The Market – Tortilla Inflation

March 28th, 2007

In case you haven’t heard, there are suddenly a lot of angry Mexicans these days.  I am not referring to the forced expulsion of illegal immigrants from this country, many of whom experienced disclocation from their families here in the States.  (Yes, they are illegal, and yes, it is a problem, but we probably could be a bit more humane with our illegal immigrant policy).  Nope, this instead is due to the price of their most basic food product, the tortilla, shooting through the roof.  TheStreet.com writes on 3/26/07, “In Mexico, manufacturers have already started to feel the pain of the [food] inflation, with political consequences.  In January, Mexico’s President Felipe Calderon was forced to impose a price cap on tortillas of 35 cents a pound, after thousands stormed Mexico City’s Central Square in protest of the massive rise in recent prices of tortillas.  Tortillas are a staple in the diets of most Mexicans and a key component of the Mexican economy.  The price cap, which is 40% more than the price for tortillas only three months ago, is still generating political tension in the country.  The hike in tortilla prices is believed to be a result of the demand for corn ethanol, generated by President Bush’s recommendations for a fourfold increase in the use of the substance in his new “cleaner energy” initiative.””  Some may laugh at this thought, but let’s be sure to remind them of all the American’s who complained bitterly because their cigarette prices were hiked substantially in an effort to quantify and pay for the effect of smoking on the public health system.  And as far as I know, humans don’t need cigarettes to survive.  Furthermore, increasing food prices due to an emerging third world middle class and the surge in demand from ethanol production will also hurt American’s wallets.  Rising food costs is not simply a third world issue. 

So in another classic foreign policy blunder becoming so endemic of this Administration, we are now exporting poverty to the lower classes of the third world.  And we are doing so in an almost blind hope that our investment in ethanol will add a net positive energy balance to our economy, instead of spending the billions in spending and subsidies on other alternative energy technologies.  But… this is what the decrepit US auto industry wanted, this is what US oil companies wanted, and unfortunately in our country, more often than not, the corporations, and not consumers, have the government’s ear first.  So let’s give the third world another reason to hate us by making it more difficult to pay for basic daily meals.  And don’t be surprised if you hear Chavez start expounding about how the great American evil empire is now trying to starve Latin American countries.  We just can’t seem to stop giving ourselves a black eye.

Entry Filed under: The Big Picture, The Market

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