MEXICO CITY - Draconian economic measures introduced by the Mexican government to tackle the country's economic crisis will further cut shrinking domestic demand for plastics products by a third, predicts Anipac President Rafael Vidales. The austerity plan announced March 9 includes a hefty hike in Mexico's added-value sales tax, a 35 percent increase in gasoline and diesel prices, and a 20 percent rise for gas and electricity, while allowing for only a 10 percent increase in the minimum wage.
The government has revised its inflation-rate forecast for 1995 to 42 percent from 19 percent, and now predicts the Mexican economy will contract this year by 2 percent, compared with previous predictions of growth.
Vidales predicts that many processors, already hit by resin prices inflated by the new peso/dollar exchange rate and by soaring interest rates, simply will cease operating for the duration of the crisis.
Resin prices already have risen this year by about 40 percent in Mexico.
Government-controlled Petroleos Mexicanos (Pemex), Mexico's chief domestic supplier of commodity resins, had been pegging its prices to a favorable dollar exchange rate of 4.5 new pesos to the dollar, but a recent report in the newspaper El Economista said, beginning March 10, Pemex boosted its rate to 6 new pesos to the dollar.
The government said it plans to impose its new austerity measures on April 1. Unlike in the past, the government is acting without the benefit of agreements with labor and the private sector.
Mexico's hard-hit plastics industry, along with other sectors, has opposed the measures in principle.
Anipac, Mexico's national plastics industry association, believes the manufacturing sector - through taxes and public service charges - is being asked to shoulder too much of the burden from the crisis.
``We feel that the whole weight of the economic adjustments has fallen on the [manufacturing] sector. We do not accept the form in which the government has imposed the measures,'' Vidales said.
The government has said it is creating an emergency fund of 65 billion new pesos (roughly US$10 billion) to enable small and medium-sized companies to extend their debt-repayment periods.
Vidales said any help for the companies is welcome, but also said industry already has waited two months for the government to introduce a detailed program. In any event, he said, the planned fund will help in the long term, but provide no immediate relief.
This month Anipac has been preparing an economic policy statement. Vidales said the industry organization, whose 300 or so members represent processors of various sizes as well as raw materials suppliers, plans to meet officials from the trade and industry ministry Secofi to discuss price increases.