Drought would raise inflation –

Inflation may register an increase of 1.5 percentage points, impacted by the effects of the drought, according to estimates by the International Monetary Fund (IMF).

Based on an empirical analysis of a sample of 179 countries, they explained that “a drought crisis gives rise to an immediate increase in general inflation above its initial level that lasts in the long term.”

Within the working document, titled “The eye in the storm: the impact of climate shocks on inflation and growth,” they highlighted that any country will experience the consequences of climate change, but exposure to vulnerabilities will depend on the size of the economies. and the ability to mitigate and adapt to climate change.

Concern regarding the inflationary impact of climate change has taken on particular relevance in Mexico to such an extent that the majority of the members of the Governing Board of the Bank of Mexico expressed it in the minutes of the second monetary announcement of the year, where they applied the first rate cut in a year.

In fact, they report in the report that this majority of members “highlighted the risks for inflation associated with water scarcity and climate impacts.”

This is not the first time they have identified it as inflationary pressure.

In the Report on regional economies that they released last March, Banxico stated that the drought that has affected agricultural products for 24 months has also impacted the distribution of certain agricultural products in the price in municipalities in the north of Michoacán.

The affected crops are avocado, strawberry, wheat, walnut, sorghum and asparagus.

Since December 2022, the director of the Center for Monetary Studies of Latin America (Cemla), Manuel Ramos Francia, explained in an interview the relevance of central banks incorporating meteorological phenomena as a risk factor for inflation.

At the end of February, the Mexican Institute of Finance Executives (IMEF) commented that the water crisis that prevails in the Valley of Mexico will have an impact on consumer prices, on the development plans of real estate projects and even on relocation. of companies.

In fact, the president of the IMEF, José Domingo Figueroa, stated that the services sector is the one that has been most affected.

Dry cleaners, laundries and inns in the Villa Lázaro Cárdenas neighborhood, in the Tlalpan mayor’s office of Mexico City, are raising the prices of their services, justified precisely by the scarcity of water.

The price for washing a king size sheepskin blanket, which still cost 160 pesos in December, today costs 300 pesos.

There are many water cuts in the neighborhood and it takes a lot to wash these covers,” justifies the clerk.

And the same is happening with the colony’s inns.

The water tank fills at night, but if the influx of customers increases, as happens during the fortnight or on Fridays, the water has to be set aside to clean the dishes and the bathroom. This is how Marina explains it, who is a waitress at the inn “La casita de Don Javi”.

“They are already buying water pipes on the block and it is an expense that was not had before. Yes, customer service prices have had to be adjusted, because if not, we will lose,” said the administrator.— El Economista