AMLO and Latin America’s anti-inflation pact arrives late and is ineffective

Gabriel Pérez del Peral, an academic at the School of Government and Economics at the Universidad Panamericana (UP), commented on the change in expectations of lower inflation for the following months of the year recently published by the central bank.

President López Obrador’s proposal contemplates the creation of a working group that will later develop an action plan to facilitate trade in basic consumer products between countries, as well as chemical and organic fertilizers.

“There is very little trade between Mexico and Latin America. When you try to make a pact to curb prices, or reduce tariffs, since there is no trade with these countries, the impact is nil,” said Iván Franco, founder of the Triplethree International consultancy.

He added that many of the products that Mexico trades with Latin America are not part of the basic basket, “many of them are luxury products,” he said.

The countries that the Mexican government contemplates to participate in this plan are: Argentina, Belize, Bolivia, Brazil, Chile, Colombia, Cuba, Honduras, Venezuela and Saint Vincent and the Grenadines.

Ingredients of the anti-inflation plan

According to Franco, in order for general inflation to drop in the countries that the President of Mexico invited, he has to focus on the products of the basic basket of these countries, with measures such as zero tariffs, facilitating logistics and trade costs, via remove some tax burdens.

Gabriel Pérez, a UP professor, pointed out that the participating countries must also make a commitment to fiscal discipline, as well as eliminate opacity in economic matters, increase competition, education and channel investments in infrastructure and not in social programs.

Once the above points are met, agreements on customs and trade facilitation may be made, he added.

Although the Mexican government agreed with self-service chains -with the pacts against inflation and high prices last year- “you cannot fool the inflation meter, which Inegi calculates,” stressed Iván Franco.

To reduce inflation, it is also necessary to improve income levels and increase employment, since inflation has a greater impact on the lower-income population.