Trade Aspects of the Internationalization of Mexican Agriculture: Consequences for Mexico's Food Crisis

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TRADE ASPECTS OF THE INTERNATIONALIZATION OF MEXICAN AGRICULTURE: CONSEQUENCES FOR MEXICO'S FOOD CRISIS

by Steven E. Sanderson

Monograph Series, 10

AGRICULTURA4çONOMK. LX3F:

Center for U.S.-Mexican Studies University of California, San Diego 0-060 La Jolla, California 92093 f2-4242JORIreir2Jr2421r2ir-dr2irdr2IRIORJOr2iFiralreir2irdr2Jr-dralr-dra21 Research Reports and Monographs in U.S.—Mexican Studies

Editors

WAYNE A. CORNELIUS RICARDO ANZALDUA MONTOYA

Editorial Advisory Board

Sergio Aguayo Susan Kaufman Purcell El Colegio de Mexico Council on Foreign Relations Adolfo Aguilar Zinser Abraham F. Lowenthal Centro de Estudios Econ6micos y Sociales del Woodrow Wilson International Center for Scholars Tercer Mundo Gabriel Murillo Castaho Douglas Bennett Universidad de los Andes Temple University Mario Ojeda G6mez Gustavo del Castillo El Colegio de Mexico Centro de Investigaciones y Estudios Olga Pellicer de Brody Superiores en Antropologia Social Centro de InvestigaciOn y Docencia Econ6micas Ina R. Dinerman Clark Reynolds Wheaton College, Massachusetts Stanford University Richard Fagen Carlos Rico Stanford University Centro de InvestigaciOn y Docencia Econ6micas E. V. K. Fitzgerald David Ronfeldt Institute of Social Studies, The Hague The Rand Corporation David D. Gregory Richard Sinkin Dartmouth College University of Texas, Austin Roger D. Hansen Peter Smith The Johns Hopkins University Massachusetts Institute of Technology School of Advanced International Studies Laurence Whitehead Friedrich Katz Oxford University University of Chicago

Publication and dissemination of important new research on U.S.-Mexican relations is a major activity of the Center for U.S.-Mexican Studies. Publications include first reports of research findings by the Center's Visiting Research Fellows, permanent staff research associates, UC San Diego faculty associates, and graduate student associates. Research presented at the Center's weekly research seminar on U.S.-Mexican Relations and at its annual conferences is also considered for publication. Occasionally, unsolicited papers are accepted for publication. Manuscripts are refereed by the Center's professional research staff, Visiting Research Fellows, and members of the Center's Editorial Advisory Board. Criteria for selection include: significant new data or interpretations which have not been widely circulated; potential for subsequent publication in professional journals or anthologies (no restrictions are placed on future utilization of material by the author); and suitability for both academic and non-academic readers. The main purpose of the Research Report Series is to make available to a wide audience important new work which will appear eventually in scholarly journals or in book form, without the usual delay involved in those forms of publication. Statements of fact and opinion appearing in Center publications are the responsibility of the authors alone and do not imply the endorsement of the Center for U.S.-Mexican Studies, The Editorial Advisory Board, or the University of California. ORDERS: A complete list of current publications is available from the Center for U.S.-Mexican Studies. Ordering information is listed at the back of this publication. TRADE ASPECTS OF THE INTERNATIONALIZATION OF MEXICAN AGRICULTURE: CONSEQUENCES FOR THE MEXICAN FOOD CRISIS

Steven E. Sanderson

Department of Political Science University of Florida

MONOGRAPH SERIES, 10

CENTER FOR U.S.-MEXICAN STUDIES University of California, San Diego

1983 TABLE OF CONTENTS

Page

Preface

I. Introduction 1

II. The Mexican Food Crisis and the Internationalization of Capital 26

III. Implications of the Internationalization of Mexican Agriculture Through Trade 57

List of Acronyms Used in Reference List 72

References Cited 73 LIST OF TABLES

Table I Average Annual Rates of Real Growth in Mexican Agriculture, 1940-1977 7 Table ll Agricultural Area Cultivated in Mexico, 1940-1979 8 Table III Average Rates of Mexican Agricultural Growth, 1965-1980 10 Table IV Agricultural Growth Rates by State in Mexico, 1950-1970 13 Table V Household Income Levels: Agricultural vs. Non- Agricultural, 1968 14 Table VI Equitable and Expected Distribution of Food by Income Category, 1975 16 Table VII Non-Consumption of Selected Foods by Location of Residence, 1970 18 Table VIII Areas Receiving Agricultural Credit by Crop, 1977 20 Table IX Participation of Key Sectors and Regions in Public Investment, 1940-1980 22 Table X Value of Export Agriculture During the Porfiriato 30 Table XI Contribution of Primary Sector to Gross Domestic Product, 1940-1978 36 Table XII Production by Crop Type in Mexico's Federal Irrigation Districts, 1970-1978 38 Table XIII Production of Selected Fruits in Mexico's Federal Irrigation Districts, 1969-1978 46 Table XIV Pineapple Production and Destination, 1974-1980 49 Table XV Per-Capita Beef Supply in the United States, 1970-1977 53 Table XVI Daily Meat Consumption of the Mexican Population, 1970 55 Table XVII Mexican Beef Consumption by Income Group, 1975 56 Table XVIII Selected U.S. Exports to Mexico, 1971 and 1979 60

iv PREFACE

This study is the first interim report of a longer-term research project titled "Aspects of the Internationalization of U.S.-Mexican Agriculture and Their Implications for Bila- teral Relations in the 1980s." The original premise of the study came from a research association in 1978-1979 with Richard R. Fagen on the theme of the "Inescapability of U.S.-Mexican Relations," which we took at that time to signify loosely the special historical intersection that has both plagued and nurtured these two neighboring societies (Fagen, 1979b). It is my feeling as this research progresses that this "special relationship" (understood here rather differently than by trade negotiators on each side of the border) has never been more inexorable nor more problematic. Mexico has recently experienced an economic boom that most Third World countries must have eyed with considerable envy. Its oil has generated.a petrochemical complex that borders on international prominence; a fertilizer complex that has removed one of the gravest structural obstacles to increased agricultural yields; a financial resource which literally snatched the country from the vortex of long-term fiscal austerity; and a public investment program which enabled Mexico to deepen its industrialization and extend its markets in ways that other countries of the South found impossible. At the same time, it is not apparent that the benefits of oil and related industrialization include a means to resolve the deep structural and political inequi- ties that also describe Mexico in the 1980s. The rural issues which exploded in the Revolution of 1910 still sim- mer unattended, while the government creates still more programs for agricultural development within a global plan' for industrialization. Nutrition, health care, sanitation and drainage, potable water, basic education, and many other glaring needs of Mexican social life still loom as large in oil-rich Mexico as they did before the advent of the recent economic expansion. For these reasons and many others, this is an excit- ing time to conduct research on agriculture and rural development in Mexico, for many of the convenient clichés and stereotypes about the limits of Mexican rural life began to fall aside in a burst of new attention by the government to its most devastated population: the campesinado. But the point of this study — and more seriously, the larger effort of which it forms a part — is not to wonder at the marvels and the distortions of the oil boom or to model future possibilities for Mexican agriculture under the oil patronage regime. Rather, this study will generate information about the character of recent Mexican agricultural growth in new detail, adding a needed international dimension; second, it will relate the internationalization of Mexican agriculture to the historical development of the United States and Mexican economies; third, it will propose some elements for a coherent theoretical understanding of the political dimensions of such international integration; and finally, this work will initiate an empirical study which bears new theoretical implications for the concepts of the internationalization of capital and the international division of labor. Of necessity, this monograph will not complete those tasks; some of the phenomena analyzed in this study will be better understood when current field research on the agribusiness connection and the role of the state in the internationalization of Mexican agriculture are complete. Nevertheless, this monograph does provide a convenient and useful entry point to an important topic and a starting point for discussing the dynamic through which Mexico deepens its industrial capacity and further integrates itself into the world system via the internationalization of capital. An understanding of the elements of the agricultural aspect of that process can lead to a framework for understanding the Mexican food crisis. The internationalization of capital and the new international division of labor figure heavily in this analysis. Analysts of the world system are devoting increasing attention to these concepts but give a number of different interpretations of them. In general, all of the various schools of thought agree that the international division of labor has something to do with the structural transformation of the world economy which has been recognized since the onset of the recession and economic crisis that began in 1974. After that simple agreement, however, they

vi begin to differ. To simplify enormously, one interpretation has the international system increasingly "penetrated" by competitive products from "developing countries" (Krediet- bank, 1978). The "developing country" analog, of course, is the "internationalization of Third World economies," represented with many of its own variations in literature from the FAO and CEPAL* (Games and Perez, 1979; Assael, 1979; Pinto, 1979). Most of these interpretations focus on trade, especially export platforms (Frobel, et al., 1980) and imply that the international division of labor is new mainly because it reverses the traditional division of labor in the international system. That is, the new international division of labor restructures the system so that the previous "hewers of wood and drawers of water" in the Third World now export a substantial portion of manufac- tured and processed goods and quite often import raw materials from developed countries. In contrast, then, to trade relations between North and South during the late nineteenth and early twentieth centuries (Furtado, 1976), the new division of labor threatens developed countries with competition in a number of sectors of industrial and agricultural activity in which they enjoyed advantage for generations. A more substantive notion of the new international division of labor, however, underlies the analysis of agricultural trade presented in this study. That analysis, found in recent works by Palloix (1977), Barkin and Rozo (1980), and Hymer (1972), emphasizes the internationalization of the world economy as a function of the expansion, valori- zation, and reproduction of capital at a global level. This understanding of the new international division of labor incorporates much of the logic of earlier studies of multinational capital. It includes analyses of the gains from and productive implications of international trade (Myint, 1954; Helleiner, 1977), the product life-cycle (Vernon, 1966; Magee, 1977), institutional imperatives for expansion (Moran, 1973), and similar conventional models which, explain the internationalization of the world economy through the expansion of production itself. This conception of the new international division of labor further suggests, however, that the multinational corporation is merely

*Food and Agricultural Organization and Comision Econamica para America Latina.

vii an agent — albeit the most important one — of a process of international integration that crosses sectors and transcends mere trade relations. It does not say that the internationalization of production eliminates concepts of nation and national economy, but it does suggest that a proper research strategy for understanding the character of a development design such as that of Mexico in the 1980s involves discovering the specific mechanics of Mexico's insertion into the international economy. The proponents of this new conception do not consider domestic development policy and disequilibria as phenomena of a closed national system and are far from considering such dynam- ics as the simple product of traditional models of dependency and imperialism. The most sophisticated among them argue that North and South are affected in contradictory and complex ways by their mutual integration. The explanation of international political economy lies, in a word, beyond imperialism. Undertaking research of this kind obviously would not be possible without the generous support of a number of institutions and the intellectual patience of many col- leagues. I owe my appreciation to the University of Florida Division of Sponsored Research for Faculty Research and Seed Grants which enabled me to begin the research design in the summer of 1980. Subsequently, the Rockefeller Foundation International Relations Fellowship Program, the Joint Committee on Latin American Studies of the American Council of Learned Societies, and the Social Science Research Council provided research support over the period from June 1981 to September 1982. David Barkin of the Centro de Ecodesarrollo in Mexico City has provided me with many theoretical insights from the inception of this project, as well as the generous assis- tance of the staff of the Centro. For similar help, I am obliged to Richard Fagen, Keith Legg, Terry McCoy, John F. H. Purcell, Helen Safa, and Charles Wood. To the many anonymous Mexican government officials who lent me their time, their expertise, and many of the more concrete insights leading up to this study, I extend my sincerest thanks.

viii I

INTRODUCTION

At the end of 1982, Mexico is facing one of the severest tests of its aggregate economic strength and political stability since the 1930s. A rush of resource wealth had accompanied the oil boom which began in 1977, and the state had committed itself to using at least some of that wealth to resuscitate the flagging agricultural production system in the Meseta Central and other marginal zones. Yet Mexico at the virtual end of the LOpez Portillo administration was enduring a grave food crisis. Whether seen as strictly a protracted trade disequilibrium in agriculture, as testimony to the collapse of revolutionary agrarian reform programs, or as a fundamental failure of the food system to provide the bulk of the population with an adequate and regular diet, the Mexican food crisis is perhaps the single most important political question currently in need of attention at the national level. Indeed, many of Mexico's collateral. crises — in employment, income distribution, uncontrolled urbanization, population growth, and emigration — may be viewed as complemen tary phenomena growing out of the transformation of Mexi- can agriculture and the new international division of labor.' The Mexican state has proposed to address the eternal post-revolutionary "rural question" by "solving" the food crisis, mainly through the much-vaunted Sistema Alimen- tario Mexicano (SAM), an intersectoral program to increase

1. The internationalization of capital has transformed the Mexican agricultural landscape by altering the advantages accruing to types of cultivation, crop mix, farm size, production contracts, and the like and by expanding the linkages between Mexican national agricultural production and the world system, principally through U.S.-Mexican trade and the internationalization of production. It is important to recognize that the U.S., as the leading element, is the focus of the current study, but it is not the only actor in the process of internationalizing Mexican production, especially in an epoch in which Mexico is consciously expanding exports and diversifying trade partners. - 2 - agricultural production of basic foods, especially in rain- fed zones. This study will contend, however, that the Mex- ican food crisis and its resolution do not yield to the various programs of the SAM, COPLAMAR,2 ComisiOn Nacional de Desarrollo Agroindustrial, and other relevant state dependencies. The principal reason for the intracta- bility of the food crisis vis-à-vis national policy lies in the international scope of the problem:3 the crisis at its broad- est level is an historical product of the internationalization of capital at the level of production. Specifically, the following propositions guide the forthcoming analysis of the Mexican food crisis:

• Mexico's insertion into the world economy, especially since World War II, has profoundly internationalized agricultural production, consumption, exchange, and distribution in Mexico.

• The course of state policy toward the agricultural sector (which relates, of course, to economic policy toward other sectors as well) has been shaped to a great extent by that same process of internationalization.

• The dynamic internationalization of capital in agriculture through direct foreign investment, production contracting, and expanding international trade networks has given rise to a new international division of labor. This new division of labor is fundamentally hostile to Mexico's national goals of agrarian reform, productive redistribution, controlling economic property, and satisfying the basic food needs of its population.

2. CoordinaciOn Federal del Plan Nacional de Zonas Deprimidas y Gru- pos Marginados.

3. Simply stated, this thesis recognizes that national policy cannot govern a phenomenon that is fundamentally international in scope. To propose that the Mexican State govern trade relations is quite problematic in itself, given historical precedents and structural pressures regarding trade. But to expect that Mexico can solve its agricultural crisis alone, when the agricultural sector is to a great degree integrated with the international system at the level of production, borders on the impossible. - 3 -

• The state finds itself in the economic regime of the oil boom with the capacity to increase abso- lute amounts of financial and technical assis- tance to the agricultural sector but without the ability to effectively reorient national agricultural production for domestic needs.

