Latinnews Archive
Latin American Economy & Business - 18 June 1976
Steroid row flares up again in Mexico
A swingeing increase of 250% in the price of barbasco powder, the raw material for steroid hormone production, has brought to a head the simmering row between the state-owned concern Productos Quimicos Vegetales Mexicanos (Proquivemex) and the six foreign subsidiaries which manufacture the steroids. Barbasco powder, the raw material for diosgenin, is bught from Proquivemex by the foreign pharmaceutical companies, which then convert the diosgenin into corticosteroids and contraceptives. The price has gone up every year for the past three, but in 1974 it was a 56% rise, and last year only 43%. This year's increase from 20 to 70 pesos per kilogramme (12.50 pesos last straw for the companies, already unhappy about previous price rises -- and, indeed, their whole position in Mexico.
Proquivemex needs the extra income, calculated at about US$6-7 million, for its ambitious 1976 development programme, which includes the construction of three new plants, to produce diosgenin, vitamin C and papaverine. It also alleges the need to carry out costly programmes to protect and develop the plant whose root provides the raw material, and whose indiscriminate harvesting has, according to the Mexicans, helped to cause a dramatic fall in yields.
However, the argument has now broadened to a debate about foreign participation in the industry, and how the profits from it should be shared out. The director of Proquivemex, Alejandro Villar Borja, accused the foreign companies of using transfer pricing to hide their real profits, and said the new price increase for barbasco powder would raise the raw material element in the final selling price of steroid hormone products from only 2% to 7%. He cited the example of one of the pharmaceutical companies' products, which was exported at US$880 a kilo, sold on world markets at US$2,400, and more than once imported back into Mexico at US$80,000.
The companies hotly challenged these figures, which they said were unrealistic and underestimated the risks involved. But what really enraged them was Villar Borja's appeal to the 'patriotism' of Mexican technicians working in foreign owned laboratories. This was taken, probably rightly, as an open appeal to their technical staff to move over to Proquivemex and help run its new plants. So they retaliated by ceasing to buy barbasco powder, and using up stocks.
That led to even more heated exchanges, with Villar Borja demanding the nationalisation of the companies in the presence of President Luis Echeverria and his successor, Jose Lopez Portillo. This is improbable, though if the companies (owned mainly by United States and West German interests) reduce their investment under the impact of declining confidence, the government might seek joint venture partners in Japan, Italy or elsewhere. In the meantime, tempers have been cooled to some extent by the appointment of a committee to study the problem under the ministry of natural resources, with three of the six foreign companies represented on it.
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