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Staple food price soaring in Mexico,monopoly blamed

Soaring international demand for corn has caused a spike in prices for Mexico's humble tortilla, hitting the poor and forcing Mexican President Felipe Calderon's business-friendly government into an uncomfortable confrontation with powerful monopolies.

Tortilla prices jumped nearly 14 percent over the past year, a move that Mexican central bank Governor Guillermo Ortiz said was "unjustifiable" in a country where inflation ran at only about 4 percent. Ortiz pinned the blame on companies monopolizing the market and blocking competition.

"We clearly have a problem of speculation," he said.

The government and economists also blame increased US production of ethanol as an alternative to oil.

The battle over the tortilla, the staple of the Mexican diet, especially among the poor, demonstrates how increasing economic integration is felt on the streets.

"This is direct evidence of the way globalization is affecting all walks of life in Mexico and all over the world," said David Barkin, an economics professor at the Xochimilco campus of the Autonomous Metropolitan University in Mexico City.

On Friday, Economy Minister Eduardo Sojo said the government had authorized duty-free imports of 650,000 tonnes of corn to drive down tortilla prices. But he warned that any price relief would not be immediate, with the corn imports hitting the Mexican market next month.

The federal government's antitrust watchdog announced this week that it was investigating allegations companies were manipulating corn prices, and making deals to limit the supply of corn to boost prices of tortillas.

The Federal Competition Commission's director, Eduardo Perez Motta, said on Friday that the investigation would extend to "the whole chain of production, all the way to the consumer."

Violators could face fines of up to 70 million pesos (US$6.4 million).

Since 2004, the agency has applied sanctions in six cases against anticompetitive practices in the corn and tortilla markets. Last year, it blocked Gruma's takeover of Mexican corn processor Agroinsa, saying it would have given it too much control over the market.

Gruma holds an estimated 70 percent share of the Mexican market for tortillas.

Supermarkets, have kept tortilla prices around US$0.55 a kilogram, but in Mexico City some shops are selling them for as much as US$0.90 a kilogram, up from US$0.73.

For low-income Mexicans earning about US$18 a day on average, the increasing prices have hit hard.

"When there isn't enough money to buy meat, you do without," said Bonifacia Ysidro as she wrapped an embroidered towel around a foot-high stack of tortillas to cart home.

Tortillas, she added, "you can't do without."

Grains traders forecast tortilla prices will rise by 20 to 25 percent during the first quarter of this year.

That prospect worries Ysidro, who said: "If it goes higher, what am I going to give my children?"
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