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October 2021, Volume 27, Number 4

Mexico: USMCA at 1

The US-Mexico-Canada Agreement (USMCA) celebrated its first anniversary July 1, 2021. The USMCA aimed to slow the exit of high-wage jobs from the US to Mexico by requiring a higher share of autos and auto parts to be produced in North America at wages of at least $16 an hour.

Agriculture. Agricultural trade has increased since NAFTA went into effect January 1, 1994. The US ships mostly grain and meat to Mexico, and imports more valuable fresh fruits and vegetables, giving Mexico an agricultural trade surplus with the US since 2014.

Mexico’s agricultural trade surplus with the US has been widening for several reasons. First is US consumer demand for fresh fruits and vegetables year round. Mexico’s major competitive advantage is climate, so that Mexico can produce and export commodities between December and May when there is little US production.

Second, Mexico has late comer advantages in producing many fruits and vegetables under protected culture structures, often plastic-covered hoops rather than glass greenhouses, that protect plants from pests and disease, raise yields, and facilitate organic production. Farm work becomes more akin to factory work as employees enter and exit though designated portals and both plants and people are monitored.

Third, Mexican wages in export agriculture are two or three times Mexico’s minimum wage, but only an eighth of US farm worker wages of $12 to $15 an hour. Labor costs are often 30 to 50 percent of production costs for fresh fruits and vegetables and, even if inputs from plants and seeds to packaging must be imported, Mexican produce can be delivered by truck at competitive prices to US buyers.

Mexico’s export agriculture appears poised to continue to expand. There is more local and foreign investment in protected culture farming for export, an improving infrastructure that reflects ag-specific and general investment, as with improvements in transportation infrastructure to serve manufacturers who export, and an experienced farm workforce.

The threats to Mexican agricultural exports are inside and outside the country. Within Mexico, some government leaders see export agriculture as a cash cow to be taxed directly or indirectly, such as via high minimum wages and enforcement of payroll tax obligations. Some NGOs decry the export of scarce water in the form of fresh produce, arguing that export agriculture resembles mining by drawing migrants to areas and then leaving them stranded after the water supply is depleted and the environment is despoiled.

There are also threats to Mexican export agriculture from the US. Protected culture is enabling Mexican farmers to export more months each year, reducing the high prices that US growers expect for early- and late-season production. US farmers, with the exception of those in Florida, have generally been free traders, but more may become protectionist as the prices of more US fruits and vegetables come under pressure from imports from Mexico.

The US International Trade Commission (USITC) in a July 2021 report concluded that Mexican raspberry producers were not subsidized by the Mexican government, echoing an earlier finding that there were no government subsidies for Mexican blueberry growers. The US imported 106,500 tons of fresh raspberries from Mexico in 2020, and the USITC cited higher yields, lower labor costs and easy access to US consumers as reasons for expanding raspberry imports.

Mexico exported 2.1 million tons of avocados worth $3.1 billion in 2020. Nearly half of Mexico’s avocado exports go to the US, which has allowed imports of fresh Mexican avocados since 1997. Avocados displaced tomatoes as Mexico’s most valuable farm export in 2016.

Most of Mexico’s “green gold” is from Michoacán, a Mexican state that is also home to several drug cartels, some of which “tax” avocado farmers or compete with them by planting avocado trees on communal lands whose ownership is in dispute, hastening deforestation. The FAO expects global avocado production to triple from 10 million to 30 million tons a year between 2010 and 2030. About 40 percent of the world’s avocados that are exported go to the US and 30 percent go to the EU.

Politics. President López Obrador in September 2021 proposed a $354 billion budget for 2022 that bolsters the roles of Pemex and electricity provider CFE within the energy sector and does not raise taxes. AMLO’s proposed budget funds the Maya Train and the Dos Bocas refinery, projects that some see as white elephants. The budget is balanced by adjusting assumptions about economic growth (assumed to be four percent in 2022), oil prices and the exchange rate.

