Santamarina Steta

We Need No Controls, Just Change Of Course To Truly Stop Inflation: Santamarina And Steta

  • Artificial measures will last a very short time and may have negative consequences.
  • The consequences may deepen the crisis in Mexico.

Mexico City. May 12, 2022. Vicente Grau, an expert in economic competition from the firm Santamarina y Steta, pointed out that the measures of the government pact against inflation, which caps prices for 24 essential basket products, do not address the causes of inflation and, therefore, they are artificial and can accentuate an inflationary spiral in Mexico in a short time, in addition to other damage to the economy. “The experience of several countries has shown that what stops inflation are the measures taken by the Central Bank in interest rates and free competition because there everyone sees the best way to lower prices to continue selling and not be left out of the market," he said.

The specialist also pointed out that the price control policy can conclude in bursting small and medium-sized companies, which cannot keep prices low for long when their inputs rise. “It is not something new. We are repeating the measures taken by previous governments, such as that of Miguel de la Madrid. What is being forgotten are the serious consequences that these types of measures attracted: runaway inflation, black markets, and massive bankruptcies. If these measures are maintained, what will remain in the market are only big companies. Exactly the opposite of a real policy against inflation, which also if there is an agreement between companies to fix prices or sell below cost, will end up being forbidden” he emphasized.

Among the various causes that are generating global and Mexican inflation, Vicente Grau highlighted the severe impact that supply chains have received. Foremost, derived from the pandemic, which led to activities suspension and operating restrictions, which resulted in a shortage of products and a lack of supplies. Added to this would be the Russian invasion of Ukraine, which generated a global increase in fuel prices and a shortage of fertilizers, which impacted Mexican agribusiness. Additionally, the President's policy to reduce the lag in the minimum wage puts significant pressure on the flow and operating capacity of companies. “We were already coming from negative growth. Then, with the pandemic, the growth expectation was reduced. The recovery has not yet arrived, and world inflation affects us. Now, companies will try to deal with scarcity and the increase in price under price control. Many simply will not be able to. 

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