Mexico to unveil inflation plan next week targeting lower food prices

FILE PHOTO: Mexican President Andres Manuel Lopez Obrador delivers a speech at the National Palace in Mexico City

MEXICO CITY (Reuters) – Mexico’s government next week will unveil a plan agreed with business groups to level prices nationwide for staples such as corn, beans, rice and milk in an effort to beat down inflation, President Andres Manuel Lopez Obrador said on Wednesday.

The plan will aim for prices of basic goods to cost roughly 20% less than current store prices, Agriculture Minister Victor Villalobos told reporters after the president’s remarks.

Villalobos added that the response from companies had been positive, and that he anticipated the plan would be short-term, lasting just until year’s end.

Inflation is at 7.72%, a two-decade high in Mexico, eating into wallets for millions of poor people that Lopez Obrador vowed to make a priority.

The central bank raised interest rates seven times in a row as it seeks to bring inflation closer to its 3% target.

Lopez Obrador said he will present details of the plan on May 4. It will include deals with large producers, distributors and retailers to contain prices in some two dozen types of goods, he added.

“No price controls, we’re going to guarantee fair prices in the basics,” Lopez Obrador told his regular news conference, saying he wanted to ensure even prices nationwide, whether in the capital, border cities or on the southeast coast.

Lopez Obrador’s comments set off some critiques that a heavy-handedness could backfire.

“The Mexican government is toying with the idea of price controls,” Tony Payan, a Mexico expert at Houston’s Rice University, said in a tweet. “It’s been tried before, with extremely bad impacts on the economy.”

Mexico has a history of seeking to control prices to tackle soaring inflation, such as when a debt crisis hit the economy in the 1980s and when a spike in corn tortilla prices in 2007 sparked major street protests.

Lopez Obrador also called on farmers to grow more crops for themselves. “If we’re self-sufficient in food, we’re going to win,” he said.

(Reporting by Daina Beth Solomon and Raul Cortes; Editing by Dave Graham, Paul Simao and Mark Heinrich)