FOLLOW on SOCIAL MEDIA
Of Tortillas and Ethanol
There is a crisis in Mexico: Tortilla prices are rising. The government, of course, will get involved. It will also try to blame the United States. Notice the demonization of the U.S. ethanol industry, which is being blamed in part for the rising cost of corn, thus driving up the price of your basic corn tortilla. What a complicated world we live in.
President Felipe Calderón signed an accord with businesses on Thursday to curb soaring tortilla prices and protect Mexico's poor from speculative sellers and a surge in the cost of corn driven by the U.S. ethanol industry. (Full story from Miami Herald)
Here's a suggestion for Mexico: Clean up your act, amigos, and stop repressing people in Oaxaca and elsewhere, privatize PEMEX and maybe - just maybe - you can grow enough corn in your huge, highly arable, mineral rich nation to make tortillas at a reasonable price. Maybe.
PEMEX, the Mexican oil company, sits on the world's fifth largest known reserves, but because it is owned and operated by an inept, corrupt government it is on the verge of bankruptcy. If land reform became a reality, there should be no reason why Mexico would be so dependent on corn from Kansas. Or money sent home from the more than 10 percent of its exiled population.
Related: Commentary from Oaxaca
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Tom - You are Dead-On Right - Land reform would solve a vast amount of Mexico's problems – economic and of course social (and some of ours north of the river too). If I recall, over 90% of the land is owned by the government, and held on long term (99 year) leases buy a smallish minority of Mexican citizens. So, of course nobody with any brains is going to put real capital improvements into anything rented (use it and abuse it is the natural state of things). Especially not when that rented land is located in a part of the world where "Nationalization" is the no.1 favorite hobby of most government leaders at one time or another. And only the cronies of those government officials can count on enough continuity to have an incentive to make any serious long term investments (sort of like Rogers Park come to think of it). If the land was privately held, lots of things would happen, probably more good than bad; increased food production would certainly be one of them.
ReplyDeleteWatch for our “head in the sand” Old Marxist neighbors all around our lovely old Rogers Park to start screaming about how the Capitalist Man is keeping the poor Mexican worker from getting his daily tortilla. You will be able to tell who they are – they will be the same folks who want development of alternative energy to happen NOW!!!!! (by mandate rather than by market forces of course). Well, they are getting what they asked for - the beginning of an actual global Ethanol market. But what they don’t understand (and probably never will understand) is that in all things, there’s ALWAYS a price to pay – somewhere, someone, somehow – and sometimes the folks who pay the price don’t really necessarily deserve to pay it, or at least they don’t cause the conditions that demand it (here I could raise the specter of your George Bush Gang and those of us clear headed enough have realized they’d be a national train wreck even back before it was so painfully clearly obvious – we all of us must now pay the very expensive price for their mischief .... But I like you Tom, so I won’t).
And yes, corn is re-pricing – look for $5.50 in the short-ish run – historically very high prices. Sugar will follow. And note that the corn rally (ethanol driven, world wide to be sure) is being sustained in the face of softening oil prices (a sign of a real systemic re-pricing of corn underway). And sorry Tom, soft oil (well, three years ago $50 oil was untenable – now we are happy to see it) is only temporary - due to an easy (for now) winter heating season – and please, we don’t need to argue over GWarming … just wait a while, stay the course, and the argument will be resolved for us. Peak oil may or may not happen soon (although it will – sorry again Tom, but it will). But, 150 million upper-middle income Chinese and 100 million upper-middle income Indians, all new-comers to the global consumer economy in the last 10 years or so, are a hard reality now – today - and we don’t need competing studies, spin-meisters and dueling computer models to argue over their existence. And they all expect to live like upper-middle class Americans, and they have the money to pay for it. And that is where all that oil is going, and will keep going. And I don’t think they are about to go back to burning cow shit in little stoves any time soon either. No more than Americans would.
So let’s blame those sneaky Chinese for the tortilla shortage... :)