Despite the recent peso slide and concerns about inflation and low growth in 2015, Mexico’s Central Bank board members have decided not to increase interest rates, which currently stand at a record low of around three percent.
Analysts expect year-end government estimated inflation to settle at four percent, with growth at 2.2 percent, considerably lower than the official estimates at the beginning of 2014.
The biggest threat to the economy next year, and specifically to the pocketbooks of millions of Mexicans, is the threat of inflation provoked by the weak peso, a possibility the Central Bank acknowledged this week.
But their bullish estimates that inflation will slow to around three percent by the middle of 2015 are disputed by others who claim to have closer handle on the way the economy works at a grass roots level.
According to Alfredo Neme Martínez, president of the Mexican Association for Fair Commerce (Asociación Mexicana para un Comercio Justo), the knock-on effect of the weak peso could provoke a sharp spike in the cost of the “canasta basica” (basic basket) of 80 food products and services that are essential for families to live on – rising by as much as 10.4 percent.With the minimum wage in 2015 set to rise by 4.2 percent, Mexicans’ purchasing power could be seriously eroded, Neme Martínez warns.
He said this week that a family needs 171 pesos daily to cover the needs of the canasta bascia. The minimum wage next year will increase to 70.10 pesos per day, or slightly less depending on the zone of the country.
According to Inegi, the federal statistics agency, around 6.5 million Mexicans, or 13 percent of the workforce, earn the minimum. The Confederation of Mexican Workers (CTM) estimates that 70 percent of the workforce earn between one and three minimum salaries.
In contrast to the government’s official four percent 2014 inflation figure, the cost of the canasta bascia rose by 8.7 percent over the past 12 month, according to Neme Martínez. He said some of the biggest increases were felt in the food sector: tomatoes going up by almost 100 percent, white bread 36.3 percent, sugar 50 percent, beef 28 percent, dairy products 17.8 percent, pet food 20 percent and cooking oil 15 percent.
Thanks to monthly gasoline hikes, the cost of filling one’s tank increased by 10.7 percent this year, and the price of electricity increased by 11 percent, although mostly for high-end users.
The unpopular monthly gasoline hikes, however, will be scrapped in 2015, in favor of a single increase at the beginning of the year, averaging around 40 centavos.