Mexican government probes tortilla price hike

MEXICO CITY — Mexico's antitrust agency announced Thursday that it was looking into potential price manipulation behind recent rising tortilla prices south of the border.

Tortilla prices have soared more than 60% in some markets in recent weeks, sparking outrage from consumers and calls by some legislators to regulate the price of the main source of nutrition for Mexico's poor.

In a statement, the Federal Competition Commission cited "structural problems" in the industry related to the concentration of market power in the hands of a few large players. And it promised to "attack the roots of the possible competition problems" in the industry.

"Recent reforms … have given us better tools to investigate and sanction monopolistic practices in the corn-tortilla chain that are harming consumers," said Eduardo Perez Motta, president of the commission.

He said companies that were found to be engaging in monopolistic practices could be hit with fines of as much as $6.4 million.

The move was a direct slap at tortilla giant Gruma, which holds an estimated 70% share of the market for tortillas and cornmeal in Mexico. Executives could not be reached for comment Thursday. The company has not participated in the raging public debate as to why prices have exploded in recent weeks and how to get them under control.

Food industry executives have blamed the price increase on a variety of factors, including rising fuel and electricity costs. But one of the most popular explanations is tight supplies of corn stemming from the ethanol boom in the United States, which is consuming millions of bushels of the grain.

Experts say this explanation rings hollow because U.S. ethanol plants aren't consuming the type of corn used to make tortillas. Ethanol is made from yellow corn, which has limited uses for human consumption. Tortillas and cornmeal are made from white corn, which is not used in the production of bio-fuels. Mexico imports very little white corn from the U.S. And Mexico's farmers produced a good-sized crop of white corn in 2006, more than 21 million metric tons, according to government statistics.

Critics say intermediaries are deliberately withholding corn and cornmeal from the market. Respected Mexican central banker Guillermo Ortiz cited "speculation" for driving prices higher.

Mexico ended 2006 with a higher-than-expected inflation rate of 4.05%, driven largely by rising food costs.

Although tortilla prices have been rising all over Mexico, some cities have been hit worse than others, reinforcing suspicions of greed and price gouging.

LATimes.Com

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