Mexico seriously affected by soaring prices

The month of November has surpassed inflation levels of the last 20 years, reaching over 7%, increasing the difficulties of Mexican citizens
Central de Abastos, uno de los complejos de mercados mayoristas más grandes del mundo en la Ciudad de México, México

REUTERS/CARLOS JASSO  -   Central de Abastos, one of the world's largest wholesale market complexes in Mexico City, Mexico.

During 2022, Mexico will face rising prices for food and services in hospitality establishments, according to Germán González, president of the National Chamber of the Restaurant and Seasoned Food Industry (Canirac).

"We are all in this effort: to see how to hold out a little. But in January there will be an increase in the minimum wage and if you already have a lot of pressure on raw materials, it will be very difficult for prices not to go up," González said during the joint conference with Santander Mexico.

The Latin American nation's inflation rate rose to 7.05% year-on-year in the first half of November, the highest since 2001, according to data from the National Institute of Statistics and Geography (INEGI).

The high price increases have been reflected in the pockets of distributors and consumers. Raw materials such as meat and vegetables have increased in price, forcing restaurants to employ different strategies to maintain service, creating different and cheaper menus or increasing the selling price of their main dishes. 

REUTERS/CARLOS JASSO - Vendors at the Central de Abastos in Mexico City, Mexico.

"In a restaurant you buy raw material, you go to buy chicken and you can no longer buy it at the same price; you start to see the price you have and they start to reduce the margins and if you are not attentive at the key moment what will happen is that there will be liquidity problems," said the president of the Canirac.

The rise in prices has implied an average increase of 13.3% in fruit and vegetables, however, during the month of November, green tomatoes, dried chillies and tomatoes have increased in price by 42%, 19.7% and 13.9%, respectively. These increases come on top of the drop in sales due to the COVID-19 pandemic, adding to the crisis in the sector.

Nancy Román runs a restaurant in Mexico, and has seen her clientele fall from 240 to 70 diners a day. "The only thing left to do is to put up with it, because I can't raise the price of food, there's no way I'm going to tell the customer that I'm going to charge two pesos more," she said.

German González expressed his concern for the sector because, although its recovery has begun, citizens no longer have the same levels of income to spend, which has an impact on business. 

mexico economia
AFP/ALFREDO ESTRELLA - A man wears a face mask at the wholesale market "Central de Abasto" in Mexico City on October 27, 2020.

Mexico has seen in-work poverty levels cease to fall between July and September due to insufficient income to afford the basic food basket, according to Guillermo Cejudo of the National Council for the Evaluation of Social Development Policy (CONEVAL).

"The latest inflation figure is the most worrying at this juncture, because it eats into the gains from the increases in income as a result of the economic recovery, especially for people living in poverty, where small variations in the prices of products limit their access to the basic components of the food basket," warned Guillermo Cejudo. 

Uncertain economic outlook 

The Mexican nation presents a major problem in the country's reactivation, as a consequence of the rise in food and electricity prices.

The energy sector has presented the highest annual variation, increasing by 15.2% with respect to 2020, with a 24% fortnightly increase during the month of November. Given this situation, the National Institute of Statistics and Geography (INEGI) has pointed out the need to consider public subsidies to reduce electricity tariffs, especially during the summer in several cities in the country.   

PHOTO/PRESIDENCIA DE MEXICO - Mexico's President Andres Manuel Lopez Obrador holds a press conference in Oaxaca, Mexico on 29 November 2021.

Inflation has become a global problem, fuelled by the post-pandemic economic recovery. "It is a global phenomenon, there is a post-pandemic crisis that is manifesting itself in all countries," warned Mexican President Andrés Manuel López Obrador.

Banco Base analyst Gabriela Siller acknowledged that the current price escalation continues to exceed expectations and threatens to affect Mexico's economic recovery. Some analysts estimate that by the end of 2021 the inflation rate will have reached 7.2%, making it the worst end of the year for the Mexican economy since 2010.

The evolution of prices is a major problem in the big banks and governments of the world, however, this situation is experienced daily in local shops, where constant readjustments try to save the economy of families. 

Latin America Coordinator: José Antonio Sierra.