IL Postcard

Major Grocery Stores Cut Prices to Help Curb Inflation

Date: 01/30/2008

January 31, 2008
Mérida, Mexico

At the supermarket recently here in Mérida, I was surprised (and pleased) to see that some prices seemed lower than I remembered…. Turns out I was right. I read in the news that major supermarket chains cut prices this month on at least 300 popular items, including consumer staples like eggs, rice, meat, soap, and toilet paper.

That’s great news for us shoppers, but why would they do such a thing? Seems the government asked them to cut prices to help fight inflation. With fuel prices rising here in Mexico (as elsewhere), prices of other goods have risen, too, as retailers pass on higher shipping costs to consumers. It’s "pass the buck" time—with the buck finally stopping at the ordinary José in the street.

The retail store price cut is the government’s way of trying to even the score. Prices were cut on essential food items and goods that make up a large part of the average Mexican family’s household budget.

President Felipe Calderón, whose government requested the price cut, is taking some heat for the strategy. Critics say that he’s turned his back on his conservative, free-market principles. Other critics say that the price cut just puts the squeeze on manufacturers rather than consumers, and that it’s simply delaying price hikes.

But Mexico is keen to control inflation. Its economy has been strong and stable in recent years, thanks in part to low inflation (3.8% for 2007, one of the lowest rates in decades) and strong consumer demand. This stability has attracted foreign investment and given middle- and lower-income Mexicans a higher quality of life.

All that has been great for Mexico and for Mexicans (not to mention for us expats living here)—so the government wants to keep the economic machine running smoothly. But higher corporate taxes went into effect this year, and energy costs continue to rise. It’s going to take effort to keep prices for goods and services from creeping upward, too.

The government has a plan for that, of course…and we’ll tell you about that soon.

In the meantime, like all my Mexican neighbors, I’ll gladly take advantage of my supermarket’s great prices. With the money I save on staples, I can splurge on something I really enjoy…. Red wine, anyone?

Best regards,

Suzan Haskins
Latin America Editorial Director

P.S. We bring you the inside scoop on Mexico every month in Mexico Insider. Real estate bargains and developments, practical tips that make Mexico living and investing that much easier—it’s all there. If you’re seriously considering Mexico, you should be reading Mexico Insider .