The government of Andrés Manuel López Obrador is going for a second attempt to contain the high levels of inflation and presented a new agreement, with the private initiative, complementary to the Package Against Inflation and Scarcity (Pacic) that it announced in May.
“Unlike the United States, where inflation is demand, in Mexico it is supply. For this reason, the best response is to produce more food and reduce regulatory and logistical costs by the government and producers to strengthen this food supply,” said Rogelio Ramírez de la O, Secretary of the Treasury and Public Credit, when presenting the Agreement. Opening Against Inflation and Scarcity.
Through various measures, the government intends to reduce the maximum price of a basket of 24 products by 8%, which would go from 1,129 to 1,039 pesos on average.
In the company of the businessmen who signed the agreement, Ramírez de la O explained the points with which they intend to deal with inflation.
The first of the points is a “universal single license” for the signatory companies, with which all regulations that prevent or make the importation and mobility of food within the country more expensive will be suspended. Among these procedures are those of the National Health, Safety and Quality Service (Senasica), and the Federal Commission for the Protection Against Sanitary Risks, (Cofepris), as well as the general import tax.
The government will also give priority to national production, especially in those grains where Mexico has a deficit.
Regarding corn flour, the companies promised not to raise their prices in order to reach an average cost 3% lower than the current maximum average.
Ramírez de la O assured that the government will continue with the tax incentives for gasoline, as well as with its policy of price containment in terms of electricity. In addition to freezing highway rates until February 28, 2023.
quality problems
As with the Pacic, analysts do not see that this new agreement will have a significant impact on inflation, in addition to highlighting that it can cause quality problems in food, leaves out MSMEs and SMEs, and continues to hit finances public.
“I see it more as a political strategy. In the background, the slow management of the Bank of Mexico is being covered or tried to be hidden, and now it seems that the government is in charge of maintaining inflation, when the Constitution says that it is the central bank,” said Luis Pérez Lezama, director of Economic Research at Saver ThinkLab.
The researcher added that inflation in Mexico is not only generated by issues of supply and demand, but also by issues of insecurity, since in several locations organized crime “charges a floor”, threatens producers, and takes money from them, which is also transferred to the final price of the product.
“It will be practically the same as with the Pacic. The objective that the government has with this agreement is to establish an average maximum price ceiling for the basic basket (…) but that is not completely inflation, inflation is hitting other items, such as services, which are not considered ” added James Salazar, deputy director of Economic Analysis at CIBanco.
transfer program
Given the little impact that is expected, Mexico ¿How are we going? has been promoting for months past a program of monetary transfers to short-term households, which they consider would have a greater impact for Mexican families, especially those with fewer resources.
Adriana García, coordinator of data in the organization, said that the most serious thing about inflation is that it is food that has shown increases in its prices above the inflation average and, being a basic need, affects it even more.
In this sense, he said that a three-month program is proposed, where just over 2,000 pesos per month are allocated, enough to cover the basic basket and which would cost 66,000 million pesos to the public treasury, much less than what will be lost due to the stimuli for gasoline that will reach almost 400,000 million pesos this year.
“It does not mean that the issue of gasoline stimuli has not benefited, but these are very focused. The reality is that it is not necessarily the lowest deciles that benefit from this support”, said James Salazar.
The decalogue of the agreement
The agreement with the signatory companies consists of:
1.- A Single Universal License is granted that exempts them from procedures or permits, as well as from the import tax in the activities of import and distribution of food and supplies for food packaging. Senasica and Cofepris procedures are included.
2.- The authority will suspend the review of any regulation that prevents or makes the importation and importation of food and its mobility within the country more expensive. This includes tariffs, non-tariff barriers to foreign trade and other requirements for entry and national circulation.
3.- With this License, the companies undertake to carry out the necessary verification to ensure that the food and supplies that are imported and distributed are of quality and free of contingencies, both sanitary and of any other nature.
4.- The government will maintain its fuel price containment policy and will freeze the tariffs for highways under concession to Fonadin and Capufe until February 28, 2023.
5.- The authority will deal with cases of food products that require particular solutions to overcome situations of unfair competition.
6.- The government will emphasize its program to strengthen the national production of those grains in which we are deficient, and will cancel (during the validity of the agreement), the export of white corn, beans, sardines and aluminum and steel scrap. used in food packaging.
7.- Currently, the maximum average price of the agreed Basic Food Basket is 1,129 pesos for the 24 Pacic products. It is expected that with this action, said amount will be reduced by 8%, to an average of 1,039 pesos, until February 28, 2023.
8.- The price of corn flour used for tortillas will not increase. In the case of extra premium basic flour, the aim is to reach an average price 3% lower than the current maximum average price.
9.- Profeco’s task of verification is accepted and that said dependency has sufficient authority and power to supervise and sanction in those cases where abuses are detected.
10.- The government will permanently review the performance of this agreement.
ana.martinez@eleconomista.mx
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