Grain production, suspend tariffs and more road safety, AMLO’s plan to curb inflation

The federal government presented this morning a plan to curb inflation that seeks that the basic food basket has a “fair price”, and that it will be based on a strategy of production, distribution, and foreign trade.

President Andrés Manuel López Obrador assured that This is not about price control. rather it is an alliance to guarantee the prices of the basic basket, an agreement with producers, distributors and merchants, who participated voluntarily.

This plan called Package Against Inflation and Famine (PACIC), which will be in force for six months, with the possibility of extending it, focuses on increasing the production of grains such as corn, beans and rice.

Read: Tomato and gasoline push inflation to its highest level in 21 years

the secretary of @Hacienda_Mexico presented the plan to contain inflation, which is focused on the production of grains, centering it on corn, beans and rice. pic.twitter.com/LvMPwTDf8A

– Political Animal (@Pajaropolitico) May 4, 2022

production strategy

The Secretary of the Treasury, Rogelio Ramírez de O, explained that the plan includes a production strategy focused on increasing the food supply and the measures are as follows:

• Stabilization of the price of gasoline and diesel, reference prices of LP gas and electricity.
• Increased grain production.
• Delivery of fertilizers: the free fertilizer delivery plan will be expanded from four to 9 states, with which the government intends to increase basic grain production by 2 million tons, in addition to 800 thousand more tons with the Sembrando Vida program.
• Elimination of compensatory quota of ammonium sulfate for one year.

distribution strategy

The measures of the distribution strategy are as follows:

• Strengthening of the road safety strategy (More than 12,000 elements and 2,300 vehicles will guarantee road safety).
• No increase in CAPUFE and FONADIN highway tolls in 2022.
• Porte Document exemption (basic and supplies) until October 1, 2022 and, if necessary, another period will be extended.
• No increase in railway rates or consideration for interconnection. This measure is for 6 months and applies to the transportation of food, fertilizers and hydrocarbons.
• Cost reduction and customs clearance time.
• Agile cargo dispatch in seaports.

foreign trade strategy

• Zero import tariffs (basic and supplies). The measure is for six months and includes 21 of 24 products of the basic basket and five strategic inputs such as corn flour, wheat flour, white corn, sorghum and wheat.

Ramírez de O explained that, in order to reduce the cost of the basket, the constitution of a strategic corn reserve, the strengthening of Diconsa and guaranteed prices in corn, beans, rice and milk are also proposed; the non-increase in prices of Telmex and Telcel services during the rest of the year.

During the conference, Grupo Bimbo promised to maintain the price of White bread the rest of the year.

“If we act in these three sectors, we would be influencing the national consumer index by approximately one third. The Profeco basket represents 46% of food inflation (…) It will allow us to stabilize prices in the next six months,” Ramirez de O said.

With the government’s plan, almost a third of the National Consumer Price Index would be affected. The Profeco basket represents 46% of food inflation, points out @R_Ramirez_O. pic.twitter.com/glHlb2pzri

– Political Animal (@Pajaropolitico) May 4, 2022

I point out that the industries will have the flexibility to adjust brands and presentations within the basket to have enough room for maneuver.

When presenting the program, the Secretary of the Treasury said that the inflation that the whole world is suffering is due to a limited supply of products derived from the COVID-19 pandemic, later due to a too sudden recovery of the economies, and subsequently aggravated by the conflict between Russia and Ukraine.

Inflation in Mexico reached 7.72% at an annual rate during the first fortnight of April, the highest figure since January 2001, when it was 7.86%.