Mexico's Tortilla Riots
February 2, 2007
by Ben Berkowitz
Ben Berkowitz is the business news editor at AOL. This is a new column that will run weekly, highlighting business stories with significant implications that were overlooked at first glance.
Photo: Mexicans are angry at the rise in price of their staple food
This week's story that no one read and everyone should have is about tortilla riots in Mexico. Yes, tortilla riots. In Mexico. Some 75,000 people protesting the rising price of tortillas.
Not to be overly blunt, but who cares, right? It's just a single grocery item in some other country. But the reason the people are up in arms is more important than anyone realizes.
Poor Mexicans rely on tortillas for their diet. And a lot of other poor people in a lot of other places rely on other foodstuffs made from corn.
The problem is ethanol. Ethanol, that fuel additive that reduces pollution and helps us wean our dependency on foreign oil and makes farmers rich and politicians look silly when they stump in Iowa. As the U.S. adds more ethanol to its gasoline, the price of corn is surging dramatically, leading to extreme market volatility.
President Bush wants to use a variety of sources to make ethanol as the government pushes increased use of the additive, but for now most U.S. producers seem to be eschewing sugar and other products in favor of corn. If that remains the case, corn prices will only go higher and the poor of Mexico and elsewhere will be further pinched.
Photo: A handful of corn is shown before it is processed at the Tall Corn Ethanol plant in Coon Rapids, Iowa, last year. Strong demand for corn from ethanol plants is driving up the cost of livestock and will raise prices for beef, pork and chicken, the Agriculture Department said Friday. (Charlie Neibergall / AP)
Of course, publicly-traded corn companies like Archer-Daniels-Midland, Bunge Ltd. and Corn Products International Inc. can't and don't mind that much - their profits are soaring. Big multinationals like Wal-Mart Stores must be happy too -- higher prices on big-selling staples are always a happy thing.
So the question remains: why should Americans care? Well, corn prices are up here, too. As are citrus prices. And lettuce and avocados and strawberries and all the other stuff that got wiped out in the California freeze last month. Operating a Mexican restaurant can't be pretty right now. Neither can living in a poor home in East Los Angeles (when was the last time English-language TV news led a broadcast with soaring milk prices, as the Spanish-language stations in L.A. did a couple of years ago?)
People need to eat. They need to be able to afford food. The underclass of America is used to being hungry already, but if people can't afford crucial staples then there's a real problem. You think the border issue is bad now? Tack a few more pesos on a kilo of tortillas and you're going to see a lot more people trying to find a better life in America - and who can (or would) blame them?
If you read science fiction books in the 1980s and 1990s, any of them with any sort of dystopian view of the early 21st Century usually included some sort of food shortage/food riots element. It seemed reasonable to assume 20 years ago that there could be problems feeding America. Hopefully, they weren't so right.