EconomyHas containing inflation worked with the PACIC?

Has containing inflation worked with the PACIC?

(Expansion) – We are living in exceptional times, the world is on alert before a possible world war provoked by Russia and another important issue worldwide is inflation.

Although price controls are proven not to be the solution to curb inflation in Mexico, it is not new for the government and the private sector to reach an agreement to maintain the prices of products in the basic basket for a certain time.

This PACIC cannot be compared with the pacts of the 80’s to curb inflation because at that time they were agreements between all sectors of the economy and the current one does not have the scope of those of that time regardless of whether or not its utility.

It should be a priority right now to contain inflation, without price controls; For this reason, the Package Against Inflation and Scarcity (PACIC) is only 24 products of the basic basket. The fight against inflation must be done using market mechanisms, and more so in an economy like Mexico’s, which unfortunately is full of monopolies and oligopolies where prices do not reflect that they are competitive markets. In other words, a way must be found to expand the supply of products and services in order to have competitive prices.

Although the PACIC intends to maintain the price of the basic basket for a short period -thanks to the help of 20 producer companies-, it is not enough and greater support is needed and more companies participate without this meaning promoting a controlled of marketing.

It is important not to enter into a price escalation, for that reason the increase in wages and the minimum wage should not be disproportionate, so as not to generate an inflationary escalation.

There is a risk in the PACIC: that it could be the pretext to try to put control prices or that the measure extends beyond what is necessary, sooner or later it can generate shortages, lower the quality of the products and higher inflation.

The data tells us that the first PACIC did not have the expected success because most of the 24 products contemplated increased. They can be contained for a while, but sooner or later, if inflation does not subside, these products are going to increase. The 24 products in this package have increased by 15.7%, which reflects that it has not been as successful as expected.

What must be recognized is that the measure that has helped to contain inflation is the fiscal stimulus to the price of gasoline, without this support we would have an inflation above 10%; However, everything in life costs and the impact on public finances is important, around 300,000 million pesos in the first eight months of this year alone.

Therefore, the PACIC is not a price control, but it has had the expected results and hopefully this will not be the pretext for later starting price controls because we already know that it would be a serious mistake for the country’s delicate economy.

Editor’s note: Jorge Sánchez Tello is Director of Applied Research at the Fundación de Estudios Financieros-FUNDEF AC Independent “Think Tank” based at ITAM, on the Financial System. Follow him on and on The opinions of this article are the sole responsibility of the author.

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