Bio-fuels trigger tortilla price bubble

Flatbread prices rising in Mexico

Demand for eco-friendly bio-fuels in the US is being blamed for a massive rise in the price of corn in Mexico. The recent 400 per cent increase in the price of a tortilla has driven thousands of Mexico's poorest people onto the streets in protest.

The country has been entitled to cheap corn imports from the US for some time, under the terms of the 1994 North American Free Trade Agreement. However, as demand for corn in the US has increased, driven by the manufacture of bio-fuels, the amount of corn available to Mexico has reduced considerably.

According to BBC reports, many business groups have signed up to an agreement to cap the price of corn. It would put a maximum price on the crop of 77 US cents per kilo, but since it is not legally binding, it is being widely ignored.

Corn is the staple grain in Mexico, and makes up the main part of the diet for many people. Since the surge in the cost of tortillas, many are spending up to a third of their income on the flat breads.

The Mexican government has responded by promising to tackle hoarding and speculation. President Felipe Calderon also says he has instructed his agriculture secretary to import corn to improve the supply of the grain. ®