some of the largest companies operating here.

"Everything is going up in price," Ramirez de la O said. "There is no escape."

Effect on manufacturers

Larger Mexican companies, some of which have a stranglehold on their industries and enjoy profit margins of as much as 30 percent, likely will be able to absorb the increased costs, Ramirez de la O said. But many smaller manufacturers could be severely squeezed.

"No one really expects these prices to be fixed for such a long time," said Ramirez de la O, who also served as economic adviser to the leftist candidate who lost the presidential election two years ago to Calderon.

The price of corn tortillas went up 22 percent early last month, according to the federal consumer protection agency, while the price of rice has spiked by 40 percent since the beginning of the year.

Calderon's government disclosed recently that nearly all the windfall profits from Mexico's oil exports — some 1.3 million barrels a day to the U.S. Gulf Coast refineries — are being spent to subsidize gasoline sold inside the country.

Mexico imports some 40 percent of its gasoline, most of it from the United States. Regular gasoline here sells about $2.80 a gallon, far lower than the price in the United States.

"This is a populist measure," Ramirez de la O said of Wednesday's accord. "The government is running very short of real alternatives."

dudley.althaus@chron.com