March 5 (Bloomberg) — An increase in the cost of tortillas, a staple of the Mexican diet since the Maya ruled 1,000 years ago, has triggered a slump in the peso.
Tortilla prices jumped 5.9 percent in January, the most in eight years, after costs climbed for corn, the main ingredient. That increase fanned inflation and a bond market rout that curbed demand for the currency. The peso has fallen 2.4 percent in the past month, making it the world's third-worst performer against the dollar among the 70 currencies tracked by Bloomberg.
"There's a big risk that tortilla price increases will lead to higher wage demands and fuel inflation," said Eduardo Perez, head bond trader at Mexico City-based brokerage Valores Mexicanos SA, the country's largest independent brokerage. "Foreign investors don't like this environment and are selling. This is directly linked to peso weakness."
Now, in addition to the Tequila Effect, Latin America has given us the Tortilla Put. This just goes to show that you cannot forget our friends south of the border when you are compiling a catalogue of potential Exogenous Events lurking in the sagebrush to derail the global economy.
No word yet as to whether Henry Paulson plans to flood the Mexican market with surplus pierogi from the Polish wards of Chicago.
© 2007 The Epicurean Dealmaker. All rights reserved.