• This complex dynamic provides the basis for important internal conflicts which threaten the well-being of the bulk of the Mexican population and may ultimately elicit the harsh repression which is the ultimate response of authoritarian governments in crisis.

To begin to understand the Mexican food crisis from an international perspective, one must recognize the role of international trade in the internationalization of the Mex- ican economy — which is simply part of the larger phenomenon of the internationalization of capital. Certain other elements essential to a full portrayal of the Mexican food crisis, such as the changing forms of rural organization and the roles of agribusiness and the state, await further analysis based on fieldwork now underway. While these factors are not yet completely understood, their historical genesis and complementarity are readily apparent in the ever-deepening networks of international trade in agriculture. But, before delving into the analytical framework necessary for understanding the Mexican food crisis as a process of international integration, we should first consider the concrete, human dimensions of the Mexican food crisis itself.

The Nature of the Mexican Food Crisis

The first step toward understanding the depth of the Mexican food crisis is to realize that it cannot be reduced to simple questions of more or less agrarian reform, income distribution, bureaucratic centralization or decen- tralization, productivity, and the like. Nor will the crisis succumb to solutions which bear only minor political costs at the national and international levels. The Mexican food crisis has many dimensions: among them are questions of nutrition, production, distribution, and control of economic property. Its effects include the potential for a political - 4 -

and legal-institutional crisis within the Mexican state; they already represent a social crisis of the campesinado, whose existence as a class4 and as individuals is in jeo- pardy. The most immediate signs of that class tension range from armed conflict in Chiapas and Guerrero to the recent land invasions in Tamaulipas. At the most basic, human level, the Mexican food crisis is a crisis of nutrition. Using the National Institute of Nutrition (INN) estimates of daily caloric and protein needs (2,750 calories and 80 grams of protein), the National Food Survey showed that in 1974, 18.4 million persons were seriously malnourished, consuming between 1500 and 2100 calories per day and less than 60 grams of protein (Chavez, 1979: 225). Using figures from the SAM, which asserts that 90 percent of the rural population suffers some degree of caloric and protein underconsumption (SAM, 1980: 8), the figure grows to 21 million. According to the SAM, about 9.5 million Mexicans suffer "grave caloric deficit," falling short of normal food consumption by as much as 25-40 percent. As testimony to the severity of the nutritional crisis, the Mexican government currently includes in its object population 35 million Mexicans in urban and rural locales, roughly one-third of whom are under the age of nine. The effects of such malnutrition, especially on the unborn and young, are well known: genetic and brain dam- age, susceptibility to disease and parasites, extremely high infant mortality rates, and the pervasive debility which combines with generalized poverty to exclude the

4. While some may pass such worries off as romantic preoccupation or rationalize them as outcomes of the "inexorable march of history," certain real dimensions of the crisis of the campesinado must be recognized analytically in a different light. Mexico behaves as if it were an advanced industrial country, using the most modern technologies in industry, capi- talizing its agricultural sector, and simultaneously marginalizing the latter as a factor in the total national product. But there is a key difference between Mexico's situation and those of other states which have industrialized and eliminated the rural producer as the mainstay of the national economy. Mexico — given its birthrate, capacity to absorb labor in industry, agrarian reform tradition, and indigenous problems, inter alia — is unable to expect that the campesinado will pass into history as a remnant of bygone modes of production. Interestingly enough, the phase of primitive accumulation in the Mexican countryside has taken place during boom epochs in which there has been little benefit or employment opportunity for the rural poor (de la Perla, 1976; Sanderson, 1981a). - 5 - undernourished from even the most basic participation in society. Considered in light of the age composition of the Mexican population — 47 percent under the age of 15, as opposed to 25 percent in the United States (Gallagher, 1980: 4) — the shortcomings of the Mexican agricultural system are clearly undermining the health and productivity of the future working population of the country. Because the Mexican food crisis is a crisis of nutrition for virtually half the nation's population, and because that crisis follows an era in which Mexican agriculture had become among the most productive in the Third World, it is with more than a touch of irony that most observers blame the current food shortages on insufficient agricultural growth since 1965. While there is substantial evidence for such a complaint against production, it must be qualified: Mexico is food-poor not simply because of inadequate growth per se, but because of the character of agricultural growth. As a corollary, we should note that programs focusing on simple increases in productivity will not adequately feed the malnourished population of the country; this goal will require the entire gamut of facilities for commercialization and consumption: supply networks, retail outlets, storage facilities, greater income shares, full employment, etc. That is, the Mexican food crisis is indeed a crisis of production; but of a special kind. It is a crisis of basic foodstuff production in the context of a general, systemic transformation of the productive system at large. That transformation is class-biased — for example, toward the production of certain food commodities and balanced animal feed at the expense of basic foods — and builds on sharp social stratification. The gross inequality in distribution and diet often makes official concern for aggregate food consumption irrelevant to the rural poor. The crisis also involves the processing of foodstuff inputs by agribusinesses which do not yield products typically needed by the malnourished.5 And finally, the crisis comes

5. One of the key elements to be elaborated in further sections of this, research project is the integration of agricultural production through the agribusiness complex. Agribusiness does not necessarily produce merely for export, but does add value to raw produce and does serve more ela- borate and well-provisioned markets. The diversion of production toward agribusiness in the Bajio — the traditional colonial breadbasket of Mexico — provides a strong example of high growth, rationalized production, and diversion from basic foodstuff needs. An industry example is the dairy industry, where an estimated 25 percent of national milk production in Mex- - 6 -

to our attention as an imbalance of foreign trade, borne out in the contradictory images of a $3 billion volume in U.S.- Mexican agricultural trade in 1980, and the rows of stalled boxcars on the northern Mexican frontier, awaiting per-- mission from the government to enter a country structur- ally unable to sustain the volume of trade implied in its development model (USDA, 1980b). Still, it is generally recognized that simply not enough agricultural goods are being supplied to the domestic market in Mexico. As table I shows, crops slipped in significance in the agricultural sector after 1960, lagging behind cattle-raising and the growth of the sector in general. This slippage, recognized by few at the time, was masked by continuing high rates of growth in agriculture in general and by agriculture's diminishing importance in the national development model of the 1960s and 1970s, which continued to emphasize industrialization. Within crop production, cultivation of basic crops (maize, beans, rice, wheat, and some oats) dropped as a proportion of total cultivation from almost 79 percent to 57 percent (see table II). The corresponding rise in forage and oleaginous crops did nothing for domestic food supplies or employment for the poor, as this monograph will detail below. It is also clear that the substantial pressures of rapid rural population growth, sectoral shifts in the workforce, and the urban concentration of capital and population all contributed mightily to the dynamic of reduced basic foodstuff cultivation. Furthermore, it happens that the population who felt most keenly the impact of this drastic rural change was the same population who needed food most desperately. Over the period 1950-1970, the value of the agricultural production of the 80 percent of rural proprietors classified as subsistence or below-subsistence farmers declined from 22.4 percent to 15.3 percent of the total (Montahez and Aburto, 1979: 45). This population included approximately 95 percent of the minifundistas with less than five hectares and three-fourths of the ejidatarios in the nation. There has been a direct association between the immiserization of these millions of campesinos and the decline of

ico reaches the market as fresh milk (note in table VII how many poor never drink milk). Most dairy products are elaborated as cheeses, yo- gurts, butter, and other products for higher-income and generally urban markets. TABLE I

AVERAGE ANNUAL RATES OF REAL GROWTH IN MEXICAN AGRICULTURE, 1940-1977

Gross Domestic Agricultural Product Crops Cattle Forestry Sector

1940-1950 10.7 4.0 4.6 7.5

1950-1960 5.3 5.3 -0.4 5.0

1960-1970 4.3 4.9 3.0 4.4

1970-1977 -0.2 2.4 ' 2.5 0.8

Source: Banco de Mexico, elaborated from national accounts data, cited in Antonio Martin del Campo (1980: 56). TABLE II

AGRICULTURAL AREA CULTIVATED IN MEXICO, 1940-1979

Total Basic Fruits & Year (1,000 hectares) Foodsa Vegetables Forage Oleaginous Cotton

1940 5,900 78.8% 5.2% 1.7% 1.0% 4.2% 1945 6,457 73.1 6.5 1.6 1.8 5.6 1950 8,600 75.3 5.7 2.2 2.0 8.8 1955 10,514 71.2 5.0 2.0 1.7 10.1 1960 12,152 64.0 5.0 3.0 1.9 ' 7.4 1965 14,785 73.0 4.6 3.5 2.4 5.5 1970 14,975 68.0 5.7 8.2 3.8 2.7 1975 15,157 62.0 6.7 14.0 6.1 1.5 1979 15,948 48.0 7.5 12.0 7.8 2.3 1980b 16,805 57.0 7.0 12.6 4.9 2.2

Sources:SARH, DGEA (1979b); SARH (1979e); SARH (1980b); SPP (1980). aBasic foodstuffs include corn, beans, rice, wheat and 30% of the oat crop. bPreliminary estimates. - 9 -

agricultural production in basic foodstuffs in two respects: the dispossession of the campesinado has led to a decline in non-market production without its replacement by com- mercialized production for the same consumers; and the immiserization of the rural poor has removed them further from the market (via lack of income, regional isolation, ina- bility to obtain credit, etc.) at the same time that the national economy has become further integrated into the international division of labor and the market. Granted that the growth rate of basic foodstuffs hardly matches that of forage crops, oleaginous seeds, and fruits and vegetables (see table III), it is not correct to say simply that agriculture has stagnated. Agriculture continues to grow away from basic foodstuffs toward cash crops such as winter vegetables, potatoes, and fruits. The rapid rise in land area dedicated to lemons, oranges, grapefruit, and grapes, as well as forage crops like green alfalfa and grain sorghum, hint at the dynamic possibilities of certain agricultural crops. At the same time, the growth of basic foodstuffs — traditionally produced by small farmers and ejidatarios and consumed locally — has been uniformly negative, despite some slight recuperation under the SAM (and extremely favorable weather conditions in 1981). As will be shown throughout this study, the locus of agricultural growth and the destination of agricultural production are responsible for the shift in Mexico's agricultural model. A combination of state policy and an overrid- ing logic of accumulation at the international level dictate that locus and that destination. For now, simply to describe the results of the agricultural transformation as it bears on the Mexican food crisis, suffice it to say that the geographic areas of growth in Mexican agriculture bear the following characteristics:

• They are overwhelmingly concentrated in the federal irrigation districts and private irrigated units administered by the federal government. Rain-fed land in general suffers both the caprice of weather and the changing humors of government policy (especially in matters of credit, extension, fertilizer, etc.). - 10 -

TABLE III

AVERAGE RATES OF MEXICAN AGRICULTURAL GROWTH, 1965-1980 (average annual percentage)

Area Crop Category Cultivated Tonnage

Basic Foodstuffs beans -1.1 0.9 maize -0.9 2.6 wheat -0.9 2.0

Oleaginous soya 30.9 29.2 safflower 37.8 52.4

Fruit and Vegetables tomatoes 4.6 10.9 melons 2.5 2.1 watermelons .04 3.2 bitter lemons 10.6 9.2 oranges 5.3 2.6 grapefruit 21.9 37.7 grapes 11.4 22.9

Forage Crops green alfalfa 7.1 14.8 grain sorghum 26.8 36.2

Source: SARH (1979b); SARH (1980b).

Growth areas in both rain-fed and irrigated districts tend to be associated with agribusiness, including not only multinational investors but also national capital and, increasingly, state capital. • Growth areas are increasingly characterized by contract production, either through direct foreign investors or through vertical integration of activities from farm to market.

• Growth areas tend to serve urban markets and (therefore) urban rather than rural tastes; higher (i.e., processed and calorie-rich) product lines; and foreign rather than domestic markets in many products.

• Growth areas also tend to be concentrated regionally, in large part due to the importance of the federal irrigation districts. The northern river valleys, for example, stand in stark contrast to the poverty of the upper Sierra of the same states; and the tropical lowlands of Oaxaca are the opposite of the marginal highlands of the state. Least advantaged in this respect is the Meseta Central, including the states of Mexico, Morelos, Puebla, Tlaxcala, Hidalgo, and the Federal District. Atomization of the land, rapid and uncontrolled urbanization, and high property values contribute to the marginalization of small producers in this area. In addition, the region fundamental campesina (Sanchez Burgos, 1980), made up of marginal areas of several central states, shows the disparity of class and nutritional privilege even within regions.6

6. The concept of the region fundamental campesina describes the geographic and economic landscape of a population engaged in petty commodity production, generally for subsistence, whose surplus is sold to markets at low prices. While this mode of agricultural activity has not dominated Mexican agriculture in modern times, in certain areas of the Meseta Central and surrounding valleys, it is the dominant mode of rural economic activity, centering on the family as the unit of production and t the minifundio, the ejido, and the indigenous community as the productive loci. Not incidentally, the regiOn fundamental campesina is also one of the key providers of migrant workers and low-wage earners in local markets. - 12 -

0 The areas of agricultural growth are in no real sense separated from the stagnation and decline of marginal areas, as others have proposed (Barchfield, 1979; LuiseIli, 1980). A key premise to be investigated here is that the con- dition for the participation of Mexican agriculture in the international division of labor is the extension of capital to all sectors of the economy, including marginal rural areas. We shall treat this proposition more seriously later; for now it is interesting to note that many of the most • miserable rural conditions in the campesino economy of central Mexico are directly adjacent and related to areas of high growth: impoverished campesinos in Queretaro and Guanajuato adjoin the Valle de Santiago and Rio Lerma irrigation district, in states whose cumulative real rate of growth in agriculture was nearly double the national rate from 1950 to 1970 (see table IV). The Sierra of Sonora and Sinaloa and the Chiapas highlands provide further evidence of the apparent complementarity of rural poverty and agricultural growth (Sanderson, 1981a; Fernandez and Tarrio, 1979).

