Mexican government officials said this week Mexico will exempt 300,000 metric tons of chicken from import tariffs in an effort to slow the steep price increases for food and, in turn, better manage the spike in overall inflation. Economy Minister Ildefonso Guajardo said the exemption on tariffs on imports would include whole chickens as well as chicken parts. The government is also dropping tariffs on tomatillos and limes to zero, he said.
As avian flu outbreak in Mexico continues to impact domestic chicken production, chicken prices have been forced upward. Also, bad weather has harmed tomatillos, a main ingredient in local green sauces, and a fruit disease affected lime crops. A 17.25 -percent increase in fresh food prices in April this year compared with April 2012 drove Mexico’s annual inflation rate to 4.65 percent, above the central bank’s 4 percent tolerance ceiling for the second month in a row.
Political pressure is rising on the Mexican government to try to contain the rising consumer prices. This is the first price shock that President Enrique Pena Nieto has faced since taking office last December, although Mexico last year cut tariffs on egg imports after a similar price surge, according to news reports.
Mexico’s free-trade agreement with the United States already provides for low import duties for U.S. poultry, so the measure will not benefit U.S. chicken exports, but should allow countries like Brazil to be more competitive in the Mexican marketplace. A memorandum about the Mexican government action that was prepared by NCC’s legal counsel Hogan Lovells is available here.
