Saturday, January 27, 2007

Tortilla crisis

I had written briefly a few weeks ago about the rise of tortilla prices in Mexico. This is growing into a serious crisis, and the Washington Post has a good article on the problems involved. Conventional wisdom is that rising demand for ethanol is the culprit, but Mexicans are increasingly blaming the shady relationship between the government and huge corporations. For example, ethanol is made from yellow corn, but tortillas are made from white corn, yet the price of white corn is indexed to the price of yellow corn. Further, one company (Grupo Gruma) controls about 80% of the tortilla flour market, and both the Fox and Calderón governments routinely make policy based on the desires of corn brokers. So far, Calderón’s solution has been to reach a “gentleman’s agreement” with companies to cap tortilla prices, though there are already charges that it is not being followed.

The article also does a nice job of outlining the health issues at stake. Tortillas are an important source of both protein and calcium, but when the price is too high, people are shifting toward cheap instant noodles, which are starchy and loaded with sodium.


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