Food manufacturers promised Mexico's government on Wednesday they would freeze prices on more than 150 food products to help families cope with the rising cost of food, The Associated Press reported Thursday.

Mexico President Felipe Calderon said prices for goods including beans, canned tuna, fruit juices, coffee, ketchup and canned tomatoes will remain fixed until December 31, 2008, The AP reported. Calderon blamed rising food prices on surging global energy prices, food demand in China, and the use of corn for ethanol production.

Good intention, wrong method

Economist Glen Langan said he agreed with the need for food assistance for Mexico's poor, but disagreed with the mechanism.

"A more effective program would be a larger cash payment or food subsidy to citizens," Langan said. "The pricing mechanism should be kept in place, because it has many benefits. Cash payments or subsidies to poor residents are much more targeted and don't provide a benefit to those who don't need it. [Mexico President] Calderon did announce a monthly subsidy, 120 pesos [$11.60], but it isn't large enough."

Further, Langan said Mexico's economic growth, which has benefited millions of citizens, has also unfortunately pushed prices higher, with poor residents affected disproportionately. For example, Langan said Mexico's current annual inflation rate, about 5%, is in practice much higher in poorer neighborhoods, which historically have above-national-average food prices, particularly in urban areas, such as Mexico City.

Prices for corn, soybeans, wheat, rice and other crops have risen substantially during the past two years, driven higher by increased demand for food in emerging markets in Asia, and by higher energy costs globally, which increase farmers' production costs. Rice is a staple for about 50% of the world and a primary food in Mexico.

Economic Analysis: The commodities-challenged initial decade of the twenty-first century is forcing policy changes in both hemispheres. Mexico, concerned about the major impact rising food prices have on its 30-35 million poor residents, has implemented a price freeze on selected items. Meanwhile, China, concerned that fuel subsidies and high global energy prices will lead to untenable costs, increased fuel prices Thursday by about 18%. As Langan noted, in Mexico's case a coupon system would have been preferable, due to its focused impact: help for those who financially need it.