January 18, 2008

The Growing Gouge of January

Now that that the free-spending holiday season has drawn to a close, Mexicans are staring straight at the annual, grim cost of January. Every year, property taxes, vehicle registration fees and school tuition come due immediately after Mexicans spend generous amounts on vacations, family dinners and Three Kings Day gifts. And this year’s gouge to the pocketbook promises to be a painful one. Among others, costs for transportation, cross-border travel permits, building and eating will shoot up in 2008.

Approved by a majority of congress from the PAN and PRI parties, a phased-in, 18-month increase in the prices of gasoline and diesel goes into effect this month. The hike is expected to trigger increases in the costs of other products as well. Price leaps of 30 percent for steel and 10 percent for cement could hit the construction industry in 2008.

Prospective Mexican visitors to the US will also have to fork out more up-front money in 2008 than they did last year. Beginning on January 31, US government fees for tourist, business and student visas will jump from $100 to $131. In Mexico, the fees are collected by Citibank-owned Banamex branches. US tourists visiting Mexico are charged approximately $22 for a 6-month tourist card. The fee is included in the price of airline tickets, or collected by Banamex and other private banks from land travelers. Besides higher fees for US visas, Mexicans will pay up to 50 percent more this year for their own government-issued passports which are good for 3, 6 and 10 years.

Once again, widespread trepidation is surfacing over the price of the corn tortilla. A Mexican food staple, tortillas jumped from about six pesos per kilo to more than 10 before public protests forced government action to stabilize the “official” price at 8.5 pesos early last year. However, tortilla kilo prices in places like Lazaro Cardenas, Michoacan, locked in at 13 pesos in 2007. In recent days, news dispatches from Chiapas, Guerrero, Veracruz, Baja California, Tamaulipas, and Chihuahua report actual or imminent price increases reaching or surpassing 9 pesos per kilo. Lorenzo Mejia Morales, president of a national corn millers and tortilla distributors trade association, affirmed the price for each kilo of tortillas will increase between 20 and 30 percent in the coming days.

“As you can imagine, (tortillas) are what everyone eats at home, even when you don’t have anything to buy meat or chicken,” said Tijuana resident Victor Ramirez, “but you can’t go without tortillas, and wages don’t go up...” The factory worker buys two kilos of tortillas a day to feed his family of five.

Citing the official Bank of Mexico, Mexico City’s La Jornada daily reported that the inflation rate for 42 basic commodities including food came to 34.9 percent in 2007. Last year, minimum wage increases averaged about four percent.

Debate is growing over the possible price impact on tortillas of the January 1 elimination of Mexico’s tariff on imported foreign corn, a measure mandated by the North American Free Trade Agreement.

Jose Guadalupe Saenz, general director of basic industries for the federal Economy Ministry, blamed last year’s price hike on shortages stemming from the diversion of white corn used to make tortillas to the animal feed market. Saenz said the tariff tear-down will allow Mexican livestock producers to import more yellow corn at affordable prices, thus freeing up white corn for the tortilla market. But a recent report by the International Food Policy Research Institute predicted steady increases in international corn prices through 2020, largely due to the use of maize in manufacturing ethanol.

To pay for their past due bills as well as pending ones, hundreds of thousands of Mexicans are making the now-ritualistic trek to pawn shops. After queing up outside storefronts, Mexicans will hock jewelry, watches, electronics goods, autos and even real estate in return for a temporary, interest-bearing loan. “I have my jewels pawned,” said Mexico City school teacher Maria Estrada Magana, “because I am retired and pensions are very small. It no longer supports me.”

Gustavo Mendez, spokesman for the Nacional Monte de Piedad pawnshop chain, said the number of Mexican families utilizing his company’s services this January will reach 750,000, a customer base up 120,000 from 2007. Mendez estimated that Monte de Piedad’s January business will be worth about $90 million. He added that 96 percent of customers will recover their properties.

The pawn industry boom is one facet of the bigger credit explosion in Mexico, which like in the US has helped fuel the economy. As 2007 ended, Mexican interest rates on mortgages had slipped to 12.57 percent on average, though some lenders were charging less than 10 percent. Consumer credit was at 31.08 percent, a rate which will ensure that the pinch of January is a sharp one for many this year.

Frontera NorteSur (FNS): on-line, U.S.-Mexico border news Center for Latin American and Border Studies New Mexico State University Las Cruces, New Mexico.

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