In sum, agriculture in Mexico is able to modernize and expand under the present model, but not toward the elimination of poverty and malnutrition; the logistics of agricultural growth for industrial Mexico and the international economy and those required for domestic food production for the entire Mexican population are different and conflictive. As a corollary to the proposition that the Mexican food system is deficient in production of basic foodstuffs, it must be made clear that if Mexico were now self- sufficient in basic grains, those most in need would undoubtedly not be served, • given current patterns of income and market distribution, as well as the basic relationship of the people to the land. As pointed out in a recent CIDER (Centro de lnvestigaciones del Desarrollo Rural) study, the bulk of the Mexican poor are rural (Montaliez and Aburto, 1979); according to another study, three-fifths of the people in the lowest income categories belonged to agricultural families (see table V). According TABLE IV

AGRICULTURAL GROWTH RATES BY STATE IN MEXICO, 1950-1970a

State % Growth

Baja California Sur 52.67 Aguascalientes 25.57 Sonora 19.21 Sinaloa 15.59 Queretaro 13.69 Colima 11.80 Guanajuato 10.56 Nayarit 8.90 Michoacan 8.02 Zacatecas 7.98 Jalisco 7.91 Chiapas 7.43 Chihuahua 7.07 Average for Mexico: 6.4 Puebla 6.35 Mexico 6.07 Veracruz 5.95 Yucatan 4.81 Tamaulipas 4.43 Tlaxcala 4.15 Morelos 4.01 Hidalgo 3.99 Campeche 3.95 Guerrero 3.60 Tabasco 3.28 San Luis Potosi 3.27 Durango 2.70 Nuevo Leem 2.56 Coahuila 2.52 Oaxaca 1.96 Baja California Norte 1.27 Distrito Federal -1.63 Quintana Roo -2.65

Source: elaborated from Yates (1978: table 11.2). aAverage percentage growth per year in nominal value of production. TABLE V HOUSEHOLD INCOME LEVELS: AGRICULTURAL VS. NON-AGRICULTURAL, 1968

Monthly Family Percent of Families Percent of Families Total Number Income (pesos) in Agriculture Not in Agriculture of Families 0-300 72.6 27.4 438,063 301-600 70.7 29.3 1,256,517 601-1,000 50.0 50.0 1,628,517 1,001-3,000 26.8 73.2 3,324,888 3,001-6,000 10.0 90.0 1,060,668 6,001-10,000 8.0 92.0 275,618 Above 10,000 10.7 89.3 166,952 All families 37.5 62.5 8,150,792

Source: Banco de Mexico, S.A. (1974); cited in Montailez and Aburto (1979: elaborated from Table XXXII). - 1 5 - to a COPLAMAR estimate, using a rule of equal distribution of foodstuffs to all families in Mexico, over six million families underconsume foodstuffs in the amount of 3.2 million tons (see table VI).7 While much of that underconsumption is related to income level per se, other compli- cating factors in the commercial exchange of foodstuffs in the countryside more fully describe the social relations of production. First, since the food-poor are also the rural poor, and since the rural poor are the main constituents of the campesino economy, the nutritional marginalization of the rural poor is difficult to rectify: the areas in which they live have few facilities for the purchase of basic foodstuffs, the poor hold little cash for such purchases, and the commercial facilities that do exist have little to do with local consumption needs (see table VII). This marginalized relationship to the market has two edges: the campesino producer normally does not produce for the market, but for subsistence (between 52 and 86 percent of campesino producers, according to Sanchez Burgos, 1980: 100); and to the extent that the campesino is integrated into the market, it is through the sale of goods other than basic foodstuffs, which causes a decline in the importance of basic food production to the small farmer (Diaz Polanco, 1979). Thus, the campesino either continues as a marginal provider/consumer in the wage economy or becomes a more closely integrated — and still dependent — element in that economy. We shall further explore this changing relationship in a later section. - Mexico's government has attempted to address this structural bottleneck in supplying the malnourished in the "marginal zones" through the SAM program for rural storage and retail expansion. But it has failed to address the fundamental question of ensuring that the demand- side incentives implicit in producer subsidies and price supports actually enhance the position of the small farmer and ejidatario. Instead, the government's efforts have deepened its budget deficit without producing a salutary redistributive effect. In other words, this attempt to

7. As its title suggests, COPLAMAR is an intersectorial agency commis- sioned with resolving some of the adverse consequences of "the dependency. . .on the world market of foodstuffs and other primary inputs, and...the dynamization of the internal market, fundamentally, of the urban market and of the higher-income social strata" (COPLAMAR, 1979: 11). TABLE VI

EQUITABLE AND EXPECTED DISTRIBUTION OF FOOD BY INCOME CATEGORY, 1975

Monthly Equitable Expected Deficit or Family No. of % Total % Actual Distribution Distribution Surplus Income Families Families Distribution (1000 tons) (1000 tons) (1000 tons)

0 16,472 0.16 0.17 47.8 50.8 3.0

1-500 1,650,739 16.14 10.92 4,822.3 3,262.7 -1,559.6

501-700 600,748 5.87 3.82 1,753.8 1,141.3 -612.5

701-950 822,463 8.04 6.31 2,402.2 1,885.3 -516.9

951-1250 894,640 8.75 7.53 2,614.3 2,249.8 -364.5

1251-1700 890,162 8.70 8.36 2,599.4 2,497.8 -101.6

1701-2200 1,029,812 10.07 9.81 3,008.7 2,931.0 -77.7 2201-3000 1,231,913 12.04 12.91 3,597.3 3,857.2 259.9

3001-4000 683,596 6.68 8.24 1,995.8 2,461.9 466.1

4001-5200 606,005 5.92 8.15 1,768.8 2,435.0 662.2

5201-7000 333,917 3.26 4.74 974.0 1,416.2 442.2

7001-9200 279,350 2.73 4.25 815.7 1,269.8 454.1

9201-12,250 N.A. 3.24 4.60 968.0 1,374.4 406.4

12,251 and above 330,864 N.A. N.A. N.A. N.A. N.A.

Source: COPLAMAR (1979 N.A.: Not available. TABLE VII

NON-CONSUMPTION OF SELECTED FOODS BY LOCATION OF RESIDENCE, 1970

Commodity Percentage of population who do not consume commodity National Urban Rural

Meat 20.6 11.9 33.0

Eggs 32.2 17.0 31.9

Milk 38.0 23.3 59.0

Fish 70.1 64.4 78.3

Wheat bread 23.4 14.0 36.9

Source: Secretaria de IndUstria y Comercio, Direccion General de Estadistica (1972), cited in SPP (1979). - 19 - integrate fully rural marketing facilities raises the question of how to integrate the campesino and capitalist economies. When we broach the question of controlling the yield of the Mexican agricultural system, we are actually addressing the food crisis as a matter of controlling economic property in the countryside, a dispute which has brewed more or less constantly since the revolution (Sanderson, 1981a). State policy toward agriculture since the Cardenas epoch (1934-1940) has markedly favored the accumulation of capital in the private sector through state intervention in social capital investments (e.g., infrastructure, machinery, fertilizer, and credit); through the development of processed-foods and other agricultural industries, with direct foreign investment leading the way; and through the general programmatic encouragement of export agriculture as a source of foreign exchange for Mexico's increasingly open national economy. As data from regional studies suggest (Fernandez and Tarrio, 1979; Sanderson, 1981a; Barkin, 1978), and as the incomplete national census data show, land tenure in Mexico has become more concentrated since 1940, especially when considered in terms of economic yield and not simply in terms of control over landholdings. That is, the most important areas of agricultural production in Mexico have generally fallen to the private sector. The management of property in those areas responds to the logic of the international market and not necessarily to the exigencies of local demand or of generating employment and benefits (see table VIII). When considered as a question of both land tenure and productivity, the concentration of landed property and economic resources in Mexico is beyond doubt. Despite (and to a certain extent, because of) half a century of land-reform politics, 76 percent of total landholdings in Mexico are in units in excess of 1,000 hectares (University of Wisconsin, 1979).11' Very roughly speaking, about 2 percent of farmers own three-fourths of the land, while the bottom quartile of holdings comprise only 0.1 percent, of

8. This figure, of course, underestimates latifundismo in Mexico, especially since such phenomena as family latifundismo (concentracion de provecho), rentismo, and prestanombres are incalculable. TABLE VIII

AREAS RECEIVING AGRICULTURAL CREDIT BY CROP, 1977

Irrigated Percentage of Rain-fed Percentage of Commodity (hectares) Total Area (hectares) Total Area

Rice 35,668 33.1 36,034 33.4

Beans 22,434 13.5 363,569 24.8

Maize 162,388 16.6 1,256,814 19.3

Wheat 307,014 49.2 45,361 53.8

Safflower 92,684 60.3 62,404 25.0

Soya 110,056 51.8 290 ‘ 0.3

Sorghum 220,271 48.7 354,077 36.9

Source: SPP (1979); SARH (1979a). - 21 - land area. A recent study shows that about one-eighth of the rural holdings in Mexico produced nearly half the national agricultural and cattle value in 1970, with less than one percent providing 30 percent of national production in the sector (LuiseIli, 1980: 87). Anyone familiar with the Mexican countryside or the literature which it has produced knows of the economic concentration, monopoly, and social marginalization and aggrandizement under- stated in these figures. As we shall see in a separate section, concentration of resources and international orientation are particularly evident in the irrigation districts, even though they are managed by the federal government. The concentration of economic growth in the hands of agricultural entrepreneurs in the irrigation districts (Hewitt de Alcantara, 1976; Mares, 1981; Sanderson, 1981a), combined with the irrigated areas' overwhelming monopoly of public investment in agriculture (see table IX), results in a real concentration of agricultural value beyond that suggested in the census. When one recognizes, moreover, that nearly half the irrigated land and agricultural value from that land are concentrated in eight irrigation districts, the concentration of economic property becomes more apparent (SARH, DGEA, 1979). The least obvious aspect of the food crisis resulting from concentration of economic resources is managed by agricultural enterprises and intermediaries, whether in the private sector or under the aegis of the state. Through production contracting and vertical coordination, many areas of the Mexican agricultural sector are directly integrated into the most advanced aspects of food and balanced animal-feed processing (Morrissy, 1974; Mighell and Jones, 1963; Goldberg, 1974). The salutary effects of such commercial and financial relationships are not necessarily in question; the relationship of such arrangements to the control of economic property and the production of food is another, more serious matter. Related to this concentration of economic resources is the marginalization of the rest of Mexican agriculture, through various structural constraints on the Mexican economy and through the very logic of economic integration into capitalist agriculture. For instance, public credit facilities have followed the irrigation districts since the 1950s, and the rain-fed areas in general have been served only marginally by official credit resources. Recent TABLE IX

PARTICIPATION OF KEY SECTORS AND REGIONS IN PUBLIC INVESTMENT, 1940-1980

Total Public Percent of Total Percent of B Percent of B Investment Allocated to Agriculture Allocated to Allocated to Years (millions of pesos) and Cattle = B Irrigation Son., Sin., & Tamps. 1940 290 15.5 80.0 N.A. 1945 848 17.2 95.8 N.A. 1950 2,672 19.3 72.1 36.2 1955 4,408 13.7 99.2 11.8 1960 8,376 8.0 85.5 33.2 1965 13,049 8.6 98.4 62.9 1970 30,250 13.4 92.5 66.3 1975 95,767 18.1 76.0 77.1 1980 424,108 16.6 59.2 24.7

Source: Elaborated by Centro de Ecodesarrollo with data from Secretaria de la Presidencia (1974); NAFINSA (1978); and Secretaria de la Presidencia (1980). N.A.: Not available. - 23 - studies have indicated that only about one out of eight ejidatarios could expect credit from public facilities in a given year, and up to one-half have never dealt with the rural bank at all (CDIA, 1974: 776). This phenomenon must be considered in light of a contemporaneous wither- ing of public credit during the 1960s and 1970s (CDIA, 1974) and a bias in existing credit facilities in favor of cash crops and away from subsistence foodstuffs (see table VIII). As we shall see, the control of economic property in rural Mexico relates to the manner in which the system is integrated into the larger national and international economies, and to the specific social relations of production at the level of the farm. For instance, the production, contracting, curing, and commercialization of tobacco is integrated into the international system in a different way than is petty commodity production of, say, corn and beans. This difference results principally from the character of the international market, the level and nature of foreign investment, the participation of the state, and the organization of tobacco cultivation in Mexico (Jauregui et al., 1980). Similar cases occur in the cultivation of pineapple, winter vegetables, and citrus and in the raising of live cattle, with specific variations depending on region, type of processing, crop type, etc. Nevertheless, all of these variables are dominated in different degrees by the forces of the international market and the state's relation to their growth. Said another way, the organization and control of rural economic property and its insertion into the general dynamic of the Mexican economy and the international capitalist system explain to a great extent the historical development of the Mexican food crisis. These macro- historical factors, when elaborated further, reveal themselves as crucial determinants of the future of the campesinos, their relation to the land, their nutritional opportunities, and ultimately, their political role in Mexican society. Focusing on the productive core of the Mexican food crisis brings us to the most disturbing — and in many ways the most political — question about the campesinos and the future of the Mexican rural economy: Are the campesinos destined to continue to wither before the forced expropriation of their resources and become rural proletarians? In other words, is the dynamic of the - 24 -

Mexican countryside simply one of primitive accumulation, in which the "historical process of divorcing the producer from the means of production" (Marx, 1967: 714) accelerates without effective political opposition? Or, as latter-day analysts of peasant economies query, is there a permanent place in capitalist society for the peasant and the peasant economy, even in the context of rapid and deepening capitalist industrialization, as Chayanov suggests (Chayanov, 1966; Esteva, 1979; Diaz Polanco, 1979; Pare, 1979)? The larger research project of which this study forms a part will eventually put forward as one of its conclusions the proposition that the peasant has little to hope for from an economy industrializing on the Mexican model. Furthermore, there is equally little hope that the Mexican economy can absorb them into the industrial labor force and make them disappear from the national political coalition once and for all. Stated another way, the primitive accumulation and capitalist aggrandizement which represent agricultural growth in Mexico offer limited prospects of shifting large segments of the rural population away from the campesino class into a role as agricultural or industrial wage laborers. But their weakening economic position within the official growth model makes state-induced change in their favor increasingly unlikely. In fact, that negative prognosis may be the best single reason behind the eternal presidential mandate to address the rural question each sexennium: each administration addresses the rural question — at least formally — because in the rural sector reside the most glaring shortcomings of capitalist development and international integration in Mexico. Economic growth of the type engendered by the "economic miracle" of 1940-1970 — and its very different reincarnation in the oil boom which began in 1977 — can satisfy the political needs of the regime insofar as the benefits of economic growth and transformation extend to the politically relevant populations of the country. As this study will show, the past and future development plans of the Mexican state — in coalition with industrialists, financiers, and international capitalists — lead away from the generation of social benefits for the countryside, not toward rural development. The key concept in the political-economic equation proposed above, of course, is "politically relevant populations"; at a subtler level lies the idea of legitimation through social integration and economic success. The food crisis is a crisis of - 25 -

political legitimation because the political conditions for accumulation of capital in Mexico require the rationalization of production and the securing of social peace in the countryside. Thus, the question of political legitimation assumes its preeminence not because of revolutionary promises, but because the political goals of the state and the reproduction of the labor process in civil society require it. In this political-social nexus certain contradictory elements stand out. For example, the national state finds itself paralyzed vis-a-vis campesino organization because it cannot encourage their organization without affording material improvements in their political-economic position. It confronts the necessity of abandoning agrarian reform for the sake of rationalizing production and providing a large (and redundant) rural labor force at low wages; but it must cloak that process in the political language of rural development, as the history of agrarian Mexico (embodied in vocal, if politically weak, opposition) demands. The food crisis, when viewed with these issues in mind, is not a straightforward economic question at all. In this context, the long-term political needs of a state presiding over a nation with four million unemployed/underemployed campesinos come into conflict with the economic logic of oil- boom industrialization in the current international system. An extreme extrapolation of this contradiction might find the state unable to defend itself and the conditions required to reproduce capitalist society because of the exigencies of capitalist society itself. With this structural difficulty in mind, let us proceed to the more specific interaction between the state and civil society in the milieu of the internationalization of capital. There we will find the core of the Mexican food crisis and perceive the logic behind the foregoing introductory statements. - 26 -

