Economics: Considerable risks from the revised Pacic anti-inflation accord, with scant effect expected in prices
This past October 19, the federal government formally decreed a second iteration of its Pacic Anti-inflation and Cost of Living Accord, known as "Pacic 2", with the corresponding decree's being published in the federal daily gazette. In addition to continuing to exempt selected goods from import duties on 24 basic or minimal consumption basket products as well as some inputs used in the production of containers and fertilizers, the latest decree spells out administrative facilities exempting participating firms from needing to demonstrate compliance with sanitary and phytosanitary regulations as well as customs duties. Officials announced that 14 retailers, distributors and food-producing companies as well as an organization of pork producers had joined the accord, only a tiny sample of the industry, while the import benefits will only apply to those that have previously imported the goods included in the plan.
There are many other reasons to fear this initiative will continue to have a minimal impact on the price of the minimum basket because the products included have an incidence of only 13.2% in the general consumer price index. In addition, the traditional marketing channels that supply public markets, neighborhood street markets and small businesses, which collectively account for a very high volume of food consumed in Mexico, are ineligible.
It is worth considering that Mexico is a net exporter of diverse products included in the Pacic 2 basket that the country produces highly competitively, especially fruits and vegetables— so the “administrative facilities” being offered for imports will have little or no effect in expanding domestic supply and mitigating price rises. Other products included in Pacic 2 (corn, wheat, fertilizers, laminated products) constitute inputs for processing food products, so their inclusion will not have a direct impact on final consumer prices, and the effect of administrative facilities will be diluted through production-commercialization channels.
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