MANAGEMENT FOCUS

SUSTAINABLE AND PROFITABLE GROWTH

We believe that the test of a comany's management strength and leadership is its ability to carry out its long-term strategy regardless of current conditions. By continuing with its growth strategy amid temporary adverse conditions following the tortilla industry deregulation, GRUMA management gives an example of confident and effective leadership.

On December 31, 1998, the Mexican federal government eliminated tortilla industry regulations, ending subsidies for corn tortillas, the country's staple food. CONASUPO, the government public-assistance agency, released its inventories into the market, and the government permitted corn imports to ensure supply for traditional millers. These actions resulted in an oversupply of corn, which caused prices to plummet.

GRUMA management applauded the end of government regulation and the beginning of a free market in Mexico's corn flour and tortilla industry, though it knew that the company would suffer short-term effects. For example, GIMSA would have to sell, in a depressed market, corn flour manufactured from corn the company had purchased at higher prices, before surpluses and lower prices affected the market. Yet management continued with its long-term business strategy, confident that the company could withstand the temporarily lower demand for its products and absorb the higher prices it had paid in the short term, in order to grow and prosper in the long term.

By the end of 1999, GRUMA was generating higher net sales than it had in the two previous years. Moreover, the company has continued with its dynamic capital investment program, which has enabled it to significantly expand operations and capacity, strengthen its leadership in core businesses, and upgrade business processes for greater efficiency and customer service.

Had management allowed current conditions to derail its long-term business strategy, GRUMA would not be where it is today -stronger than before and well positioned for long-term, profitable growth.