THE MEXICAN FOOD CRISIS AND THE INTERNATIONALIZATION OF CAPITAL

As suggested in the introduction, this investigation will not only reveal the specific descriptive dimensions of the Mexican food crisis but also explain part of the trade dynamic and historical origins of the internationalization of Mexican agriculture. The Mexican agricultural miracle which began at the end of World War II tripled wheat yields and modernized 2.5 million hectares now under federal irrigation. Yet this model of agricultural growth, which does produce a per-capita product in excess of basic food requirements at the national level, does not feed Mexico's population regularly. The answer to the complex question of why this situation has come about lies at the international level, and at its core is the internationalization of capital. This limited introduction to the internationalization of capital in the Mexican food production system cannot reveal all of the subtle manifestations involved in the insertion of the Mexican political economy into the international economic system. This monograph will examine the trade aspect of that deeper dynamic and give only passing attention to the important roles of agribusiness and the state in the internationalization of Mexican agriculture. However, by way of introducing that general theoretical understanding of the Mexican food crisis, a theoretical digression is in order. Classical trade theory presumes that benefits of the international system will be maximized when each country produces and exports goods for which it enjoys comparative advantage.9 In agriculture, however, the determination

9. This study obviously will not conduct a thorough critique of the concept of comparative advantage beyond the limited suggestions in the text. The principal point in question is whether the integrated Mexican agricultural system is built on trade or, as I argue, it is a more deeply integrated system of international production — which has consequences in the area of trade. - 27 - of comparative advantage is complicated by shifting production functions, changing factor costs of production, market imperfections, and the high degree of uncertainty in climate and commodity prices (Jabara and Thompson, 1980). Other complications include the determination of the price of inputs in a mixed economy such as Mexico's (namely, the variable rural daily wage and the subsidies for fertilizers, credit, and water for certain crops). And in a context of a truly internationalized production questions of comparative advantage become, perhaps, secondary in importance because of the closer integration of production-level decisions (as opposed to those of commodity trade). The "pure theory" of comparative advantage is further qualified by the social costs imposed on a small economy with a large agricultural sector torn by conflicting demands: the demand for employment, land tenure, and capital in agriculture versus the demand of the international economy for the export capabilities of the agricultural system. In the case of Mexico, these conflicts lie at the center of contemporary rural disequilibria. Mexico's agricultural growth and increasing export orientation came as a response to several historical factors: its growing role as supplier of agricultural commodities to the United States since the 19th century; its importance as a supplier of strategic raw materials to the United States during World War II; the centrality of the agricultural sector to its plans for import-substitution industrialization in the late 1940s and 1950s; and the changing mode of agricultural production in the United States after World War II. As a result of these factors, Mexico's system of producing and processing agricultural goods and other raw materials became, during the period 1940-1980, pro- gressively more international in orientation. State policy and international incentives figured importantly in this process, as did more direct forces emanating from the international commodity market, local intermediaries, and direct foreign investment. The international orientation of Mexico's agricultural system began to affect decisively its waning capacity to deal with the domestic food needs of its population. The theoretical point of this study of trade aspects of the internationalization of the Mexican agricultural system is threefold: - 28 -

• During the Porfiriato (1877-1911) -Mexico became an increasingly important part of the agricultural production system of the United States. Commodity exchange and finance capital dominated the trade relationship between the two countries, as did agricultural goods and other raw materials. Traditional notions of the international division of labor could appropri- ately be applied to that relationship.1°

• During World War ll Mexico experienced an export boom, which was accompanied by import-substitution industrialization and the state-induced capitalization of agriculture. Thereafter, the actual integration of agricultural production at an international level came to replace commodity exchange and finance capital investments as the dominant force in the rural sector's growth areas. Instead of pure commercial exchange, the Mexican agricultural system began to emphasize contract production, food processing, balanced animal feeds, and infrastructure for an ever-expanding international trade system. The trade system, typified by U.S.-Mexican trade in agriculture, in many respects led the process of integration at the international level.

• The agricultural system during the post-World War II era shifted from being the "engine of growth" of the Mexican economy to being merely an adjunct of industrial development. With that demotion, the agricultural sector also generally received less of the crucial policy attention it had garnered in earlier periods. More importantly, the political position of agricultural forces in the party and state apparatus deteriorated, as did living conditions for the campesinos.

10. That is, traditional notions of the division of labor based on trade advantage. An instructive example of an international division of labor led by trade is the British trade empire of the late 19th century, especially with regard to its major Third World trading partners such as Argentina. - 29 -

Before proceeding to the concrete manifestations of theoretical propositions, it is necessary to warn that the purely binational agricultural trade relationship between the United States and Mexico, related protectionist sentiments from some farm policy makers, and enthusiasm for food power tactics hide the broader global context of the U.S.-Mexican agricultural system. Nevertheless, Mexico remains most deeply linked to the U.S. via trade, agribusiness, contracting, and finance. The U.S.-Mexico connection — fraught as it is with the painful intimacy of empire — reveals much about the general global dynamic of internationalization, which is the broader backdrop of this study. The complex set of relations in the U.S.-Mexican context includes the transformation of Mexican agriculture and the integration of agricultural production across the U.S.-Mexican border, impelled by the internationalization of capital, in both commodity and productive forms. Under- standing key aspects of that dynamic offers insights into the social relations of the Mexican system of agricultural production and its international implications.

Receding Frontiers: Linking the U.S. and Mexican Economies Through Trade

The history of U.S.-Mexican agricultural trade is a long one. It dates from the Spanish empire in the New World and was stimulated by the 1849 Gold Rush, the mapping of the Southwestern trails to the Pacific, the Westward expansion of the 1870s, the range cattle boom of the early 1880s, and other watersheds of frontier history.11 The character of the first sustained trade boom in agricultural commodities, which took place during the Porfiriato, was stunning in its portent for the modern era. During the years of the Porfirian dictatorship, agricultural capitalism blossomed in certain export enclaves, and the value of exports boomed, despite the uneven economic swings of the last quarter of the 19th century (see table X). These exports of primary goods included almost all

11. Again, more detailed treatment awaits a broader theory of frontier expansion than has been provided us by the rather provincial frontier historians of the U.S. More useful representations of the idea of frontier and poles of growth may be found in Furtado (1976) and Foweraker (1981). TABLE X

VALUE OF EXPORT AGRICULTURE DURING THE PORFIRIATO (Pesos)

Commodity 1877 1890 1900 1910

Coffee 2,340,743 5,691,669 6,049,334 8,034,993

Chicle 468 550,929 549,057 1,501,598

Garbanzo 598,195 N.A. 1,984,859 1,906,090

Henequen 2,189,135 10,625,660 15,152,053 24,779,774

Rubber 33,068 119,734 245,316 9,241,722 lxtle 253,205 983,311 1,447,387 2,120,633

Vanilla 366,192 722,115 403,850 3,084,640

Source: Elaborated from El Colegio de Mexico (1963?). N.A.: Not available. - 31 - exports of consumer goods, as well as the bulk of production goods exported during the Porfiriato. Together, agricultural exports represented almost half of total export value, a striking proportion, given the contemporaneous resurgence of mining. Mexico, as a growing provider of raw materials to the industrial nations, grew in trade at a much faster rate than other providers (Rosenzweig, 1965: 636). Part of that growth in trade, as in the 1980s, came in the form of food imports. In addition, the Porfirian boom coincided with the U.S. movement westward after the Civil War. To American expansionists, who were transforming annexationist filibusters into economic dominion from the 1860s to the 1880s (Schoonover, 1978), Mexico represented "one magnificent but undeveloped mine. . .the bridge of commerce of the world" (Anderson, 1884; Pletcher, 1958). The adventurous capitalists of Western railroad companies-- the International Railroad Company, the Mexican Central, the Mexican National, and the Credit Fonciery, among others — saw fortune and trade opportunities in Mexican rail lines beginning in the 1860s (Powell, 1921). The increase of trade during the Porfiriato and the resurgence of mining in the greater Southwest confirmed their expectations (Sonnichsen, 1974). The ensuing rail networks also shaped the commodity markets of Mexico and split the frontier states from the Meseta Central. The expansion of the railroads in late-nineteenth- century Mexico joined "the last great American frontier and the paradise of Sinaloa" (Pletcher, 1958: 276) and other states. More importantly, it also guided the first attempts at rationalizing land tenure and exploitation in the fertile river valleys of the Pacific Coast and the broad expanses of cattle land in the states of Sonora, Chihuahua, and Coahuila. The expansion of exports of henequen, vanilla, coffee, cacao, watermelon, garbanzos, resins, and other important agricultural products from diverse regions brought with it the dispossession of the peasantry in areas central to the boom (McBride, 1923; Cossio Silva, 1974). The current internationalization of the U.S.-Mexican agricultural economy bears many of these same effects for the Mexican rural population, though in a very different set qf social and economic relations. Now, as in the late 19th century, the modernization of transportation and the rationalization of capital play a part in the trade of agricultural commodities between the United States and Mexico. - 32 -

Likewise, geographic and sectoral shifts in agriculture and cattle-raising north of the border have an effect on production to the south. And of course, as in the system presided over by the old regime, the state mediates the interrelation of the two countries' markets. But between the two epochs, important differences exist in agricultural trade and production patterns, the level and quality of the internationalization of agriculture (which has implications for the power of the state to mediate trade), the class content of production changes, and the capacity of Mexico to feed its growing population. Each of these differences has been molded historically through generations of trade and production shared by the United States and Mexico and through the increasing internationalization of capital in agriculture. It is a commonplace that the trade which originated during the Porfiriato served as a vehicle for integrating key sectors of the two economies. That trade (for obvious geographic, cultural, and economic reasons), as well as less obvious political choices and development plans, has stimulated an active border area which represents the living integration — unequal, permanent, and conflict-ridden — of the United States and Mexico. Scarcely a century ago the border region was only sparsely populated by semi-nomadic Indians, missionaries, prospectors, isolated garrisons, and occasional land speculators. The way in which the United States Southwest , and Mexican North was colonized and settled has profoundly affected the character of the border region today. Official Porfirian colonization and frontier development plans dovetailed with the settlement of the Western United States. Not only did this historical conjuncture of frontiers provide the forum for the entry of land and mining capital into Mexico, but the settlement of the U.S. West and the industrialization of its economy broadened trade opportunities for the savvy merchants of new port cities such as Guaymas and Manzanillo. Thanks to new railroad links and a rising U.S. economy, agricultural and mineral exporters forged trade relations northward and westward (Rippy, 1926; Coatsworth, 1974; Billington, 1974). By 1878, these links were so substantial as to generate a fear in Mexico that more of the northern frontier would be lost to the great Yankee expansion (Rippy, 1926: 321). Of course, an earlier U.S. expansion westward had cost Mexico approximately half its territory, including - 33 -

Texas, California, New Mexico, and Arizona (Connor and Faulk, 1971; Martinez, 1975; Brack, 1975). Scarcely more subtle, and equally important in the long term, was the completion of the Transcontinental Railroad in 1869, which shifted the economic center of the U.S. westward. As more rail links integrated the far western territories into the mainstream of the American economy, important changes occurred. Texas and other western states became large producers of not only range cattle but also feeder cattle and stockers for midwestern feedlots and grasslands. Rail transportation opened up the possibility of establishing regional packing houses and made feasible a greater integration of expanding grain production, lot-fed cattle, and the packing industry (Ross, 1980; Ebeling, 1980; Dyer and O'Mary, 1977; Arnould, 1971; Kujovich, 1970). Furthermore, the receding frontiers of trade along the border resulted from a conscious development policy — however shortsighted and incomplete — of the Porfirian regime. For reasons of national security and territorial protection and as an alternative to early colonization failures in the North, Porfirio Diaz welcomed railroad, survey, and land concessionaires from the United States. The rail links stimulated by Mexican legislation of the 1880s connected the Mexican North with Southwestern United States and its expanding trade potential, leaving aban- doned the North's fragile market ties with central and southern Mexico (Brand, 1961; USDA, 1944). In addition to settling the frontier by eliminating the Indian raiders of the North, the railroad and survey concessionaires and their military protectors opened the fertile river valleys of the Northwest and the expanding cattle haciendas of the desert North to the United States' market, and left behind the precapitalist consumer market of the Meseta Central. The Mining Act of 1884, the 1883 Colonization and Survey Law, and the elimination of the alcabala (a local tax on commerce) in 1896 all served to stimulate interstate and international trade (de la Pena, 1976; Cossio Silva, 1974). Related to this observation is a more crucial and durable result of 19th-century development along the border., The colonization of the frontier and the modernization of north-south trade between the western United States and northern Mexico effectively split the market system of Mexico. Through the internationalization of money and commodity capital (i.e., through expanded trade and - 34 - investment in the mining and export-agricultural booms) the northern tier of states was separated from Mexico and linked in daily commerce and traffic to the United States. Nogales, Tucson, El Paso, Laredo, and Brownsville were the hubs of northern Mexican commerce, not Guadalajara and Mexico City. The settlement of the Laredo-Indianola- Brownsville triangle of Texas in the first half of the 19th century (coinciding with the first Mexican colonization grants in Texas and building on a century of cattle raising in New Spain) began a modern frontier cattle economy emanating from Mexico. This economy presaged windmill irrigation, barbed-wire fences, scientific stock improve- ment, the introduction of Shorthorn and Hereford cattle, and forage cropping on both sides of the Rio Bravo (Webb, 1931: 224ff; Brand, 1961). As a by-product of the great range cattle boom of the early 1880s and its thunderous crash in the blizzard of 1886-1887, land speculators and foreign latifundistas (such as Senator George Hearst and Lord Beresford), hacendados (e.g., Luis Terrazas and the Sanchez Navarros), land companies (e.g., the Palomas Land and Cattle Company), and grand robber barons (e.g., Collis P. Huntington and Nelson Aldrich) poured their dollars and pesos into modern cattle and mining enterprises rivaling the largest in the world at the time (Rippy, 1926; Brand, 1961, Webb, 1931). In agriculture, the Porfirian laws of the 1880s, along with the United States' push to the Pacific Coast, made the Sonora and Sinaloa river valleys lush gardens for vegetable and fruit exports. Guaymas boomed by the 1890s and was stunted in its commercial growth only by repeated Indian wars and the militarization of the Sonoran agricultural heartland (Aguilar Camin, 1977; Dabdoub, 1964; Sanderson, 1981c). The importance of the Isthmian canal and the consolidation of the Western frontier under the "open door" of the last decade of the 19th century coincided with a commodity price stability in the 1890s that further stimulated agricultural exports from Mexico. But after two decades of that export experience, the advent of the Mexican Revolution and the Great Depres- sion crushed economic growth in Mexico and ensured that export agriculture in the North would not know its true potential until the expansion of trade with the United States after World War II. - 35 -

