Mexican president signs accord to contain soaring tortilla prices, protect dietary staple

(AP) President Felipe Calderon signed an accord with businesses on Thursday to curb soaring tortilla prices and protect Mexico's poor from speculative sellers and a surge in the cost of corn driven by the U.S. ethanol industry. The corn tortilla is the basic staple of the Mexican diet and is especially crucial for the poor. The accord limits tortilla prices to 8.50 pesos ($0.78) per kilogram and threatens to use existing laws to achieve prison sentences of up to 10 years for company officials found hoarding corn. Some stores have been selling tortillas for as much as 10 pesos ($0.91) per kilogram.

It also raises quotas for duty-free corn imports to 750,000 metric tons (826,733 U.S. tons), most of which will come from the United States.

The measure is to be reviewed for possible modifications on April 30.

"The unjustifiable price rise of this product threatens the economy of millions of families," Calderon said. "We won't tolerate speculators or monopolists. We will apply the law with firmness and punish those who take advantage of people's need."

The rise in tortilla prices has been one of the first major challenges for the conservative who took office in December, putting him in an uncomfortable position between the interests of business and those of the poor.

Tortilla prices rose by 14 percent in 2006, more than three times the inflation rate, and they have continued to surge in the first weeks of 2007.

The rise is partly due to U.S. ethanol plants gobbling corn supplies and pushing prices as high as $3.40 a bushel, the highest in more than a decade.

But Calderon also blames price gouging by Mexican middlemen who grind corn into flour and sell it to thousands of tortilla sellers across the nation.

"The increases in the international corn market do not justify the tortilla hikes in this country in the last weeks," Calderon said.

Under the accord, corn flour will be limited to 5 pesos ($0.46) per kilogram and corn itself will not exceed 3.5 pesos ($0.32) per kilogram, which is about the current market price.

The agreement was signed by Mexico's major supermarket chains and bakers, including the world's largest tortilla maker, Monterrey, Mexico-based Gruma SA. It was also signed by associations for thousands of independent tortilla sellers.

Calderon did not specify how the prices would be enforced on vendors.

Lawmakers of the Democratic Revolution Party of leftist Andres Manuel Lopez Obrador had demanded the president impose price controls. Lopez Obrador, who narrowly loss the July election to Calderon, has seized the opportunity to blame the new government for deepening the misery of the poor.