Mexico registers the highest rise in inflation in the month of January since 2017

A man sells potatoes in November at the Central de Abastos in Mexico City.Nayeli Cruz

At a difficult time for the country, in full wave of COVID-19 infections and economic collapse, Mexico has registered the largest rise in inflation in a month of January since 2017. Prices have increased by 0.86% with compared to December, according to data published this Tuesday by the National Institute of Statistics and Geography (Inegi).

This rise is mainly due to energy, whose cost has increased by 5.23% at the beginning of the year.

The annual variation in inflation stands at 3.54%, slightly above that projected by analysts, but within the range of variability estimated by Banco de México.

The pandemic has hit Mexico's economy hard.

GDP in 2020 plunged 8.5%, the biggest drop since the Great Depression, but for Mexicans commodity prices have continued to rise during the contingency.

Thus, according to the National Consumer Price Index, the cost of potatoes has increased this month by 18.84%, 12.25% for bananas and 2.75% for cigarettes.

In addition, the price of gasoline (6%) and gas (9%) has increased.

On the other hand, the crisis in which the tourism sector is plunged has caused air transport to be 21.54% cheaper and package tourism services 11.64%.

Also the drop in the cost of foods such as onions (18.8% less) or chili peppers (8.9% less) have helped to contain the general rate of inflation.

The variation in prices has not been homogeneous throughout the country, although all entities have registered an increase in costs.

State of Mexico, Sinaloa and Hidalgo are the states that have suffered the most from the increase compared to Chiapas or Quintana Roo.

Marco Oviedo, head of Economic Research for Latin America at the English investment bank Barclays, pointed out to EL PAÍS in November that inflation is expected to continue growing until mid-2021. During the pandemic, Mexicans spent on food what they previously spent on entertainment or restaurants, Oviedo says, which led to an increase in inflation.

This year the new factor is the vaccine. Once a large part of the population has been immunized, it is expected that the gastronomic industry will start again at full capacity and will have to adjust its prices to the new costs of food.

In addition, another variable that can raise inflation comes into play: the 15% increase in the minimum wage approved in mid-December.

Mexico has one of the lowest base salaries in Latin America and the government of Andrés Manuel López Obrador approved raising it to 141.7 pesos a day throughout the country and 213.39 pesos on the northern border.

This double-digit increase is well above the rise in inflation.

It is the third increase in two years: in 2019, the minimum wage increased by 16%, and in 2020, another 20%, the biggest jump in 40 years.

The responsibility of containing inflation corresponds to Banco de México.

Banorte's Director of Economic Analysis, Juan Carlos Alderete, believes that the central bank has done "a very good job maintaining price stability and without inducing major shocks that further affect the real income of families."

The expert defines inflation as "a tax that affects all people, but especially those with lower incomes" so the consequences of its increases should not be minimized.