The Costs of Rising Tortilla Prices in Mexico


Spurred by the increasing use of corn for ethanol, tortilla prices in Mexico have skyrocketed by more that 50 percent in many regions. Mexicans protested these sharp increases, forcing the government of Felipe Calderon to publicly promise to punish speculators and to call for increased corn imports. Calderon also negotiated a pact with the largest tortilla producers to cap the price of tortillas at 8.5 pesos per kilogram-a 40 percent price increase.  However few consumers will benefit from these efforts.  Instead, WALMART, the large corporations that dominate the industry, and the U.S. transnational companies that supply Mexico with corn are likely to be the beneficiaries.

 

The tortilla price hikes and the government’s responses will be shouldered by Mexico‘s poorest consumers and producers. Tortilla prices have increased by more than 10 times the recent increase in the minimum wage.  In some states a kilogram of tortillas accounts for as much as one-third of the daily minimum wage. Increasing imports is likely to further devastate Mexican corn producers, who have been especially hard hit since the 1994 implementation of NAFTA.

 

The Mexican government has not always been willing to sacrifice the poor for giant corporations.  In the Mexican Revolution in the early 20th century, Mexico‘s working classes demanded social justice. Successive Mexican administrations responded by granting land to the landless and subsidizing the production of tortillas.  As Mexican governments sought to transform the economy through industrialization and large scale agriculture, peasant and worker resistance led to the creation of a government agency with a chain of stores to keep basic food prices within the reach of consumers.  This agency established a minimum producer price and purchased staple grains directly from small producers.  While the goal was not to eradicate poverty or challenge the market system, this authoritarian responsiveness provided a basic security net for millions of Mexicans.

 

These social policies were greatly weakened by Mexico‘s economic crisis of the 1980s and the U.S.-inspired response.  Social programs were slashed and food subsidies eliminated as private businesses were hailed as the solution to Mexico‘s economic ills. This has led to a virtual abandonment of the countryside. Mexico‘s farm employment has been reduced by 30 percent since the implementation of NAFTA.  According to a study the International Relations Center, between 1999 and 2004 the price paid Mexican corn farmers fell by about half as U.S. imports flooded Mexican markets.  While for centuries Mexico‘s campesinos have produced maize and other basic staples, their lands are increasingly privatized or abandoned and are forced to migrate in search of better opportunities.

 

Among the major beneficiaries of the government policies in the 1980s and 1990s, and of recent price hikes, is the Mexican tortilla giant Grupo MASECA (GRUMA). Founded in 1949, GRUMA pioneered an industrial process of making corn flour and tortillas. When subsidies to maize and tortillas plummeted, GRUMA thrived as Mexican President Carlos Salinas diverted state corn stocks away from smaller subsidized tortilla factories and to the ready-mix tortilla industry, such as GRUMA, openly favoring them as more efficient producers.

 

GRUMA’s dominance of the Mexican market stimulated its international expansion. GRUMA controls approximately 65 percent of the overall Central American corn flour market. In the U.S., with Mission and Guerrero as their key brands, GRUMA controls about 70% of the tortilla market in Southern California.  It operates 13 industrial plants in the U.S including the largest tortilla factory in the world in Rancho Cucamonga. GRUMA has benefited from its strategic alliance with Archer Daniel’s Midland, one of the world’s largest agribusinesses and a key recipient of U.S. corn subsidies.

 

WALMART, Mexico‘s number one private employer and leading retailer, also stands to gain from the price hikes. In its nearly 800 stores, WALMART has not raised the price of tortillas as much as other retailers.  Its dominance of the market allows it to undersell  smaller stores thereby attracting more customers. Smaller and national retailers are likely to be the casualties, enabling WALMART to consolidate its monopolistic hold over the Mexican market.

 

The current crisis provides an opportunity for agribusiness to strengthen their dominance of the Mexican countryside. Several large producer organizations and biotech firms have called on the government to authorize the planting of genetically modified corn to increase yield in Mexico.  In the search for a quick fix, however, such a policy would deepen Mexico‘s food dependence.

 

The lack of food sovereignty has had disastrous consequences for Mexicans.  According to Laura Carlsen of the International Relations Center, the Mexican government recently reported that 12.7 percent of children under age five are chronically malnourished. In the countryside, the percent is nearly double.  The increases in the price of tortillas, heightens the risk of malnutrition.  Hector Bourges Rodriguez, the director of Nutrition of the National Institute of Medical Sciences and Nutrition, reports that tortillas are the one food item in the Mexican diet that deliver the greatest amount of nutritional components. Increasing the price could lead to the further deteriorization of the Mexican diet.

 

The recent price increases of tortillas in Mexico, therefore, are not mere market adjustments.  They have profound implications for who controls Mexico‘s basic food staple. Long-term solutions to price increases must be rooted in policies that increase Mexico‘s food sovereignty and give more control to local campesino producers and consumers.  Short-term panaceas that benefit WALMART, GRUMA, and U.S. agribusiness will not improve the standard of living of the average Mexican; instead, they may lead to greater malnutrition and instability.

 

 

Enrique C. Ochoa is a professor of History at the California State University, Los Angeles and the 2006-07 Weglyn Chair of Multicultural Studies at Cal Poly Pomona.  The author of Feeding Mexico:  The Political Uses of Food Since 1910 (2000), he is currently writing a book on the tortilla industry in Mexico and Los Angeles.

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