After the Revolutionary Disjuncture

After the huge disruption of the Mexican Revolution and the Great Depression, the frontier economies of both countries became more important to general national economic development plans, especially in the case of the Mexican North. Under President Miguel Aleman and his successors, the great irrigation projects of the 1948-1965 period began to take form, principally in the highly valued (and externally linked) North. Under Aleman (1946-1952), the cardenista agrarian reform miracle became the "engine of growth" of industrializing Mexico (Reynolds, 1970; Han- sen, 1971; Villarreal, 1976; Mosk, 1950). Beginning with an ambitious irrigation and infrastructure development plan (Benassini, 1954; Orive Alba, 1947), public investment in agriculture skyrocketed; the bulk of that public investment went to irrigation works, more specifically to large northern dams and canals serving northern and export markets (see table IX). The agricultural production system responded to the highest levels of public spending to date — at least in the areas favored by investment. Even so, the rural sector was badly distorted by industrialization, export promotion and slow decapitalization over the 1940 to 1970 period, and its share of GDP diminished (see table XI). While agricultural exports — to a greater and greater degree being grown in federal irrigation districts — contributed the foreign exchange necessary for import-substitution industrialization (Mosk, 1950; Rey- nolds, 1970; Villarreal, 1976), the exigencies of that very model of export promotion dragged the sector away from production of basic foodstuffs. In 1978,. after thirty years of public investment and cultivation, seven of the eight federal irrigation districts harvesting over 100,000 hectares were in the northern border states plus Sinaloa. The eighth was in Guanajuato, in the heart of the vegetable-processing and strawberry complex. Production in the eight super-districts made up nearly half the agricultural value produced in irrigated districts in Mexico and roughly one-sixth of total agricultural' value (SARH, 1979a; 1980a). The dedication to export agriculture of the best northern lands, and many of the best regions of central and southern Mexico as well, resulted from three basic elements of postwar economic and social development: the capitalization of large farms by the Mexican government - 36 -

TABLE XI

CONTRIBUTION OF PRIMARY SECTORa TO GROSS DOMESTIC PRODUCT, 1940-1978

GDP Percent (millions of Attributable to Year 1960 pesos) Primary Sector

1940 46,693 18.0

1950 83,304 19.5

1960 150,511 15.3

1970 296,600 11.2

1978 476,900 8.3

Source: SARH (1981: 16). aPrimary sector is defined as agriculture, cattle-raising, forestry, and fishing.

and agricultural entrepreneurs in the irrigation districts; the abandonment of populist agrarian reform; and the internationalization of productive capital in agriculture. Each of these elements, in turn, relates to the process of import-substitution industrialization and the Mexican "economic miracle," and each reveals the class-based and other political difficulties entailed in the Mexican agricultural model. It is fair, although not very specific, to say that the capitalization of Mexican agriculture was historically over- determined. That is, one cannot easily separate one group of influences from others and determine causality. The expansion of commodity trade after World War II, the end of the populist agrarian reform, the influence of import- substitution industrialization on the agricultural sector, the rise of the state in agrarian affairs, and the expansion of international capital in food production, processing and - 37 - distribution all contributed in some way to defining the process of "agricultural modernization" in Mexico (Hewitt de Alcantara, 1976). The grandes obras de irrigacion turned the northern desert oases of Sonora, Coahuila, Sinaloa, Tamaulipas, and the Laguna area of Durango Coahuila into the richest areas of Mexican agricultural production. Consistent with the logic of using agricultural production to provide foreign exchange to fuel industrialization, the irrigation districts produced increasingly for the export market. Until the early 1970s, Mexico exported wheat and corn as well as more important crops such as winter vegetables (tomatoes, squash, peppers, cucumbers, green onions), citrus fruits, grapes, and strawberries. Paralleling, indeed impelling, irrigation district growth in exports was a new international division of labor in agriculture: this new specialization favored the production of basic foodstuffs in the United States and the production of exportable luxury foods in the traditional peasant areas of Mexico. Campesinos in the Bajio began to grow sweet corn, peas, strawberries, and asparagus for export and buy imported grains for consumption (de Janvry, 1980: 370). Producers in the Yaqui and Mayo valleys turned away from wheat to cotton and then to oilseeds, as prices and markets demanded. While the irrigated districts still grew almost all of the Mexican wheat crop, new areas under irrigation moved to other (luxury) foodstuff crops and cattle fodder. The technological package associated with export agriculture — its mechanization and the use of improved seeds, pesticides, fertilizers, etc. — was also part of -this new international division of labor, the implications of which will be dealt with in a separate section. The trend in export agriculture was clear: the concentration and capitalization of both ejidal and private land tenure in the irrigation districts; the marginalization or eradication of subsistence providers in rain-fed regions and their proletarianization on large farms; the steady energy- and labor- intensification of export crops; and the increasing pressure to hold down inputs of labor and energy for the sake of export competitiveness. Recent trends in agricultural production in the irrigated districts of Mexico also show an increasing role for two crop types: fodder for animals and export fruits and vegetables (see table XII). In both irrigated and non- irrigated areas, such forage crops as alfalfa and sorghum replace corn as a basic crop; oleaginous crops are TABLE XII PRODUCTION BY CROP TYPE IN MEXICO'S FEDERAL IRRIGATION DISTRICTS, 1970-1978

PERCENT OF TOTAL PRODUCTION Change in Area Crop Type 1969-70 1974-75 1977-78 (ha), 1970-78 Grains 59.50 57.79 53.73 -205,416 Other foods 3.25 3.23 3.77 + 36,375 Forage 4.63 6.72 7.78 + 127,084 Oleaginous 12.96 18.67 16.50 + 190,898 Textiles 13.39 6.01 9.09 -50,126 Industrial 3.50 4.20 4.61 + 56,542 Fruits 1.99 2.36 3.80 +68,916 Flowers 0.08 0.02 0.02 -1,329 Seeds 0.02 0.02 0.04 +677 Other 0.68 0.98 0.66 + 3,531

Source: SARH, DGEA (1979). - 39 - increasingly planted and used for cattle and poultry feed. The leader in oil-seeds, soya, is not cultivated because it is an efficient source of vegetable oil so much as because it renders profitable soya meal for animal feed (Fornari, 1979). If we look to beans, corn and squash (basic foods) in the irrigation districts, it is clear that they have suffered in relation to export crop growth (see table XII). Likewise, as the irrigation districts have specialized in fruits and vegetables for export, industrial processing, and cattle feed, credit and resources for traditional crops have disap- peared (until the inauguration of the SAM). Needless to say, with the marginalization of the subsistence or family farmer, new credits for such crops are hardly likely to be well -distributed. Import-substitution industrialization ,and the export orientation of the irrigation districts have been comple- mented by a more general decapitalization of the agricultural sector as a whole. Industrialization policies, investment incentives, the orientation of the banking system, and food prices at the retail level have all contributed to a general decapitalization of agriculture, estimated at about $2.5 billion pesos in lost capital from 1942-1962 (CDIA, 1974: table 11-21; Solis, 1967: 63). Along with the stagnation of ejidal credit (which at its best had never fully penetrated the public farming sector) and the transformation of rural class relations, general food production stagnated during the 1960s and 1970s, while export and cattle-fodder production grew. Rural class relations changed with the growth of the irrigation districts in ways more profound than the marginalization of the ejidatario and minifundista. Their transformation from landholders to agricultural laborers, tied to the export orientation of the agricultural economy and its capitalization, destroyed the foundation of the campesinado so recently given land in postrevolutionary land- reform programs. The establishment of seasonal migration circuits — day workers who shifted from asparagus to cotton to tomatoes in Baja California, Coahuila, Sonora, and Sinaloa (Pare, 1979) — contributed to the maldistribution of income, emigration, and consequent pressure on urban services. Privileged ejidatarios in irrigation districts often found themselves taking anti-reform political positions because of pressures on their lands by landless agricultural workers who personified the ejidatarios' own heritage (Sanderson, 1979). More importantly, the relatively labor- - 40 -

intensive export vegetable industry found in the irrigation districts have lured marginal ejidatarios and minifundistas to abandon their lands and take their places in the labor reserve made available by the local rendition of the new international division of labor. Intimately linked to the expanded agricultural trade between the United States and Mexico and its shifting character is the expansion of capital in the agricultural sector. In addition to the capitalization of farms themselves, in the U.S.-Mexican context there has been a tendency for agricultural products to be produced, consumed, distributed and exchanged on an international level as well. That is, U.S.-Mexican agricultural relations are not simply commodity trade relations, but reflective of a genuine internationalization of agricultural production and the social relations it embodies. That internationalization results partly from historical trends in the sector, some of which we have traced briefly. Other trends which have tended to internationalize agricultural production include the integration of multinational enterprises across the border; the specialization of production, consumption, and exchange within the U.S.-Mexican economy; shifts in comparative advantage within the U.S. agricultural system; and the increasing importance of contract agriculture as a means of controlling agricultural production without risk to the contracting agent. This essay will treat these issues below.

Winter Vegetables

In winter vegetable production, trade is the mechanism of internationalization. The growth of import- substitution industrialization policies encouraged traditional exporters of agricultural commodities to refine and expand their linkages to the north and to react in their production priorities to the U.S. consumer market. Since 1961, when growers organized the National Union of Vegetable Producers (UniOn Nacional de Productores de Hortalizas), there has been a rapid internationalization of the production, consumption, exchange and distribution of tomatoes, bell peppers, squash, green onions, and eggplant in the Mexican North. This internationalization has rendered the definition of "national producer" in the traditional sense obsolete (Sanderson, 1981b; Mares, 1981; Rama and Vigorito, 1979). Through production - 41 -

contracting with local intermediaries as well as U.S. distributors and multinational food processing firms, the farmers of the Bajio and Sinaloa — along with other secondary contributors — divert important land and resources from the production of basic grains (Barkin and Suarez, 1980). The Mexican government participates in production for export through credit facilities, a national tomato production plan (SARH, 1979d), and public irrigation works, as well as more subtle forms of support including turning a blind eye toward land concentration beyond legal limits, legitimate land reform petitions, and minimum wage com- plaints from day workers (Cecena et al., 1973). An interesting aspect of the winter vegetable trade is the cross-national sectoral alliances formed between Mex- ican producers, border distributors, and U.S. and Canadian retailers. The Mexican national tomato plan, for instance, is geared to market expectations and information emanating on an hourly basis from the West Mexico Vegetable Distributors Association in Nogales, Arizona, through which 85-90 percent of Mexican produce exports pass (UNPH, 1979; Rubio Valdez, 1978). The Mexican producers send their products to Nogales on consignment, in the amounts requested by the distributors. Most distributors have contracts with Mexican farmers and negotiate the sale of fresh produce with American and Canadian retail outlets, often through their own regional distributors. The Mexican producer has no immediate priting power; nor do Mexican producers have a domestic "safety valve" or -spillover market, since export-quality produce is too expensive and not part of the basic Mexican market.12 While it is true that Mexican growers do control to a certain extent the size of production for export, grower expectations concerning the market for their produce emanate almost exclusively from the importing agent: the U.S. distributors. The freshness of the produce in question is a critical matter. Mexican producers are captive sellers of their marketing outlets, because the shelf-life of their produce is short, and the domestic transport and marketing facilities are inadequate to provide a domestic outlet for high- priced, export-quality produce (Zepp and Simmons, 1979: 50). In most situations, Mexican producers send to

12. For price data and differentiation by destination, see Mexico, SARH, 1979c. - 42 -

Nogales all they can; only when prices are extremely low do they divert their smaller tomatoes to the domestic market to buoy prices in the United States. At whatever price, selling is a rational decision for the Mexican producer, because recovering part of the cost of production is better than recovering nothing (Simmons, 1979). Tomato producers have on occasion had to dump produce to rot for lack of markets. In the language of conventional trade theory, the "factor intensity" (or organic composition of capital) of winter vegetable production favors Mexico, principally due to the widespread use of (internal) migrant and resident farm labor there as compared with Florida. That trend has been intensified by such phenomena as the Mexican rural population boom, the decline of agrarian reform grants, the concentration of capital in agriculture, and on the U.S. side, increasingly expensive oil and fertilizer combined with durable land boom and low commodity prices. These factors also ease the internationalization of agricultural production and trade (as evidenced through the increased participation of multinational corporations — MNCs — in food processing and marketing). The prospect of continuing export expansion in winter vegetables, however, is not unambiguous. Although the Mexican government — and U.S. producers threatened by Mexican export competition — have assumed that Mex- ican production of winter vegetables will continue to grow at an accelerated rate in the 1980s, there are serious questions about such an assumption. Productivity increases have permitted a gradual increase in tomato exports over the last decade, but there has been no great secular increase in cultivation of export tomatoes. Furth- ermore, there is strong evidence that the cost advantages which have made Mexican tomatoes competitive in the U.S. and Canadian markets are diminishing (although this is not necessarily true for processed produce). Wage increases, although small in real terms, have outstripped U.S. wage increases in the sector, and the national rate of inflation is greater than that of the United States (Zepp and Simmons, 1979: 50). The critical point is that the marketplace is truly international. The market is not simply the organizational nexus for buyers and sellers, but extends also to the conditions, technologies, supplies, and labor/capital intensity of production in winter vegetables. Likewise, there is no - 43 - effective means of separating the U.S. and Canadian winter vegetable market from national markets for the same produce in Mexico. For instance, although the Mexi- can market is effectively split as far as the control over and destination of produce, the weak Mexican domestic market for winter vegetables of export quality has no separate price structure. The significance of this observation is that the production, consumption, exchange, and distribution of export vegetables from Mexico is an international economic phenomenon guided not simply by nationalist producers in Mexico, but by an integrated productive apparatus based on production contracts and consignment sales. As in northern Mexico's beef industry, production in certain highly technological zones has been effectively separated from the needs of the domestic market in favor of export markets, especially that of the United States. As a later phase of this research will show, that separation extends as well to the agribusiness complex in each country and is not simply a trade-related phenomenon. A more significant consequence of this market internationalization is that theories of comparative advantage, focusing on relative factor endowments, economic structures, and organic composition of capital do not explain the complex reality of a binatiopally integrated market. In this market structure, the production function of winter vegetables is determined, not by highly variable technologies, but by the socially determined price of agricultural labor in a truly international context, or the subsidized price of other elements of production (e.g., fertilizer, water) which accrue principally to internationalized elements of the sector.13 It is equally important to recognize that virtually all of Mexican production of winter vegetables is consumed in external markets. This is not to say that no winter vegetables are consumed in Mexico, nor that the market for processed vegetables is not growing in Mexico. Data indicate, however, that winter vegetables sold in

