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Mexico: Ethanol Boom Inspires Protest and Hope

corn protest

“For the Corn!” by Cadeva – A protester against rising corn prices in Mexico City's Chapultepec Park.

As old as sin, I mean, alcohol

Today's hemispheric rundown of all things Latin American is a collection of posts all wrapped in the common husk of corn. That's right, the elongated staple of summer barbecues, movie matinees (in its popped form, of course), and taco tortillas is husking basking in some rare media limelight thanks to every politician's new favorite buzz word, ethanol. Though its newfound popularity is firmly based in 21st century petrol politics, ethanol itself has been the intoxicating ingredient of diverse cocktails since Persian alchemists first came up with distillation (for which I am still indebted) around 800 AD. According to Wikipedia, “Dried residues on 9000-year-old pottery found in northern mainland China imply the use of alcoholic beverages even among Neolithic peoples.” And who said they didn't get down in the stone age?

Even though ethanol, also called ethyl alcohol, was known for millennia throughout Europe, the Middle East, and Asia, its production was mostly dependent on sugar, grains, and rice. Unbeknownst to the so-called “old world”, across the ocean throughout what would soon be called the Americas, corn was king. Called maize in much of the world, the spanish word maíz derives from the original Arawak term for the plant. Its seeds were brought back to Europe, and beyond, by the Spanish Conquistadores and, in testament to its popularity, eventually came to be called “corn,” the original English word for any cereal grain.

Corn and Globalization

If it is true that food is the frontrunner in the accelerating race of globalization, then corn is the culinary British East India Company. Called “mealies” throughout much of Africa, dried corn kernels are a key ingredient in Umngqusho, a favorite dish of the Xhosa people and former South African President Nelson Mandela. Genetically modified corn has also been at forefront of a debate over whether genetically altered foodstuffs present a solution to malnutrition in the developing world or a risk to the environment and food supply. The globalization of corn cultivation is apparent when looking at the top ten maize producers in 2005 (including China, Indonesia, Argentina, France, India, and South Africa).

Good News for Latin America?

The Council on Hemispheric Affairs (COHA) has put together a useful outline of how corn-based ethanol may provide Latin America with some much-needed relief from “Globalization’s Merciless Quest to Replace Fossil Fuel.” Just over a decade ago, the implementation of the North American Free Trade Agreement (NAFTA) eliminated tariffs on U.S. shipments of corn to Mexico despite the heavy subsidization of American corn farmers by the US government. Corn farmers throughout Latin America weren't able to compete and, over the next decade, were squeezed out of the market. But here comes the silver lining. As COHA reports, “On the other hand, corn farmers who had grievously suffered from free trade agreements are now likely to benefit from Washington’s new ethanol obsession, since U.S. corn shipments will be heading for Midwest ethanol plants, rather than displacing foreign producers in their own local markets.”

Indeed, as Pablo Bachelet prophetically declares in the Miami Herald, “The Bush administration has a new theme to court Latin American nations: ethanol.” But while US diplomats hope to use Brazilian corn husks to compete with Hugo Chavez's policy-moving petro-dollars, the recent increase in the price of corn is causing (or, at least, adding to) political instability in Mexico.

Bad News for Latin America?

Marie Kennedy and Chris Tilly, two contributors to the Dollars & Sense weblog are currently based in the Central Mexican state of Tlaxcala. After reminding readers of the various social protests that swept throughout Mexico in the second half of 2006, they claim that:

In January 2007, all of these struggles have been heating up once again. Key Atenco leaders are getting out of jail. Activists are marching in Oaxaca city once again, and a major Triqui indigenous community in that state just declared itself autonomous from the state, federal, and “official” local governments. AMLO and allies across the country are gearing up what they call the Democratic National Convention, with the aim of building a new politics and writing a new Constitution. The Zapatistas unfurled an Encounter with the Peoples of the World, hosting 2000 delegates in their base communities. And across Mexico, the hot topic of the moment is … the price of tortillas.

According to Boz, “Mexico is in part responsible for this problem thanks to the duopoly that controls tortilla manufacturing. But whatever the reason, the increase in tortilla prices is creating both a political and a health problem in Mexico. It's not enough, as the New York Times suggests, to simply ask people to change their diets in Mexico. Corn tortillas are a staple of nutrition among the poor and the recent increases threaten to affect the diets of literally millions of Mexicans and affect the government of our neighbor.”

