- Artificial measures will last very little time and may have negative consequences.
- The consequences could deepen the crisis in Mexico.
CDMX. May 12, 2022. Vicente Grau, Expert in economic competition of the firm Santamarina and Steta, pointed out that the measures of the government's pact against inflation, which caps prices on 24 basic basket products, do not address the causes of inflation and are therefore artificial and may accentuate an inflationary spiral in Mexico in the near future, in addition to other damages to the economy.. “The experience of several countries has shown that what stops inflation are the measures taken by the Central Bank on 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,” said.
The specialist also pointed out that the price control policy could end up ruining small and medium-sized companies, which cannot keep prices low for long when their inputs rise. “This is nothing 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 brought about: rampant inflation, black markets and massive bankruptcies. If these measures are maintained, only large companies will remain in the market. This is exactly the opposite of a real policy against inflation, which, in addition, if there is an agreement between companies to set prices or sell below cost, will end up being illegal.” stressed.
Among the various causes that are generating inflation worldwide and in Mexico, Vicente Grau highlighted the severe impact that supply chains have received. First, derived from the pandemic, which led to the suspension of activities and operating restrictions, which resulted in product shortages and lack of inputs. To this should be added the Russian invasion of Ukraine, which generated a global increase in fuel prices and a shortage of fertilizers, which strongly impacted the Mexican agroindustry. Additionally, the President's policy to reduce the lag in the minimum wage strongly pressures the flow and operating capacity of companies. “We were already experiencing negative growth. Then, with the pandemic, growth expectations were reduced. Recovery has not yet arrived and we are affected by global inflation. Now, companies will try to deal with shortages and rising prices, under price controls. Many simply will not be able to do so.
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