13. It is well known, for example, that the SARH subsidizes users' fees for water in irrigation districts, and exercises direct control over fertilizer prices through the state monopoly FERTIMEX and energy prices through PEMEX. If it is not entirely accurate to say that these benefits accrue exclusively to the export sector, it is true that they do benefit the internationalized sector in the broader sense of internationalized production (e.g., via agribusiness). - 44 -

Mexico are rarely of export quality, are sold at a substan- tially lower price, and represent more of a spillover than a primary market for the export farmer (SARH, 1979c). Because of the internationalization of productive arrangements (in this case through commodity trade and integration), the social relations of production and consumption are governed in some profound sense at the international level, and their primary agent is capital, not the state. Previous attempts to understand the increasing importance of multinational enterprises in the internationalization of economic affairs have focused on dependency, imperialism, the product cycle, and institutional imperatives for expansion (Evans, 1979; Fagen, 1979a; Girvan, 1976; Moran, 1974; O'Donnell and Linck, 1973; Thomas, 1974). But the argument to be pursued here focuses on the logic of capitalist accumulation and the multinational enterprise as an agent of that logic. Whether we see the relationship as centering on trade or a more directly integrated agribusiness investment, the objective nature of the relationship remains the same. The rationalization of production at the international level is the key to the process. That process, in turn, demands greater economic integration and a change in the international division of labor. In the abstract, this internationalization is the direct product of the need of capital to compete, to expand, and maximize profits (valorize) through technological transformation, market expansion, and greater rates of exploitation of the labor force (Sweezy, 1942; Palloix, 1977; Frobel et al., 1980; Hymer, 1972). At a more concrete level, the internationalization of capital through productive expansion is manifest in import-substitution industrialization, MNC expansion in industries of transformation (as well as production goods), and the organization of traditional labor forces as wage laborers as well as consumers in new markets. In fresh fruits and vegetables, including tomatoes, the fresh produce market is governed by forward contracts by U.S. commercial brokers and the processed vegetable market by processors such as Del Monte, Gen- eral Foods, United Fruit, and Standard Brands, among others. Grains are also subject to these relations of production but are not always dominated by MNCs and U.S.- based brokers (Barkin and Suarez, 1980; Rama and Vigor- ito, 1979). Contract farming, which we observe throughout the sector, has many forms and many local effects (Morrissy, - 45 -

1974; Bergland, 1981). It affects the job opportunities — and thereby the class interests and position — of Mexican migrants in the United States as well as those agricultural workers (about 70,000) employed in export tomato enterprises in Mexico. It tends to denationalize economic decision-making to the extent that it replaces the nation- state and "national capitalist" decision makers with an assemblage of national, international, and state capital mediated by the forces of international markets in commodities. That shift in economic power also signals a certain dependence on external markets, not only for final consumption of agricultural commodities, but for price, transport, packaging, regulation, technology, and ultimately the viability of the sector itself. Whatever the effects of contract farming, it represents at a basic level the logical response of multinational capital searching for the lowest purchase price, the cheapest factor inputs (especially labor), the fewest constraints, and the smallest investment risks of farm proprie- torship. The contractor of tomatoes, for example, can reach across the Mexican border to harvest secure supplies of low-priced, high-quality tomatoes which Mexico might not otherwise produce — and certainly does not produce for domestic consumption. To a great extent that contractor and other industry leaders (including those in Mexico) can ensure over the long run the varieties of produce, the technology employed, and the levels of pesticide residues. Since the produce is delivered on consignment, the distributor essentially assumes no risk as long as the market remains stable enough to continue his contracts.

Fruit

The area of fruit production reveals some of the most interesting class and sectoral characteristics of the internationalization of Mexican agricultural production. Aside from the general comment that fruit cultivation has been taking an ever larger share of irrigation district production over the past decade (see tables XII and XIII), it is important to note that fruit production has typically come most heavily from private irrigated areas, subsidized but not governed by the federal government (SARH, 1974). Not only has fruit production taken an increasing share of federally controlled irrigated land, but it has also TABLE XIII

PRODUCTION OF SELECTED FRUITS IN MEXICO'S FEDERAL IRRIGATION DISTRICTS, 1969-1978

1969-1970 1977-1978 Crop Area Value Area Value (hectares) (thousands of pesos) (hectares) (thousands of pesos)

Citrus 5,222 16,582 3,516 128,949

Strawberries 3,126 81,683 4,663 439,463

Watermelons 3,937 41,682 7,643 195,573

Grapes 7,635 79,349 18,979 866,719

Source: SARH, DGEA (1979). - 47 - significantly affected the prospects for food production in private irrigated lands. Second, production of fruit, especially pineapple and grapes, is one of the leading growth areas in Mexican export agriculture (see table XIII). On the Coast of Hermo- sillo, grape producers benefited greatly from federal irrigation and colonization projects in the 1950s and one of the largest pump irrigation districts in the Northwest. Grape harvests have nearly quintupled in area, and producers increased their output six-fold. Total nominal revenues from grapes in that district increased from 7.9 million pesos in 1970 to 202.5 million in 1977, despite the recession and problems with energy and land tenure in the area (SARH, 1979a). During that same period, wheat production declined over 100,000 tons in the district, despite strong government pressure and incentives to maintain traditionally high levels of wheat production. The region's other major products — cotton, safflower, sorghum, soya, and beans — all either stagnated or declined radically. The Laguna region of Durango-Coahuila experienced similar changes, with grape cultivation increasing in pump irrigation areas, but yielding variable results in harvest tonnage. In grape production, the market has clearly changed in the past fifteen years, with more production devoted to export and new producers appearing mainly in the northern irrigation districts and private pump irrigation areas. Sonora alone has some 20,000 hectares devoted to existing vineyards with an equivalent amount due to be planted in the near future. According to a 1979 USDA report, Sonoran production of grapes, raisins and wine will likely double by the mid-1980s (Emerson, 1979). According to that same report, Mexican table grape exports may grow to represent more than half of U.S. grape imports and 10 percent of annual U.S. consumption. Currently, of the four largest producers of grapes in Mexico, three states (Durango, Coahuila, and Sonora) are northern parvenus, with only Aguascalientes representing , old viniculture (SARH, 1979c). The geographic center has moved northward, not only in response to new irrigation areas and better weather, but also due to the export market for fresh grapes and related transport requirements. - 48 -

Pineapple is another fruit which offers insights into changing agricultural production with domestic impact in Mexico. From 1974 to 1980 total production of pineapple increased by 52 percent, and exports as a proportion of total production increased from 8 percent to 13 percent (see table XIV). In addition, more pineapple was "industrialized" or processed before export. Despite slight export setbacks in 1979, world demand for fresh pineapple is burgeoning (USDA, 1981b), which creates some difficulty for processors. Nevertheless, the export market for fresh pineapple seems much greater than Mexican capacity to produce and transport the fruit. Current realities suggest several important analytical points: first, pineapples appear to be following the general sectoral trend of rising proportions of industrialized product, both for domestic consumption and for export. This does not necessarily imply greater local control, since many processors are large international firms who use production contracts in Mexico to broaden their food processing investments; second, little discretion is left to the producer regarding market destination or price, although prices have generally been high. More interestingly, the increase in fresh exports seems to compete directly with canneries and exporters of the processed product. This competition obviously has the potential of making the rationalization of fresh pineapple supplies,to canners more difficult, and in 1981 canners had some difficulty continuing their operations throughout the season. This difficulty, in the context of an export surge and official export pro-- motion plans (BNCE, 1980; IMCE, 1980), offers the opportunity for the state to intervene in production contracts and stimulate new pineapple growing areas such as Loma Bonita, Oaxaca. It further encourages a model of fruit production based on agribusiness needs rather than on a more general consumer orientation (SARH, 1980c). And finally, more of the product is consumed outside the producer country, which has effects on the consumer market in Mexico, the availability of fresh produce locally, and the satisfaction of basic necessities among the lower strata of the consuming population.

Cattle

As we have seen, cattle-raising has been integrated to some extent since the 19th century. But since the TABLE XIV

PINEAPPLE PRODUCTION AND DESTINATION, 1974-1980 (Tons)

Total Industrially Fresh Processed Internal Year Production Processed Exports Exports Market

1974 397,781 159,112 13,145 18,035 225,524 1975 371,258 148,503 17,153 14,417 205,602 1976 441,564 176,626 18,736 22,634 246,202 1977 510,003 204,001 27,822 29,987 278,180 1978 561,000 224,400 37,619 33,492 298,981 1979 632,101 208,600 44,031 30,575 379,500 1980 604,600 211,600 45,000 33,500 348,000

Source: 1974-1978 data from BNCE, Comercio Exterior 30:4 (April, 1980); 1979-1980 data from USDA (1981a) - 50 - consolidation of the meatpacking industry, the geographic shift of feedlots to the U.S. Southwest following World War II, the concentration of feedlots and packing plants, and the cost-price squeeze in the U.S. feeder-cattle industry, Mexico has witnessed a boom in its potential for cattle and beef exports to the U.S. The industry was temporarily frustrated in its export program by a 1979 government shutdown in cattle exports, but the realities of the U.S.- Mexican system make a resumption of cattle exports to the United States very likely. At the very least, domestic marketing in Mexico will be disrupted by the U.S. market and companies in the sector itself. Growth in cattle production in Mexico grew along with the rationalization of the industry in the United States, due partly to production contracting and partly to conscious policy by the U.S. government. During the 1950s, cattle production grew rapidly in the north (15 percent) and in the Gulf region (41 percent), while production in the central states contracted by 5.3 percent (CEPAL, 1975: table IV). While Gulf cattle production grew rapidly to meet the increasing demand for beef for domestic consumption, the northern states, characterized by open range and low-quality grazing, remained in the hands of cattlemen who ran feeder cattle operations for export to the growing meat-packing industry in the U.S. Southwest. A small proportion of beef cattle were slaughtered in Mexico for export as fresh beef or tinned beef for U.S. contracts. Important in the evolution of the links in cattle production between the Mexican North and the U.S. were the bilateral campaigns to regulate import quality and eliminate disease. The 1947-1954 campaign against aftose fever was fought by a bilateral commission for the eradication of the disease. The commission created a program to process and can contaminated meat, which would be distributed through the U.S. Commodity Credit Corporation and consumed in various parts of the world, especially by U.S. troops. The USDA sent veterinarians and technicians to Mexico to eliminate the disease and to set up border region meat-packing plants oriented toward export to the United States (Machado, 1968; 1981). In a more benign variation than had occurred in the great meat scandal of - 51 - the Spanish-American War,14 the U.S. Government was buying low-quality "manufacture beef" for the U.S. troops from a Mexican industry that did not exist previously (UNE, 1970). After the elimination of aftosa and the recognition of the division of Mexican production into two zones — the North, free of disease and free to engage in foreign trade, and the South, without the permission or opportunity to export — Mexico began in 1955 to export frozen and fresh boned beef to the U.S. Reacting to a later amendment to the U.S. Meat Inspection Law which required that foreign plants be "at least equal to U.S. plants" in sanitary stan- dards in order to export to the United States, the Mexican government created a special category of meat-packers inspected by the Secretariat of Agriculture and Cattle- Raising. The packing houses, referred to as T.I.F. (tipo inspecciOn federal) are the only ones licensed for export, and react in their production schedules almost exclusively to the export market. In the 1970s maquila beef operations, which process live cattle imports from the United States in the free zones of the North of Mexico and ship the boned meat and offal to Japan or back to the United States, have become important centers of economic activity. The market for consumption of these products in Japan appears secure, and the maquila operations provide not only an outlet for exports from the U.S., but an opportunity for the Mexican meat-packing industry to expand. Maquila beef production totalled nearly 2.7 million pounds in 1979 (USDA, 1980a: 10-11), and one of the largest investment groups in Mex- ico (Grupo Alfa) began to set up a similar integrated operation for pork export. Changes in the U.S. economy have also stimulated trade and production between U.S. and Mexican cattle feeders and packing houses. Outstanding among such changes was a significant shift in the feedlot industry in the United States, both in geographic and production terms. In the 1950s and 1960s almost all cattle not used

14. I refer to the sensational scandal related to the purchase of spoiled beef for canning and use by U.S. soldiers in the field. It is said that one of President Roosevelt's motivations in the passage of the Meat Inspec- tion and Pure Food and Drug Acts was the memory of having sampled that tainted meat. - 52 - for herd replacement were destined for feedlots, in response to the burgeoning demand for high-quality beef in the United States (Wirak, 1977: 11; Scherz et al., 1979). Much of the growth in the feedlot industry took place in the high plains of Texas and the Southwest. Feedlot size increased dramatically during the 1960s, and the industry became vertically integrated to a greater degree. The U.S. feedlot industry was concentrated in 23 states, and larger producers (over 16,000-head capacity) were found pri- marily in the Southwest (Arizona, California, Colorado, New Mexico, and Texas) and in Washington, Nebraska, and Kansas (Dyer and O'Mary, 1977: 18). This geographic shift and concentration in the feedlot industry related to changes in the international division of labor, since it came on the heels of improvements in refrigeration and transport which permitted the deconcentration of meat- packing to the benefit of new entrants such as feedlot owners (Arnould, 1971). The significance for Mexico of this shift in production and processing has come since the onset of the 1974 recession. The effects of feedlot concentration in the Southwest have included a tendency to shift feeder cattle operations away from marginal U.S. producers — the group who benefited most from the growth period 1950 to 1970 — who suffer a cost-price squeeze. Production is shifted geographically to the benefit of Mexican producers under contract who have advantages in size, transport costs, and capacity to produce for the U.S. market. A related phenomenon has been the disappearance of range beef from the U.S. cattle system. The production of "manufacture beef" (low-quality beef for processing) has experienced a boom in recent years. U.S. consumers, themselves beset by inflation, appear to be stimulating supplies of manufacture beef and live range cattle through changes in their beef consumption patterns. Ground beef consumption as a proportion of total beef consumption per capita has crept up since 1970, as table XV shows. Although the import content of that ground beef consumption has remained relatively constant (at 13-15 percent) over the short term, this may be due to spurious effects caused by an incomplete picture of the overall beef cycle or to stopgap interventions by the Mexican government in the export of range beef cattle. Given the difficulties experienced by cow-calf operators and the increasing cost of land and inputs, one can hardly expect the United - 53 -

TABLE XV

PER-CAPITA BEEF SUPPLY IN THE UNITED STATES, 1970-1977 (Pounds)

Percentage of Ground-Processed All Total Sold as Year Beef Beef Ground-Processed

1970 46.6 114.6 40.7

1971 46.5 113.6 40.9

1972 46.8 115.8 40.4

1973 45.2 108.5 41.7

1974 49.3 114.7 43.0

1975 57.9 118.2 49.0

1976 59.3 127.5 46.5

1977 55.2 122.8 45.0

Source: Simpson and Degner (1978).

