Mexico’s Anti-Inflation and Deficit Program (PACIC) aims to stabilize the prices of staple products and considers, among other things, measures related to product imports.
In its first stage, the program includes the suspension for six months of import tariffs on 21 basic foodstuffs, as well as the creation of a corn reserve, and price guarantees for small corn, bean, rice and milk producers.
Specifically, the Mexican government temporarily exempted 66 items from import tariffs as of May 17.
Then, on October 3, the Mexican President’s Office announced that it will suspend the review of all regulations that are considered to impede or make it more expensive to import and import food and its mobility within the country, including tariffs, non-tariff barriers to foreign trade and other requirements for its entry and national circulation.
The government will also temporarily cancel the export of white corn, beans, sardines and aluminum and steel scrap used in food packaging.
As part of the first announcement, it was agreed with private sector operators to maintain consumer prices of basic products, including rice, unchanged for six months, with the possibility of extension.
In addition to interventions aimed at containing domestic transportation costs and expediting the processing of goods at customs points, among others, PACIC provides for the temporary suspension of import duties on 26 staples and commodities used in food processing, including rice.
Interventions to support domestic food production include the continuation of state assistance under the Basic Food Guarantee Prices, Sembrando Vida and Production for Well-Being programs, as well as the expansion of the coverage of subsidized fertilizer distribution under the Fertilizers for Well-Being Program from five to nine states, support for organic fertilizer production, and the suspension of compensatory quotas on ammonium sulfate imports for one year.
Strategies to increase production include: stabilizing energy prices; increasing grain production; expanding fertilizer delivery; and eliminating duties on certain fertilizer imports.
While strategies to improve the distribution of goods include: improving road safety; suspending toll increases on public highways during 2022; exempting the transportation of goods and basic inputs from certain import and export requirements until October 1, 2022; suspending increases in rail tariffs and fees for the transportation of food, fertilizer, and hydrocarbons for six months; and reducing and expediting customs clearance costs and time.
The program includes the suspension for six months of import tariffs on 21 basic foodstuffs, as well as the creation of a corn reserve, price guarantees for small corn, bean, rice and milk producers, and additional support for food supply programs.
The PACIC also contemplates meetings between the Government and private companies for at least six months in order to stabilize the prices of 24 basic foodstuffs.
According to the International Monetary Fund (IMF), Mexico faces a difficult environment as global inflation has soared.
Although recovery from the pandemic has been relatively gradual, domestic inflation has accelerated to levels not seen in two decades.
Near-term growth prospects for the United States have weakened, as real incomes are dented by inflation and both fiscal and monetary policy are tightening.
Overall, global financial conditions have tightened as central banks have responded to elevated inflation, increasing the risks of capital flow reversals in emerging market economies.
On October 3, the federal government and various production and distribution companies signed a complementary agreement to the PACIC announced last May in order to combat price increases in food products and supplies.
During President López Obrador’s morning conference, the Secretary of Finance, Rogelio Ramírez de la O, pointed out that an initial effort consists of the coordinated action of the government, producers and self-service stores to reduce by 8% the maximum average price of the basic basket of 24 products, from 1,129 to 1,039 pesos on average.
He pointed out that the government will place additional emphasis on its program to strengthen domestic production of those grains in which we have a deficit.
Another measure consists of suspending the review of all regulations that are considered to impede or make more expensive the importation and internment of food and its mobility within the country, which includes tariffs, non-tariff barriers to foreign trade and other requirements for its entry and national circulation.
With this license, companies undertake to carry out the necessary verification to ensure that the food and supplies imported and distributed are of high quality and free of health and other contingencies.
Ramírez de la O stressed that, unlike in the United States, where inflation is demand-driven, in Mexico it is supply-driven. For this reason, he said, the best response is to produce more food and reduce regulatory and logistical costs on the part of the government and producers, in order to strengthen this food supply.
The October 3 meeting was attended by Antonio Suárez Gutiérrez (Tuny); Leovi Carranza Beltrán (Grupo Pinsa-Dolores); Juan Antonio González Moreno (Grupo Gruma-Maseca); Altagracia Gómez Sierra (Grupo Minsa); Daniel Salazar Ferrer (Bachoco); Isidro Ávila Lupercio (San Juan); Jesús Vizcarra Calderón (Sukarne); Arnulfo Ortiz (Grupo Gusi); José Zaga Mizrahi (Opormex); Eugenio Caballero Sada (Sigma Alimentos); Alfonso Celis (Socorro); and Alfonso Rosales Wybo (Verde Valle).
On the distributors’ side, Guilherme Loureiro and Javier Treviño from Walmart; Ricardo Martín Bringas from Soriana, and Antonio Chedraui Obeso from the Chedraui chain were present.