Prices spike for Mexican favorite - tortillas

(Fortune Magazine) -- A spike in the price of tortillas, the corn-based staple of Mexico, has become the first major test of President Felipe Calderón's administration. The 100 percent rise since June, to 90 cents a kilogram, prompted street protests, forcing Calderón to intervene and ask producers and retailers to hold prices down.

But what caused the tortilla market to heat up in the first place remains a mystery. There was no shortage of finger-pointing. Critics of Mexico's oligopolies accused the large food conglomerates - corn-flour producers Maseca and Minsa, baked-goods company Bimbo and U.S. agricultural giants Archer Daniels Midland (Charts) and Cargill - of rigging the market by hoarding supplies.

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But a spokeswoman for Cargill pointed to crop failure, and CEO José Cacho of Minsa blamed rising international corn prices. The head of Mexico's central bank, Guillermo Ortíz, denounced speculators, while the leader of a tortilla-manufacturers association says the problem began with a government decision - supposedly to prevent the price of corn from collapsing - to subsidize the export of one million tons of white corn last year in anticipation of a record harvest that didn't happen.

Even Greenpeace got in on the act, saying Calderón's decision to increase tariff-free corn imports from the U.S. was a plot to sneak genetically modified corn into the country.

At first the culprit seemed to be sharply increased prices for yellow corn, fueled by rising demand for ethanol. But Mexico produces only white corn, which isn't used for biofuels.

For now, Calderón's tortilla-stabilization plan won't erase all of the price gains, adding to the hardships of the poor, who have endured 4 percent inflation over the past year. "It's all politics," says Alicia Valdéz, who runs a juice stall at the Medellín market in Mexico City.

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