Nov. 9 (Bloomberg) -- Kimberly-Clark de Mexico SAB, the country’s largest seller of bathroom tissue and diapers, plans to raise prices next year because of increasing costs for bulk paper, said Chief Executive Officer Pablo Gonzalez.

“We’re thinking that we’re probably going to raise prices again around April or May to make up for these increases in pulp paper prices,” Gonzalez, 41, said in a Nov. 5 interview at the Bloomberg Economic Forum. He declined to say how big the increase could be.

Guillermo Ortiz, governor of the Banco de Mexico, warned on Nov. 5 that Latin America’s second-biggest economy could face “some inflationary pressure” in coming months. Those concerns may prompt policy makers to raise the benchmark lending rate from 4.5 percent as soon as the first quarter of next year, said Janneth Quiroz, an economist with IXE Grupo Financiero SA.

“Once the economy begins to recover, then the central bank will be increasing its rates to be more competitive,” Quiroz said in a telephone interview from Mexico City.

Inflation will quicken to 4.5 percent next year from 4.2 percent in 2009, according to the average estimate from 29 economists surveyed by the central bank on Oct. 19 to Oct. 28.

Mexico’s annual inflation rate dropped to 4.9 percent in September from a seven-year high of 6.5 percent in December as the steepest recession since the 1930s eroded consumer demand.

Consumer prices climbed 0.3 percent in October after increasing 0.5 percent in September, the central bank said today.

Mexico’s peso strengthened 1 percent to 13.2712 per U.S. dollar at 4:19 p.m. New York time, from 13.4098 on Nov. 6.

13% Rise

Pulp and recycled paper may rise 13 percent in dollar terms next year, according to an Oct. 23 report by Joaquin Ley, a Mexico City-based analyst with Banco Santander SA who covers Kimberly-Clark de Mexico.

Gonzalez said he will monitor bulk paper prices to determine how much the company will boost prices on products, such as Huggies diapers and Kleenex tissues.

The company’s shares rose 1.44 pesos, or 2.6 percent, to 56.36 pesos in Mexico City trading at 4 p.m. New York time. Shares have risen 24 percent this year.

Kimberly-Clark de Mexico, based in Mexico City, boosted prices an average of 5 percent earlier this year and then lowered them as raw-material costs didn’t rise as much as expected, Gonzalez said. The company’s prices and sales volume both increased 3 percent in the third quarter.

Mexico’s economy probably will rebound in 2010, boosting consumer demand and enabling Kimberly-Clark de Mexico to raise prices, Gonzalez said. Gross domestic product shrank 9.2 percent in the first half as the global recession that began in the U.S., the buyer of 80 percent of Mexican exports, prompted companies to pare output.

Markets

The Bolsa index gained 4.3 percent last week to 29,868.62. Telmex Internacional SAB rose the most, adding 14 percent. Grupo Carso SAB had the biggest decline, losing 4.3 percent.

The peso had the biggest weekly drop since September, weakening 1.6 percent to 13.4098 per U.S. dollar, from 13.1977 on Oct. 30.

Yields on Mexico’s benchmark peso bonds due 2024 were little changed at 8.26 percent, according to Banco Santander SA. The bond’s price rose to 114.96 centavos from 114.90 centavos per peso.

The following is a list of events in Mexico this week:

Event                              Date         Forecast
Trade balance (Sept.)              Nov. 10
Industrial production (Sept.)      Nov. 11      -6.2%
Gross fixed instruments (Aug.)     Nov. 11      -12%

To contact the reporters on this story: Thomas Black in Monterrey at tblack@bloomberg.net

Last Updated: November 9, 2009 16:35 EST