The almost-pro-market National Action Party of Mexico

The “Tortilla Protests” got so bad, in fact, that, as Mexico City-based, radio talk show host Ana Maria Salazar writes, “a so called “Tortilla Price Stabilization Agreement” was signed by the government and companies linked to the tortilla industry in order to fix a 8.50 peso price per kilo.” This was followed by widespread speculation that the corn supply would run out by the year's end to which Alberto Cárdenas Jiménez, the Secretary of Agriculture, responded “that the price hike of a kilo of tortillas was not due to a shortage of maize, rather it was due to price speculation. Likewise, Cardenas Jimenez said that there will be sufficient maize throughout the year with the Sinaloa harvest due in May [and] Ricardo Monreal, the PRD senator, presented the Attorney General´s office with a formal complaint against maize speculators who brought on the tortilla price hike.”

As could be expected, the “Tortilla Price Stabilization Agreement” wasn't agreed upon by all and didn't last for long. As “Enigma”, the prolific political blogger based in Mexico City, explains:

Para empezar, díganme sino fue extraño ver que el Presidente Calderón, quisiera controlar el precio del maíz con ayuda de sus colaboradores, digo chistoso ya que el PAN y el centro derecha de la clase política del país, cree en la libertad de mercado mas que los caballeros en la cruz templaría, pero ok, se entiende, fue una decisión mas política que económica y que la gente pedía a gritos; digo, que el maíz, alimento de la nación y del mexicano por excelencia histórica, suba 20% de su precio cundo, el salario mínimo sube no mas de un 4% al año, es una acción que viene a desajustar a todos los presupuestos quieran o no.

No solo eso, la meta inflacionaria parece que en este año no se alcanzara (menor a 4%) ya que este encarecimiento del maíz, viene a afectar directamente todos los balances en macro y micro economía que había desarrollado y proyectado el Banco de México.

To start, tell me it wasn't strange to see President Calderón wanting to control the price of corn with the help of his collaborators. I mean, it's funny given how much the National Action Party and the political center-right of this country believe in the free market. But OK, it's understood that this was more of a political decision than an economic one. The people were screaming about it. I mean, corn, the historical nourishment of the nation and the Mexican, has risen in price 20% when the minimum wage hasn't gone up more than 4%. That is going to cause some anger whether you like it or not.

Not only that, but it looks like – with the rise in corn prices – the goal of under 4% inflation won't be reached this year, which will directly affect all of the macro and microeconomic forecasts projected by the Bank of Mexico.

En fin, se salio a la defensa del salario y s fijo el precio en 8,50 el kilo para tortilla hecha de maíz de nixtamal.Una semana y media luego de la firma de este pacto, vemos que no ha sido respetado por todos, ya que no todos los grupos de productores de tortilla lo firmaron. Además, en una entrevista realizada por medios de comunicación (Televisa) se mostraba a un vendedor de expendio de tortilla (tortillería, pues) que vendía su kilo de producto en 9.50, un peso arriba del precio pactado por una sencilla, pero verdadera razón: “no hay regla que me prohíba vender a ese precio”, respondió.

Finally, in defense of the worker's salary, the price of corn tortillas was fixed at 8.50 pesos (80 cents US) per kilo. A week and a half after this pact was signed, we find that it hasn't been respected by everyone since not all of the tortilla producers signed it. Furthermore, in an interview on Televisa, a tortilla salesman was shown selling his product at 9.50, a peso above the agreed-upon price, for once simple but true reason: “there is no rule that prohibits me from selling at that price,” he responded.

Earned Income Versus Cost of Living

Of course, the root of the protests have little to do with corn itself, and everything to do with the widening gap between earned income and cost of living.

Mexico's National Chamber of Industrialized Corn Bulletin has been collecting numerous articles about the effects of the rise in corn costs, including this opinion piece by Aquiles Córdova of Milenio.

Es obvio, por tanto, que para los más necesitados sólo hay dos salidas verdaderamente justicieras: o se deja el precio de la tortilla al nivel de antes o se le incrementa su salario, su ingreso, en la misma proporción en que se encarecen los productos de primera necesidad.

And so it's obvious that for the neediest there are only really two just solutions: the tortilla is returned to its previous price or the worker's salary is elevated proportionally with the rise in costs of basic foodstuffs.

Or as University of Massachusetts professors Marie Kennedy and Chris Tilly conclude from Tlaxcala:

Whatever happens next with tortilla prices, the issues of the widening gap between most Mexicans’ salaries and the cost of living, and the other widening gap between the rich and the rest, are not going away. These are some of the same issues that fueled the Zapatista rebellion, the street vendors’ protest in Atenco, the teachers’ strike in Oaxaca, and the wave of anger at the elite that has made AMLO’s protests much more than the sour grapes of a losing candidate. Calderón’s strategy—continued free market reforms sprinkled with crowd-pleasing tactical concessions like the tortilla pact … seems more likely to accelerate these trends than halt them. In the coming years, expect Mexican politics to heat up as hot as a tortilleria’s comal.

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