States cattle system to provide higher amounts of range beef in the future. In any event, the U.S. market exerts a strong "pull" attracting Mexico's northern range cattle, which when mixed with fat from U.S. domestic trimmings offers a cheap-quality beef, not only for fresh beef consumption, but for the booming fast-food and processed food industries (UNE, 1970: 43; USITC, 1977: 12). The increasing concentration of the feedlot industry and the integration of cattle-fodder production, balanced feed, meat-packing, and retailing operations mark a new and different level of internationalization in this sector (Ward et al., 1977). Increased use of soybeans and other grain additives in "blended beef" also may pose a future pricing - 54 -

problem for Mexican importers of basic grains (Simpson and Degner, 1978). In beef-cattle production, we again see the recurring theme of the divided Mexican market. That is not to say that the Mexican market is divided in any strict sense, with one section of the country being part of a separate structure of production and public-policy environment. Rather, it is the thesis of this study that the very integration of the national system into the international capitalist system permits the bifurcation of the Mexican market. The northern frontier states, which have more than 27 percent of the nation's beef cattle (SARH, 1977: 11) and less than 20 percent of the population, generally serve markets to the north of the border, not the concentrated consumer population of the Mexican central plateau. This essay has described some of the more important historical reasons for the regional separation of the north from the central and southern regions of the country. To those we might add the limited exploitation of the desertic regions of the present Mexican borderlands by industries that provided little social infrastructure for permanent settlement (Fur- tado, 1976: 47ff.); the sparse and hostile populations of the U.S. Southwest and Mexican North which remained belligerent toward the Mexican government until after the Mexican revolution of 1910-1917 (Spicer, 1962); the special character of concessional development of the coastal river valleys, mining centers, and rich oil fields by North American and British speculators in the late 19th century; and the tradition of fierce independence which was a political mainstay of the federalist northern frontier from the end of the colonial period. The production of Mexican cattle and beef for export has created political problems such as the conflict over beef and cattle exports after the Federal District suffered serious shortages in 1979. Furthermore, it encourages the deforestation and dispossession of basic cropland in the Center and South of Mexico for the sake of compensating the domestic market for the beef not supplied by northern ganaderos. The progressive internationalization of the sector itself permits the commercial and capital linkages that make the "modern" element of Mexico's beef cattle system (as well as its poultry and pork production systems) direct its capital and energies toward urban markets rather than rural, and to foreign markets rather than domestic. - 55 -

In fact, the northern cattlemen have given a great stimulus to the Mexican beef cattle industry, a stimulus with profound negative social consequences for the daily diets of the Mexican population, given the class bias of beef (and meat in general) as a consumer commodity. As tables XVI and XVII show, the daily meat consumption of the Mexican population does not extend to the lower classes of Mexican society; what those tables do not show is that the livelihood of non-consumers of meat is affected by the production of beef and animal feed in Mexico.

TABLE XVI

DAILY MEAT CONSUMPTION OF THE MEXICAN POPULATION, 1970

Days per Week of Consuming Cumulative Meat Consumption Population Population

0 9,979,154 9,979,154

1 8,198,005 18,177,159

2 8,908,260 27,085,419

3 7,377,096 34,462,515

4 3,822,412 38,284,927

5 1,424,266 39,709,193

6 1,366,773 41,075,966

7 8,131,397 49,207,363

Source: SAG (1975). - 56 -

TABLE XVII

MEXICAN BEEF CONSUMPTION BY INCOME GROUP, 1975

Average Monthly Income Monthly Consumption (pesos) (kilograms)

0 3.4 1-300 1.2 301-400 1.9 401-530 1.2 531-700 2.1 701-950 4.4 951-1250 3.4 1251-1700 5.0 1701-2200 5.8 2201-3000 7.2 3001-4000 8.5 4001-5200 8.9 5201-7500 10.4 Above 7500 12.1

Source: SPP (1979). - 57 -

III

IMPLICATIONS OF THE INTERNATIONALIZATION OF MEXICAN AGRICULTURE THROUGH TRADE

It is clear from episodes such as the notorious "Florida Tomato War" that American producers feel the effects of the internationalization of U.S.-Mexican agriculture, whether those effects are perceived (incorrectly, in the case of tomatoes) as encroachments on the market share of domestic producers or as a more general movement of a sector's activities "offshore." Clearly, U.S. exports of basic grains to Mexico have increased and probably will continue to increase, despite the episodic setbacks apparent in the 1 981 crop year. This export expansion from the U.S. side is due in part to the export orientation of Mexican agriculture, as well as to certain technological and energy advantages U.S. grain producers have traditionally enjoyed. The expansion of U.S. agricultural exports since the 1950s is not simply a trade phenomenon brought about -by the competitiveness and productivity of the U.S. farmer. We must begin to understand the export market structure for U.S. agriculture as an integrated function of the international expansion of production, advanced partly through trade. The continuation of this process depends on the further integration of capital at the international level and on a more complete and durable version of the international division of labor. The reorganization of U.S.-Mexican agriculture on the basis of a more internationally integrated model has political and economic implications that penetrate to the core of the state's capacity to make agricultural policy, to address the issues of rural development and nutrition, and to ensure the livelihood of the Mexican campesino. In the, United States, agricultural policy in the age of structural transformation is also encouraging new political coalitions, new state policies toward subsidies and credit, and a real marginalization of some kinds of farm activities. Neverthe- less, because of the small part of the population engaged in farming, the lack of a revolutionary tradition, the low - 58 - levels of state involvement in farm policy in the United States, and the immediacy and gravity of the Mexican food crisis, one dare not speak of the two states' problematicas in the same breath. At the same time, the new international division of labor presents itself to U.S. producers of leather goods, grapes and raisins, asparagus and winter vegetables, citrus and pineapples, and feeder cattle as a problem of great substance which threatens their ability to produce in a more open international market. The hostili- ties engendered by such transformations — which have many historical analogs in the annals of American trade — create a climate of tension and resuscitate barely hidden protectionist sentiments which formed the bedrock of earlier farm interests. According to the most recent figures, in 1980 Mexico imported agricultural commodities from the United States valued at 2.49 billion dollars — part of a U.S.-Mexico agricultural trade bill totalling over $3.5 billion (USDA, 1981a: 45-46). Although the huge expansion of U.S. exports to Mexico during the late 1970s is partially explained by severe drought in Mexico during those years, high levels of grain imports from the United States are expected to continue in the 1980s. For 1981, the first full year of the SAM and a record crop year, Mexico and the United States have signed an agreement providing for 6.1 to 8.1 million tons of basic agricultural commodities (USDA, 1981a: 7). Mexico will continue to import wheat in the foreseeable future because increases in domestic demand (estimated by the Mexican government at 250,000 tons per year) cannot be met by increasing the already high yields of the modern Mexican irrigation districts or by extending the acreage available for wheat cultivation in a water- and land-short environment (USDA, 1981c: 3). In the cases of grain sorghum and soya, burgeoning demand for cattle and poultry feed throughout Latin America and the explicit Mexican government policy of substituting maize cultivation for sorghum in rain-fed districts militate toward a continuation of present trends in U.S. agricultural exports to Mexico. It is clear at first glance that imports of wheat, rice, barley, corn, soya and other key products have skyrocketed in both volume and value since 1971 (see table XVIII). Although sorghum yields have nearly doubled since 1971 (CANACINTRA, 1978), the demand for cattle fodder and balanced feed has outstripped the capacity of the - 59 - system to provide for local consumption. The USDA has projected a possible increase to 4 million tons in Mexico's requirements for soybeans alone. It is important to recognize that if current patterns abide, only about 8-10 percent of those soybean imports and almost none of the sorghum imports provide food for direct human consumption (USDA, 1978b: 2). Of course, soya and sorghum imports really do result in more food product than the above paragraph suggests, if we take into account the indirect impact they have as providers of animal protein. Mexican consumption of pork, poultry, and beef has increased recently, with pork leading the way (USDA, 1978b). With an increasing demand for animal protein not unlike other "middle-income developing countries," Mexico is likely to continue demanding more balanced feed than it can produce. Nevertheless, it must be recognized that the generation of protein through animal raising is a terribly inefficient means of improving diet (Ward et al., 1977). Also, meat in Mexico is, like other luxury foodstuffs, a class-biased commodity. As tables XVI and XVII show, lower-income Mexicans radically underconsume meat, relative to the rest of the population. Their underconsumption of meat, fish, eggs, and other animal proteins provides a clear example of the diversion of the Mexican food system _from the production of basic foodstuffs for the majority of the population in favor of a set of products which are international not only in their productive circumstances, but also in their dietary mix and class bias. In addition to the structural increase in demand for more cattle, eggs, poultry, and pork for urban consumers, chronic drought has induced pressure for production of more cattle feed in those rain-fed districts which the government has supplied with infrastructure, credit, extension, and the like. We may take as an example the new government emphasis on federal distritos de temporal (Ley de Fomento Agropecuario, 1981: Ch. II). Drought and overpasturage combine to threaten natural forage for cattle, and government and growers have encouraged the' replacement of certain basic food crops with feed grasses such as rye and alfalfa (SAG, 1975: 17). The new reforms of the federal Agrarian Reform Law, part of the legal com- plement of the SAM, actually created a new category of landholding which benefited integrated cattle enterprises. Through the new law, certain cattle holdings are endowed TABLE XVIII

SELECTED U.S. EXPORTS TO MEXICO, 1971 AND 1979

1971 1979 Commodity Volume Value Volume Value (pounds) (dollars)a (pounds) (dollars)a

Non-fat dry milk 30,357,698 4,526,723 33,059,671 2,900,790

Wheat 7,337,474 11,267,181 43,289,593 86,515,803

Rice 1,322,552 115,671 31,927,870 82,340,650

Barley 205,870 235,348 2,310,358 3,900,790

Corn 629,941 1,101,579 34,502,513 50,076,383

Grain Sorghum 479,357 653,458 52,910,016 67,610,623

Oranges 384,603 23,268 N.A. N.A.

Limes 349,850 16,364 N.A. N.A. Grapefruit 338,000 17,900 N.A. N.A.

Grapes 456,902 40,122 1,101,952 133,011

Raisins 3,754,544 442,426 434,776 243,383

Beans 18,795,352 1,588,495 47,249,917 3,858,648

Animal Feed 2,392 106,641 38,355 3,665,496

Cattle Hides 2,194,779b 15,714,815 10,698,177b 41,823,529

Soybeans 2,031,198 5,807,932 14,977,437 51,921,422

Animal fats, oils 4,052,220 340,752 4,523,891 891,572

Soya Oil 363,240 41,128 1,177,755 178,665

Source: U.S. Department of Commerce, Commodity Trade Schedule B. a1967 dollars. bCattle hides are measured in units rather than by weight.

.. - 62 -

with certificates of immunity from agrarian reform petitions and, for the first time, permitted to grow and sell forage crops. (Earlier laws had successively forbidden and then limited the cultivation of forage or any other crops on land held in immunity from agrarian reform petitions, on the grounds that such land was strictly susceptible to cattle- grazing and not fit for agricultural purposes.) Returning for the moment to the more general issues of trade in both directions and its impact on the receiving and sending societies, it is clear that Mexico suffers inor- dinately from the internationalization of its agriculture via the denationalization of agricultural production. This denationalization comes about through the mechanisms of contract agriculture, control of food processing and animal feed industries by enterprises linked to the international market, and the realization of many export products outside the country without a parallel market at home. Con- tract agriculture, with which we have only dealt briefly, undermines national priorities for domestic food production, whether through the price mechanism in agricultural products (inducing farmers to prefer vineyards to wheat or carotins over corn), or through long-term contractual relationships of the kind that characterize tomato or pineapple production. Production of cattle for export creates a most difficult situation for the Mexican state. In fact, the clamor in Mexico City over beef shortfalls forced the government to close the border to all beef exports and reduce exports of feeder cattle. The border is closed despite the realization that the infrastructure, feedlots, and feed supply situation make it difficult to convert to domestic purposes the rarefied product yielded by purebred calf breeders in the north. The distribution and sale of agricultural and cattle products outside the country with little or no parallel internal market has a number of negative effects for Mexico. Those producers linked to such markets have little pricing power, as has been demonstrated by the price sensitivity to U.S. markets of Mexican tomatoes and range cattle. Moreover, as has been demonstrated in the case of the cattle industry, market and contract relationships which endure over long periods of time are difficult to break or to reorient toward domestic priorities. The dilemmas entailed in transforming the northern feeder calf industry to domestic use are colossal, and easy solutions have eluded the government and the private sector thus far. In fact, it /

- 63 - might be more accurate to say that the cutoff of beef cattle exports to the United States has merely diverted attention to other, more secure and lucrative markets such as hog fattening and processing for the Japanese market (a recent Grupo Alfa venture). Interestingly, the prospect of increasing internationalization in pork might well induce more pressure on balanced feed industries than increased exports or domestic consumption of beef, as 18 percent of current balanced feed supplies are consumed in porcicul- ture, as opposed to 11 percent in beef cattle (Rama and Rello, 1980). This dynamic needs more study. Furthermore, a series of class consequences for Mex- ico result directly from the internationalization of Mexican agriculture. Beginning with the realization of agricultural products outside the country, it is fair to say that therein lies a fundamental irrationality: Mexico is a country producing luxury consumer goods for export to the United States, while large segments of its rural and urban populations go hungry. That class consequence is made even less tolerable by the fact that the sine qua non of that export production has been the proletarianization of the Mexican campesino at a low wage. By destroying the land base of the traditional Mexican farmer and building large commercial enterprises and multinational trade networks, the Mexican government and private sector have allied themselves with those who argue that comparative advantage governs the production of tomatoes and fruits for export. It is a comparative advantage born of wage inequality, energy subsidies, and dispossession. As CONASUP015 and SAM have both witnessed, if Mexico is to progress in agricultural production and rural development, there must be some larger logic governing a socially determined comparative advantage. That concept of comparative advantage must be formed with a conscious political intent to resolve some of the grosser inadequacies of the food system using a rationality broader than that of simple aggregate economic advantage (Barkin and Esteva, 1981). Of course, the class consequences of the internationalization of capital are much more complex than we can recount here; they are to some extent a function of the

15. Compania Nacional de Subsistencias Populares. - 64 - sector of activity, the availability of alternative crops and laborers, the part played by international migrants in the cultivation of a given crop, etc. Class consequences at the national level are compounded by the fact that competing producers in winter vegetable and fruit industries use migrant labor to challenge the wage advantage of Mexican labor. At the same time, the Mexican agricultural complex is also subject to the internal logic of technological modernization and the drive to valorize capital and reproduce the labor process. So the Mexican farm system — although it continues to have a much higher labor com- ponent than its North American counterparts — tends gradually to mechanize and to reduce labor possibilities, not only within the cultivation of crops themselves, but within agribusiness processing as well. Despite a tendency to favor labor-intensive export crops over capital- intensive imports of basic foods — the average number of workdays for Mexican export crops is 163, compared with 28 workdays for U.S. imports to Mexico (Gonzalez Rodriguez, 1979: 77) — Mexican agricultural productivity per worker is very low and value added per dollar investment befits the abysmal rural wage (Gonzalez Rodriguez, 1979: 78).

