By Dr. Alfredo Valadez Garcia*
2022 was a year of economic challenges and complexities, with inflation being one of the most harmful for social welfare. The increase in prices had a behavior that harmed the pockets of the population in a large part of the world. In some economies, inflation in 2022 reached considerably high rates, as is the case in Argentina, becoming “chronic inflation”, due to the magnitude and time that this situation has lasted.
If the data for Latin America are analyzed, the price increases had a diverse behavior. For example, Panama registered an annual rate of 1.7%, in contrast to Cuba, which reported 34.2% at the end of 2022 (Venezuela and Argentina are omitted as they are exceptional cases). Given this scenario, where the effects were global, different measures were taken by the central banks to mitigate the vertiginous rise in prices. Some have achieved good results, others not so much.
The Mexican economy is located in this second group. On the one hand, we have that the multiple and necessary efforts of the Governing Board of the Bank of Mexico (Banxico) to increase the rate in 2022 from 5.50% to 10.50%, have not managed to contain inflation. Secondly, Nor has the Federal Government’s measure, called the “Package against Inflation and High Costs (PACIC)” been effective, since prices do not budge, and this effort in conjunction with a sector of the business union seems just an illusion or something that was limited to a letter and a photo. Given this scenario of failed strategies, we find ourselves with a start to the year that has resulted in the most expensive and complex January slope for Mexicans since 2021.
Started 2023, the tonic has been maintained. Those who believed that with the start of a new year the inflationary situation would gradually begin to subside and get closer to the central bank’s target (3% +/- one percentage point), for now they have been wrong. The reality of things is that the outlook seems to be the opposite of that expectation, since INEGI recently reported the figure corresponding to the first half of January, which places inflation at 7.94% in annual terms, which represents an increase of 0.46%. compared to the last fortnight of 2022.
We experienced a January accompanied by adversity and damage to the purchasing power of Mexicans. To what has already been described, we must add a factor that has not been widely disclosed and that has already begun to wreak havoc in the cross-border region between Mexico and the United States: the excessive and uncontrolled increase in the price of eggs. You have to think carefully about the impacts this unleashes: the dozen eggs in California, as of this writing, it fluctuates around 8 dollars (151 pesos at the current exchange rate), all this for reasons of shortages derived from bird flu, which has caused the corresponding US authorities to slaughter more than 50 million birds. And we all know that when a product is scarce, the price tends to go up. To put ourselves in the correct perspective, for example, the egg in the United States during the December dates cost up to 276% more expensive than at the beginning of the year and 210% more than the previous Christmas.
The particularity of this problem has more effects, since this product is one of the pillars of the basic basket, which places it in high demand. Mexico is the fourth largest egg producer worldwide, where one of every 27 eggs produced in the world come from national territory and our annual per capita consumption is 26 kilos, which places us in first place worldwide.
Typically in the markets, when the price of a good increases, an exchangeable good is chosen. In this case it is complex to find an integral substitute good that the consumer can have as an alternative. This important need for eggs in the consumption of families has even caused there is already a smuggling of said protein from Mexico to the United States.
Therefore, we find ourselves in a context where externalities such as bird flu have contributed to the start of the year, even with inflationary pressures, which have translated into discomfort for the population. It remains, then, to wait for the route dictated by the Governing Board of the Bank of Mexico in terms of interest rates, since this should affect the future behavior of prices in the national economy.
*Alfredo Valadez is a full-time professor at the School of Administration and Business of CETYS University Campus Tijuana
Editor’s Note: This text belongs to our Opinion section and reflects only the author’s vision, not necessarily the High Level point of view.
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