(Bloomberg) -- Mexico aims to cut the cost of 24 basic goods by curbing food exports and extending a pact with major companies in the latest attempt to tame soaring consumer prices.
The government wants to cut prices for the key goods by 8% from their average peak, through February 2023, Finance Minister Rogelio Ramirez de la O said Monday.
The government will pause exports of goods including white corn, beans and sardines, as well as scrap metal used for food cans, Ramirez said. It will also suspend requirements such as tariffs and other import barriers for firms that agreed to the deal, he said.
The companies involved in the pact include supermarkets Wal-Mart de Mexico SAB, Grupo Comercial Chedraui SA and Organizacion Soriana SAB, as well as food producers such as Gruma SAB de CV, Industrias Bachoco SA and Sigma Alimentos SA, Ramirez said.
"Unlike the US where inflation is caused by demand, in Mexico it's due to supply," Ramirez told reporters. "For that reason, the best response is to produce more food and cut regulatory and logistical costs."
The consumer protection agency will have the power to sanction any price abuses, Ramirez said. A type of corn flour used to make tortillas should drop 3% under the plan, he said.
Measures like reducing paperwork and pausing tariffs should help companies become more efficient and reduce costs, but the pact "is unlikely to lead to a marked improvement regarding food inflation," Bradesco strategist Rodolfo Ramos wrote in a note, adding that minimum wage increases and higher social spending could add pressure on inflation.
Latin America's second-largest economy saw inflation soar to a 22-year high of 8.7% in August, even as some regional peers including Brazil have begun to see price increases slow. Argentina has sometimes tried to curb inflation by restricting exports of beef and other products, with limited success.
Read more: Export Ban on Popular Argentine Beef Cuts Extended for Two Years
President Andres Manuel Lopez Obrador has argued that the agreements can't be considered price controls because companies will decide the prices themselves. He said Monday that soaring inflation may temper the size of minimum wage hikes going forward.
At the same time, the central bank raised its benchmark interest rate to a record 9.25% last week, citing a worsening inflation outlook.
(Updates with president's comment on minimum wage in ninth paragraph.)
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