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Mexico Hikes National Tax By 50 Percent

Sun., April 2, 1995

In Mexico, the national sales tax is known as IVA, although for years wags have said the initials really stand for “imposible vivir aca,” or “impossible to live here.”

The old joke became even truer Saturday when the tax - figured into the price of nearly everything - went up 50 percent, part of the government’s drastic plan to deal with the country’s economic crisis.

“Every week, every day, they increase prices,” said housewife Lidia Flores, carefully comparing the new prices with the old in a store in the northern city of Monterrey. “This isn’t just, and on top of it all there are no jobs. What’s going to become of us?”

The government’s austerity package was announced March 9 in response to the crash of the peso, which lost nearly half its value against the dollar in a devaluation that began Dec. 20.

In addition to raising the valueadded tax - applied to most everything except basic foods and medicine - to 15 percent from 10 percent, the government raised gasoline prices 35 percent and electricity rates 20 percent.

The government is forecasting 42 percent inflation this year and a shrinkage of the economy by at least 2 percent. The national minimum wage is scheduled to go up today by 12 percent - for those working.

Labor Secretary Santiago Onate has estimated 500,000 Mexicans will have lost their jobs by July.

Hundreds of Monterrey women have been marching on the state government headquarters in recent days banging empty pots with spoons and shouting they have no food for their families.

So far this year, prices for basic foods like beans and rice are up 25 percent, while imported goods have risen 50 percent or more.

As of Saturday the old price tags were pulled off and the new ones went into effect.


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