Mexico’s government is seeking a pact with private companies to limit price increases of basic items in a bid to tame the fastest inflation in two decades.
The potential deal aims to focus on the roughly 25 items that are part of Mexico’s basic basket of goods, according to Jesus Ramirez, spokesman for President Andres Manuel Lopez Obrador.
Lopez Obrador, or AMLO, may announce the pact as early as Tuesday, Ramirez said in a phone interview. It’s not yet decided which goods will be included in the agreement, he said.
The government has met with representatives of leading companies to discuss the plan, said two people familiar with the talks, who asked not to be named because the discussions are private.
While higher inflation is hurting most governments around the world, Lopez Obrador has been particularly sensitive to price pressures on his working-class base. Last year he announced price caps on cooking gas and his government has subsidized fuel prices using windfall income from soaring crude prices.
Inflation in Latin America’s second-largest economy reached 7.72% in early April, more than double the central bank’s 3% target. Lopez Obrador said Monday that he will present a plan that will make prices of Mexican staples less exposed to the volatility of global food markets.
Some economists are skeptical about the plan’s chances of blunting inflation.
The deal would mimic pacts made in Mexico in the late 80s and early 90s, which helped curb double-digit inflation, said Gabriel Casillas, chief Latin America economist at Barclays. But now, with a more open Mexican economy, the government will have less ability to influence prices, he said.
Trying to stop inflation in this way could cause product scarcity and ultimately lower Mexicans’ welfare, said Gabriela Siller, director of economic analysis at Grupo Financiero BASE.
Source: Grupo Financerio BASE