Shop til you drop due diligence

This article describes the recent history of corn flour for tortillas in Mexico. I looked it up after Stormy’s recent post on Wages and prices.

By 1996, Maseca had drawn the attention of Archer Daniels Midland, the world’s largest corn broker. Itself no stranger to government largesse, ADM spotted a good business model from across the border, and bought a 22 percent stake in GRUMA, Maseca’s parent company. Today, ADM’s formidable board chair G. Allen Andreas sits on GRUMA’s board of directors, as does the company’s CFO, Douglas J. Schmalz.

GRUMA now controls 70 percent of Mexico’s corn-flour market. As NAFTA opened the Mexican market to cheap, highly subsidized U.S. corn and dismantled Mexico’s support for its farmers, the price of corn in Mexico plunged, providing a windfall for GRUMA and despair for Mexican corn growers. Maseca now imports 30 percent of its corn for tortilla production from the United States, according to an Oxfam report [PDF].

And as the price of corn fell, the Mexican government — citing free-market dogma — withdrew its ceiling on the tortilla price. According to Oxfam, between 1994 and 2001, the corn price in Mexico fell by 70 percent; meanwhile, between 1994 and 1999, the price consumers paid for their staple, tortillas, rose threefold — further burnishing GRUMA’s bottom line. And when rising tortilla prices pushed many consumers to switch to white bread, GRUMA cashed in as well. Another of its subsidiaries — a joint venture with Archer Daniels Midland called Molinera de Mexico — is the nation’s largest wheat-flour producer, and GRUMA owns a fast-growing bread business as well.

GRUMA has also moved aggressively north into the U.S. tortilla market, and south into Central America. It is by far the world’s largest corn-flour and tortilla producer.

Thanks to his patrons in the Mexican political elite, GRUMA’s chief executive, Roberto Gonz├ílez Barrera, now stands atop a global tortilla empire with annual sales of $2.4 billion. (Amazingly, he also controls a major Mexican bank, Banorte, which Carlos Salinas delivered to him amid perhaps the most disastrous bank-privatization scheme in history.)

Good links are in the original. Was this good or bad for the teachers mentioned in the Wages and Price demonstration?
END