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Inflation a Worry? Be Glad You're Not in Mexico

November 11, 1987|Associated Press

MEXICO CITY — Consumer prices in Mexico skyrocketed 109.2% in the first 10 months of 1987, surpassing the record 105.7% increase for all of last year, according to the nation's central bank.

Continuing inflation problems could spell trouble for Mexico's efforts to handle its massive debt, which at $105 billion is second only to Brazil's $113-billion debt among developing nations.

Government planners early this year had predicted that the accumulated rise in consumer prices would be held between 75% and 85% for the year. But those expectations were dashed last month, when Banco de Mexico reported that consumer prices had risen a total of 93.1% through September.

Private analysts now expect inflation totaling 140% to 145% for 1987.

Much of the inflation in the past two years has resulted from reduction or removal of government subsidies on such basic goods as corn, bread and cooking oil as well as gasoline and other fuels. Those moves, while substantially raising consumer costs, were intended to help cut a huge government budget deficit.

Nevertheless, in a report quoted Monday by the government news agency Notimex, the Department of Energy, Mining and State Supported Industry said prices for goods provided by the public sector still lagged well behind inflation.

Fuel prices rose about 100% from December, 1986, through last July but still trail real costs, Notimex noted, citing figures from the government oil monopoly Pemex.

The energy department had planned for an 85% increase in prices this year to help it meet revenue needs. Now, it faces the choice of matching the inflation rate through more price hikes or of carrying the deficit over to its 1988 budget, Notimex said.

Mexico's annual consumer price increases were below 30% throughout the 1970s and through the end of 1981. In 1982, inflation shot up to 98.8% as the country fell into its continuing economic crisis arising from its heavy foreign debt.

Consumer inflation dropped back to 80.8% in 1983, to 59.2% in 1984 and to 63.7% in 1985 before reaching last year's record.

Through October, 1986, the year-to-date inflation was 78.6%.

In October this year, consumer prices rose by 8.3%, while producer prices--the costs to manufacturers for their materials--rose 8.8%, according to a Banco de Mexico report released Monday.

In a breakdown of major categories, the bank reported price increases in clothing and shoes of 10.6%; miscellaneous services, 10.6%; furniture and domestic appliances, 10%; health and personal care, 9.4%; food, beverages and tobacco, 8.9%; education and leisure, 7%; transportation, 5.7%, and housing, 5.1%.

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