Mexico granted women the right to vote in 1953, but machismo made politics a male affair until recently. In 2021, half of the members of Mexico’s Chamber of Deputies were women, compared with a quarter of women in the US House of Representatives. A quarter of the 32 Mexican states have female governors, a result of 2019 constitutional reforms that require gender parity.

The 140,000 resident mining city of Fresnillo in Zacatecas was deemed by over 95 percent of residents to be unsafe, making it the most insecure city in the country. There were 122 killings in June 2021, giving Fresnillo the highest murder rate in Mexico. Zacatecas borders on eight other states, and Fresnillo is a transportation hub that is contested between the Sinaloa Cartel and the Jalisco New Generation Cartel.

AMLO promised a “hugs not bullets” response to drug cartel violence and has relied increasingly on the military to support his economic and security policies. The US and Mexico in October 2021 negotiated changes to the 2008 Mérida Initiative that aimed to combat drug trafficking by going after gang leaders.

Pope Francis in a letter to Mexican bishops called on the Catholic Church to “recognize the painful errors committed in the past” during Spanish colonization. Conservative Spanish clergy countered that colonization brought “freedom and civilization” to the New World, supporting politicians from the Popular and Vox parties who said they would not apologize for Spain’s colonial history.

Canada. Canada aims to admit 401,000 immigrants in 2021, up from a Covid-reduced 184,215 in 2020 and 341,175 in 2019. International migration accounts for 85 percent of Canada’s population growth, and Canada plans to raise the target by 10,000 a year to 421,000 in 2023.

One mechanism to increase immigration is reducing requirements for foreigners already in Canada on temporary work and student visas to apply for immigrant visas. In May 2021, some 90,000 foreigners in Canada, including 40,000 international students who graduated from Canadian schools, 20,000 health-care workers, and 30,000 essential workers, were allowed to apply for immigrant visas.

The Temporary Foreign Worker (TFW) Program allows Canadian employers who cannot recruit local workers to be certified to recruit and employ guest workers. There were 100,000 TFWs in 2019, including 79,000 in the top three provinces: 33,000 in Ontario and 23,000 each BC and Quebec. About 30 percent of TFWs were from Mexico, followed by 12 percent from Guatemala and 10 percent each from India, Jamaica and the Philippines.

The TFW includes four guest worker streams: (1) high-wage for jobs that pay more than the provincial median wage; (2) low-wage for jobs that pay less than the provincial median wage; (3) primary agriculture; and (4) global talent. Primary agriculture, which accounted for 57 percent of work permits in 2019, in turn has four sub-streams including the Seasonal Agricultural Worker Program (SAWP).

The number of TFWs employed in agriculture fell to 50,000 in 2020, when 35 percent of TFWs were employed in greenhouse and nursery crops, 24 percent in fruits, and 22 percent in vegetables. Of the TFWs employed in agriculture, 49 percent were from Mexico, 19 percent were from Guatemala, and 15 percent were from Jamaica.

Fashion executive Peter Nygard was extradited from Manitoba to New York City in October 2021to face sex-trafficking charges. Nygard International filed for bankruptcy, so that victims may not be compensated.

Canadians went to the polls September 20, 2021 after a 36-day campaign and gave PM Justin Trudeau’s Liberal Party a plurality of 156 seats in Parliament, one less than in 2019. The Conservatives won 121 seats, the same as in 2019, and the leftist New Democrats won 27 seats. Trudeau’s government introduced a tax on carbon emissions, which rose each of the six years that Trudeau has been in power.

The Jamaican Ministry of Labor and Social Security oversees the deployment of 7,000 Jamaicans a year to the US with H-2A and H-2B visas; another 6,000 Jamaicans are recruited privately to fill H-2A and H-2B jobs. The government wants to expand deployments from 13,000 to 30,000 guest workers a year by 2025.

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