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July 1996 Volume 2 Number 3

Mexican Agriculture and Trade Issues


Mexico may have to import a record 11 to 12 million tons of basic
grains in 1996 because of a drought and low yields due to fertilizer
shortages. Mexico imported six million tons of corn, wheat and
sorghum in 1995. Mexico launched an eight billion peso ($1 billion)
program on April 24, 1996 to increase farm output on 600,000 farms.

Mexico in 1995/96 produced 14 million tons of corn in the
spring/summer season, and is expected to produce three million tons
in the fall 1996 harvest.

Mexico has a segmented farm structure, and a great deal of rural
poverty. Two-thirds of Mexico's poor people live in rural areas, as
do three-fourths of the very poor.

Mexico in mid-1995 had a population of 94 million, including 67
million urban residents and 27 million rural residents. Although the
rural share of Mexico's population is about the same as the rural
share of the US population (25 percent versus 29 percent), most of
Mexico's rural residents live on farms, while fewer than 10 percent
of the 66 million rural residents of the United States live on farms.

In Mexico, the agricultural sector generated less than seven
percent of GDP in 1993, down from almost 10 percent in the mid-1980s.
Rural incomes are less than one-third of Mexico's $3,800 per capita
1993 GDP. US agriculture, by contrast, generates a slightly larger
share of GDP than farmers' share of the population, so US farmers
have higher than average incomes.

Low farm incomes encourage rural-urban migration in Mexico. About
27 of Mexico's 29 million labor force in 1990 - 7.8 million workers -
were farmers or farm workers, a 25 percent increase from almost six
million in 1980. About 50 percent of the Mexican work force is
employed in services, and 22 percent in industry.

Most Mexican farmers fit into one of four groups: commercial,
family, subsistence, or landless. There are perhaps 400,000
commercial farmers that hire at least one laborer for one month or
more --they represent about 10 percent of Mexico's four million
farms, and cultivate about half of Mexico's farm land.

The second type of Mexican farm are family farms that use family
labor to produce food for their families, and sell the excess to the
government and in local markets. There are about one million such
small farms, and they control about 40 percent of Mexico's farmland.
Many of these small farmers cultivate ejido or communal land,
on which they grow corn and beans for their families.

The largest group in rural Mexico are subsistence farmers. These
1.5 million farmers, concentrated in the north central and southern
states, produce the corn and beans on which their families depend.
Since some of these subsistence farmers produce and consume the corn
that they grow, they can be hurt by Mexico's high corn price
guarantees, since they must pay high prices for corn to feed their
livestock.

The fourth group in rural Mexico are landless workers. There are
about 700,000 such workers, although estimates of their number range
as high as three million. These households survive by working in
local and distant labor markets.

Mexico in 1995 sent $69 billion worth of goods to Canada and the
US--86 percent of Mexico's exports went to its NAFTA partners in
1995. However, 300 Mexican companies accounted for 70 percent of
Mexico's exports, and almost half of Mexico's exports come from
maquiladoras.

In 1996, a procession of US fruit and vegetable growers have
charged that "unfair competition" from Mexico and Central America is
hurting them. First came Florida tomato growers, then the California
avocado industry and, in May 1996, California sugar pea growers
complained that Guatemala, which produces an estimated 70 percent of
the world's snow peas and snap peas, have an unfair advantage in
lower labor costs and a climate that allows year-round sugar pea
production.

Despite the complaints of US growers, US production of some of the
commodities has increased. Florida tomato production, for example,
was 1.2 billion pounds from 46,300 acres in 1980-81, and 1.6 billion
pounds from 50,600 acres in 1994-95.

On July 2, 1996, the International Trade Commission ruled in a 4
to 1 decision that US tomato and pepper farmers were NOT being
economically injured by Mexican imports, therefore did not merit new
trade protection. The ruling was a surprise to fruit and vegetable
industry leaders, who expected a favorable ruling. The president of
the Florida Fruit and Vegetable Association said that the ruling will
force some growers out of business.

Another case filed by Florida tomato growers on April 1 alleges
that Mexican tomato growers are dumping cheap tomatoes in the US. A
preliminary ruling by the Commerce Department is expected on
September 9. If it judges that Mexican tomatoes are being sold at
unfair prices, the agency has the power to set border taxes on
tomatoes and bell peppers.

In 1996, prices for 25-pound boxes of tomatoes fell from the usual
$10 to $12 to $3, below the $8 cost of production in Florida, and the
$6 cost of production in Mexico. The ITC vote sends the dispute to
the Commerce Department, which has until September 9, 1996 to
determine whether Mexico "dumped" tomatoes in the US.



Jerry Jackson, "Tomato Imports Ruled OK," Orlando Sentinel, July
3, 1996. Chris Aspin, "Mexican grain bill to double," Reuters, May 6,
1996. Love, John and Gary Lucier. 1996. Florida-Mexico Competition in
the US Market for Fresh Vegetables. Vegetables and Specialties.

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