A loyal MR reader asks:
[Please discuss] food prices in Mexico (especially in light of the recent corn/tortilla issue)
Tortilla prices have long been subsidized and controlled, though the market was liberalized in 1999. Due largely to ethanol demand, corn prices in Mexico rose 14 percent last year. There are now new price controls on tortillas, circa 2007. Mexico also continues to restrict the importation of American corn.
Tortillas provide about half of the protein and calories of the Mexican poor.
Those looking for "optimal worlds" might argue that tortilla subsidies are an efficient means of transferring income. Mexican governments aren’t honest or organized enough to administer a traditional welfare state with much effectiveness. For instance Mexican bureaucrats may be too corrupt to stop the non-poor from claiming direct welfare payments. But low tortilla prices select for poor consumers automatically, as tortillas are an inferior good.
Note that tortilla price controls require, in the long run, subsidies for tortilla producers. The low price transfers real income and the subsidy ensures that supply continues and that quality does not fall apart.
American corn ethanol policy seems like a bad idea for sure. Let’s open up our markets to superior Brazilian sugar-based ethanol. That would lower American and also Mexican corn prices.
And Mexico? My head knows what is right but my heart is torn. Can Mexico can afford the protectionism which keeps local producers going and gives it the world’s best and most diverse corn, the world’s best tortillas, and supports a major part of its national identity, most of all for its most oppressed and politically sensitive groups? I am emotionally torn and will not proceed with the question any further.
I might add that the flour tortillas of northern Mexico are, slowly but surely, gaining ground on the corn tortillas of the Mexican interior. Flour tortillas are in any case cheaper and easier to transport and store.
#37 in a series of 50.
Oh how I miss authentic Mexican food. You can’t find a decent Mexican restaurant here in Boston.
Can Mexico can afford the protectionism which keeps local producers going and gives it the world’s best and most diverse corn, the world’s best tortillas, and supports a major part of its national identity, most of all for its most oppressed and politically sensitive groups? I am emotionally torn and will not proceed with the question any further.
Tyler, I’m happy to see someone with such strong libertarian tendencies recognize the potential validity of protectionist arguments, which of course have little to do with economics and everything to do with the other issues mentioned above. I (sometimes) refuse to let my head get in the way of my heart on important matters such as these.
Up with wheat! Wheat is the superior cereal. Down with corn!
Yes, there are corn import quotas in Mexico–which will disappear in 2008. Historically, Mexican white corn is more expensive than imported corn. With the rise in international corn prices, this differential has been reduced somewhat, so that even expensive Mexican corn could be exported. The result? A shortage of white corn for tortilla production and an increase in tortilla prices.
Tyler seems to miss the point when he does not distinguish between corn/tortilla producers and tortilla consumers. The latter group is much more numerous and would benefit from quota removal, and the poorest consumers would benefit more from cheaper imported corn to make cheaper tortillas.
And yes, some local corn producers will take a hit when quotas dissapear in 2008. But with corn prices so high, they might survive or switch to yellow corn for ethanol…
“Tyler, I’m happy to see someone with such strong libertarian tendencies recognize the potential validity of protectionist arguments, which of course have little to do with economics and everything to do with the other issues mentioned above. I (sometimes) refuse to let my head get in the way of my heart on important matters such as these.”
I don’t mean to sound dismissive, or short-tempered, but my head tells me that the well being of poor Mexican’s who receive so much of their nutrution from tortillas is more important than the tastes of rich American tourists.
Passing up an opportunity to denounce a corrupt government’s protectionism and subsidies making it more difficult for the poor to buy food? What kind of economist are you, Tyler? You’d better hope the rest of your profession doesn’t exile you to the land of the mushy-headed folk.
The true test of a man’s libertarianism is when it hits him in the stomach. This test Tyler has failed.
The real problem on the price of tortillas is not
protectionism or the lack thereof, but the subsidies
in the US for corn-based ethanol production, something
now very popular among US presidential candidates hoping
to do well in Iowa caucases. I am not against ethanol,
but let’s favor non-food bio-sources, please.
Flour tortillas are in any case cheaper and easier to transport and store.
We consume a lot of tortillas. Even the Wal-mart here probably carries at least a dozen varieties of each (probably more) – wheat, whole wheat, white corn, yellow corn, blue corn, stone-ground, thin (for tacos), thick (for enchiladas), 6″, 10″, 12″, etc. I have wheat tortillas that not infrequently go bad (mold), but rarely have the same problem with corn tortillas. What is the support for the statement above?
Kevin,
What restaurant are you talking about… Los Dos Amigos… something else? I haven’t been to Norman in 5+ years, but I want to know where to go when I head back this fall for a football game.
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flour tortillas cannot substitute white corn tortillas as a staple because they have a lesser nutritional value, and when tortillas is most of what you eat, malnutrition ensues.
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