| MEXICO CITY
MEXICO CITY Jan 13 Mexicans who already feel
the pinch from a gasoline price hike share economists fears it
will now drive up the cost of food and other basics, adding to
the unpopularity of the government ahead of elections this year
Riots that broke out after a 14 percent increase in regular
gas prices on Jan. 1 also reflected anger at President Enrique
Pena Nieto over corruption, crime and the failure of reforms to
improve living standards.
More increases in fuel prices are slated for February as the
government phases out subsidies, but Pena Nieto vowed he would
keep a lid on other consumer prices, and the central bank said
any spike in inflation would be temporary.
In Mexico City's Granada market this week, few gave credence
to such reassurances, a sign of the risk for the ruling
Institutional Revolutionary Party in governor elections this
year and the 2018 presidential vote.
"I don't believe the president at all," said housewife
Fabiola Hernandez as she left a market with corn tortillas from
a shop that had just raised prices by 1 Mexican peso ($0.05)
following the gasoline hike.
The head of Mexico's tortilla association said prices for a
kilo of the flat corn patties that are staple to the Mexican
diet would rise by between 1 and 3 pesos this month above prices
of 10 to 16 pesos per kilo last year, daily El Universal said.
"Really, I do not see a good outlook. People are really
mad," Hernandez said. "I don't think there is going to be any
benefit or that prices will remain the same, I think they are
going to have to go up," she said.
A bigger jump in tortilla prices sparked protests in 2007.
"Providers have to raise prices because of the gasoline,"
said trader Florentino Aguilar as he chopped raw chicken at
another market. "That affects me because I don't want to
drastically jump to a high price because people get frightened."
Inflation is also fanned higher by a record slump in the
peso on fears U.S. President-elect Donald Trump could
crimp trade with Mexico. Analysts say the peso could fall
further if Trump slaps a threatened tax on exports from Mexico.
Higher consumer prices could hurt consumer demand, which has
supported growth in Latin America's No. 2 economy amid uneven
demand for exports to the United States.
Consumer prices will rise by 1.61 percent in early January
following the gasoline hike, according to analysts at Banamex.
That would be the highest month-on-month jump in 17 years.
Inflation data for early January is due Jan. 24.
Morgan Stanley in a note on Friday revised its outlook for
inflation this year from 3.9 percent to 5.1 percent, which would
be the highest since 2008.
Morgan Stanley said the inflation could strengthen populist
candidates, although the measure would help improve government
Pena Nieto's popularity sank to 24 percent in one November
poll, the lowest since he took office in 2012. On Friday,
opposition lawmakers blasted government officials for
implementing the hike without reigning in spending.
($1 = 21.5700 Mexican pesos)
(Writing by Michael O'Boyle: Editing by Frank Jack Daniel and