The Intervention of the State

As was mentioned above, the internationalization of Mexican agricultural production has as one of its principal consequences the denationalization of political and economic control over the agricultural sector. Neverthe- less, in the case of Mexico, the state maintains a very high level of intervention in the rural arena, thanks as much to the enormous bureaucratic apparatus engaged in agrarian matters as to the seven decades of agrarian reform struggle at the national level. From the direct intervention in the marketplace as a capitalist (in the form of TABAMEX, CORDIMEX, FINASA, among others)16 to the productive

16. TABAMEX, CORDIMEX, and FINASA are the Mexican government corporations engaged in tobacco, henequen, and sugar, respectively. - 65 - and distributive tentacles of CONASUP017 or the more modest tripartite negotiation of the national tomato plan or irrigation priorities in federal districts, the Mexican state is deeply involved in what is produced in the Mexican countryside. Added to that direct productive role, of course, is an important infrastructural one, which ranges from the building and maintenance of large irrigation works, sewage and drainage systems, roads, transport networks, and similar supports for rural production to the generation of a large amount of rural credit through official and private agricultural banks. In this respect, the SAM alone is estimated to have a $3.5 billion budget for 1981 (USDA, 1981c), much of which will be funnelled through the rural bank. Finally, and of critical importance, the state has maintained a functioning bureaucracy dealing with the tenure and exploitation of the land, the organization of rural producers and workers, and the generation of domestic foodstuffs through agricultural organization. Although the agrarian reform aspect of the state's intervention in the rural economy has perhaps been mortally wounded by the political coalitions and economic exigencies governing the oil boom, it is still impossible to ignore the "reform sector" of Mexican rural politics. The largesse accompanying the public appropriation — however momentary — of the oil boom profits enabled the state to take new interest in the agricultural sector, which quickly changed the 1977 atmosphere of fiscal austerity toward rural development to a palpable enthusiasm over the financial and political possibilities of the SAM in 1980. Added to the immediacy of the food crisis itself, and the optimistic lens through which the LOpez Portillo administration viewed development in the 1980s, was a very real concern that Mexico not replicate the Nigerian and Venezuelan models of rural development in a context of oil boom and industrialization. That is, the Mexican government professed its interests in (a) reducing the "petrolization" of the economy, especially the trade bill, and (b) avoiding excessive reliance on external markets

17. CONASUPO, a warehousing, purchasing, distributing, and retail agent for basic commodities in Mexico, is the only authorized buyer of international supplies of wheat, beans, and corn. For excellent treatments of the history, policy, and role of CONASUPO, see Grindle (1977), Barkin and Esteva (1981), and Esteva (1979). - 66 -

for the basic necessities of the Mexican economy (i.e., food). In the language of the SAM itself, the Mexican government is determined to avoid the veleidades (fickle- ness) of external markets and the spectre of vulnerability to the "food power" of the United States (SAM, 1980: 7). Nevertheless, the Mexican state's intervention in the economy and the process of internationalization is condi- tioned by several limiting factors. After the Echeverria administration failed to establish a new political coalition to govern the resurgent agrarian populism of the 1970s, the Mexican political leadership was unable or unwilling to address the rural question and the new international division of labor by reorganizing the control of economic property in the countryside. For the Leopez Portillo sexennium, at least, the agrarian reform was a dead letter. The inauguration of the "alliance for production" in 1977 was based to a great extent on the promise of security in private property and the right of unrestricted accumulation of capital for the private sector, both obviously negating serious notions of state-led agrarian reform. Internationally, the Mexican state is faced with an obligation to create and maintain a "safe investment climate," not only to secure direct foreign investment in the industrial sector, but also to cement the positive bargain- ing position of Mexico in seeking international financial investment. Also, despite the oil boom — indeed, partly because of it — the Mexican foreign debt and balance of payments disequilibrium has worsened. Agricultural export promotion and market diversification have continued to figure as important elements in the basic economic plan of Mexico, especially in light of the incapacity of the manufacturing sector to make sufficient headway in international markets. So, in spite of the domestic self- sufficiency plan for basic grains embodied in the SAM, there is a continuing emphasis in diverting rural credit, infrastructure, and other resources to crops destined for agribusiness processing and international trade. Finally, related to the concern for international trade expansion in manufactures is the necessity of providing some hedge against domestic wage increases. The LOpez Portillo government managed to control the demands of organized labor every year since 1977. But the political milieu of current (and future) state policy toward agriculture must include the desire to provide basic foodstuffs to urban markets at a low price, at least partly to avoid - 67 - demands for high wage increases which reduce the competitive possibilities for industrialized exports. In this sense, the government's program of agricultural growth with SAM as its centerpiece is also a twofold subsidy encouraging the deeper internationalization of the economy as a whole. That is, in addition to benefiting from nationally controlled prices for energy inputs to industry (at a rate much lower than comparable prices elsewhere in the world), and a large set of infrastructure projects fueled by the revenues from the oil boom, the industrial sector benefits indirectly from the energy, price, and fertilizer subsidies granted to the agricultural sector, as well as the spinoff benefits of dampening the inevitable inflation and its effects on wage demands. In this rather circuitous fashion, there is an embodied energy transfer from Mexico to the international system as a whole, via the use of the oil boom to deepen the process of international integration in both agriculture and industry. Given these constraints on the development of the Mexican state's response to the dynamic described in these pages, it is not surprising to find that the general policy toward the agricultural sector involves, in the self- description of the SAM: the current world crisis and its potential for disrupting Mexican development; problems feeding the Mexican population; problems employing the Mexican workforce; the need to strengthen the state; the need to develop a larger .and more fully articulated national market; the need to create popular alliances in the countryside; the problem of creating a "convergence" between food and oil ("sembrar el petroleo"); a redistribution of national income without disrupting property; and a reassertion of the independence of Mexico as a nation. More modestly, and yet still at a level of ambition little known in modern Third World governments, the SAM has the following short-term goals:

• To provide a target population of 19 million people in 688 municipalities with a basic food basket to improve their nutrition. Of the target population, 6 million are urban, 13 million rural.

• To revive agricultural production among small- holders and ejidatarios in rain-fed districts, to organize them, to subsidize their production and others' consumption, and to modernize their - 68 -

output. Involved in this operation is a set of subsidies by the state for fertilizer (a 30 percent price reduction), credit (reduced from 14 per-- cent to 3 percent), improved seeds (a 75 percent reduction in price), and crop insurance (increased coverage with government responsibility).

o To deliver the increased product to the undernourished at a low price (target price 13 pesos for the basic food basket). This, of course, involves improving infrastructure in the marginal areas, creating new grain storage and transport facilities, retail outlets and wholesale markets, and subsidizing consumption.

o To provide for the self-sufficiency of Mexico in corn and beans in 1982 and in wheat, rice, soya, safflower, sesame, and sorghum by 1985. Such a stunning achievement would involve an annual increase of 6.2 percent in corn production and of 13.1 percent in beans.

Beyond the obvious ambition of the plan, which would require a level of funding that could be met only by a state undergoing a substantial expansion in public investment funds, several interesting points about the SAM bear on our earlier treatment of the sources of the current food crisis. First, it is interesting that the SAM does not touch the irrigated districts which serve as the heartland of Mexican agricultural production. Rather, the entire SAM depends upon the recuperation of marginal rain-fed lands for the sake of domestic food production. The implication of this hope is that the rain-fed areas have somehow become unproductive through neglect and not through the same processes of economic concentration, agricultural capitalization, and export orientation which have dispos- sessed the smallholder and ejidqtario and given huge tracts of land over to cattle and their sustenance. Even in its distributive phase, the SAM has a bias favoring the internationalization of production. Even if the provision of improved crop insurance and the funneling of expanded credit to new "units of production" do have the desired effect of expanding market facilities and supplies - 69 - for basic foodstuff consumption, the new mechanisms will nevertheless favor the best-provisioned markets. Replac- ing traditional rural intermediaries with state-supported market facilities (under CONASUPO and COPLAMAR) or with integrated production supervised by the Comision Nacional de Desarrollo Agroindustrial does not address the fundamental problem of making greater supplies available to the most marginal campesino communities with the least cash and employment. If market facilities and rational commercialization and distribution procedures are expanded into certain rural zones without fundamental reorganization of the rural workforce, its wage structure, and its relation to the control of economic property, we can hope for little more than a certain "oil patronage." As a later phase of this project will show, the Comision Nacional de Desarrollo Agroindustrial, far from controlling the process of agribusiness concentration and penetration of the national economy, is trying to establish a set of "parallel structures" which duplicate agribusiness activities under the aegis of the state. The premise behind this new wave of state involvement is that the forces of market integration are inevitable, and the role of the state should therefore be to mediate those forces and to ensure a higher rate of value-added returned to the producer of agricultural raw materials. By engaging in new agroindus- tries where contracts are the dominant mode of rural organization for production, the state is helping to integrate the market further with public monies. The mer- its of an integrated market structure (in which the producer of raw pineapple or sugar cane or milk can find a regular and remunerative buyer or processor without the traditional vicissitudes of rural caciquismo) are perhaps less important than the question of how to use scarce rural development funds. If the dynamic described in this study is the abiding relationship in the Mexican countryside, then the integration of markets into the international system may well have the same long-run effects as did previous market integration in other areas: the marginalization and dispossession of the campesino. The Mexican oil boom has mixed with the structural distortions of the national economy to produce a high-- growth economy with tremendous inequalities in distribution and a level of malnutrition which is incongruous with the redolence of wealth in Mexico City. The Mexican government recognizes many of the elements of a crisis in - 70 - the countryside, as is evident from the surge in policy attention toward rural development and agricultural self- sufficiency. It would be convenient and reassuring to sur- mise that the government's attention, when mixed with proper amounts of public funding and bureaucratic reorganization, could solve the rural problems of Mexico. It has been the contention of this essay that such a solution is not at hand, not necessarily because of the vacillating will of the Mexican state toward rural reform, but because of structural and historical imperatives which block rural development. The first of these underlying structural and historical limits to reform is that the international economic system is exercising more control over the priorities of production in rural Mexico, to the permanent disadvantage of the rural population, who suffer the gravest distortions of the industrial economy and the international system. It is not only that Mexico is on a capitalist road to industrial growth and economic change; underdeveloped socialist economies experience many similar effects of international integration. Rather, Mexico is on a capitalist road to internationalized production and economic growth, the character of which cannot be controlled at the national level. Empiri- cally, in the cases described above, the trade aspect of the Mexican food crisis is one that is extremely difficult to resolve because the system of production and exchange transcends national borders in a way not experienced in past epochs. The second key element in this logic of growth with hunger has to do with the fact that Mexico is deepening its industrial base and marginalizing its rural population during an era in which the relations of production do not readily admit a way to absorb the rural population in non- agricultural occupations. It is not too glib to claim that Mexico is forced — in a technological and developmental sense — to act as if it were an advanced industrial country; and at the same time, it is burdened with economic and social problems of unequal exchange and under- development not typical of such advanced productive structures. That problem, too, is to a great extent a pro-- duct of internationalization. Thus, the Mexican development dilemma will have to include the campesino far into the future, perhaps beyond the point at which the economy can no longer bear the political costs of the historic rural - 71 - question. The implications of such a proposition must be treated with more precision by historians of the Mexican economy. Finally, and most importantly from the national standpoint, Mexico's economic growth mode under import- substitution industrialization and the subsequent oil boom has not yielded the national-level political coalitions which can force the issue of rural development. Current leaders of Mexico, preoccupied with the logic and requirements of industrialization, foreign commerce, and international integration, have little patience with political claims against the state by poor campesinos and their represen- tatives. If there was a lesson of echeverrismo, it was that the commanding forces of the modern Mexican economy — which were international to some significant extent — were unwilling to rejoin the issue of rural reform at the expense of their capacity to accumulate capital and to protect their property. Security in property and the inviola- bility of the private sector in a mixed economy are now first principles of the Mexican political platform. If current inclinations toward industry, foreign investment, international finance, and agricultural growth continue under the oil-boom economy, there will be little room for structural reform in the countryside. Without that reform, and without a reform coalition genuinely committed to — and empowered to address — the rural disequilibria of Mexico in the 1980s, the state will be left with traditional programs of patronage and subsidy to dampen the deleterious effects of the current model of growth. In 1981, the Mexican government spent an estimated $418 million to subsidize the price of tortillas to the consumer. Even a state with billions in revenues from oil exploitation can little afford such subsidies, which have no productive return and little capacity to resolve the inequalities which call forth their expenditure. While such subsidies keep the price of tortillas low to the urban consumer, they also subsidize an internationalized model of agricultural production which provides many of the sumptuous commodities found on the tables of consumers in the United States, Japan, and Europe. As long as that mode and that commerce continue to dominate the trade aspect of Mexican agriculture, the campo will yield a bitter, if modern, harvest. - 72 -

LIST OF ACRONYMS USED IN REFERENCE LIST

Acronym: See:

BNCE Mexico, Banco Nacional de Comercio Exterior CANACINTRA Mexico, Camara Nacional de Industrias de TransformaciOn CDIA Centro de Investigaciones Agrarias CEPAL United Nations, CEPAL COPLAMAR Mexico, Coordinacian Federal del Plan Nacional de Zonas Deprimidas y Grupos Marginados SAG Mexico, Secretaria de Agricultura y Ganaderia SAM Mexico, Sistema Alimentario Mexicano SARH Mexico, Secretaria de Agricultura y Recursos Hidraulicos SARH, DGEA Mexico, Secretaria de Agricultura y Recursos Hidraulicos, DirecciOn General de Economia Agricola SPP Mexico, Secretaria de Programacion y Presupuesto UNE UniOn Nacional de Empacadores UNPH UniOn Nacional de Productores de Hortalizas USDA United States Department of Agriculture USITC United States Department of Commerce, International Trade Commission - 73 -

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The Center for United States-Mexican Studies at the University of California, San Diego Opened in September, 1980, the Center for U.S.-Mexican Studies is the nation's largest university-based program devoted exclusively to the study of Mexico and U.S.-Mexican relations. It combines interdisciplinary research, instruction, and public service activities that deal with the full range of problems affecting economic and political relations between Mexico and the United States. The Center serves as an integrating mechanism and informational clearing-house for research undertaken at many different sites in both the United States and Mexico. It compiles and publishes a twice-yearly inventory of Mexico-related research being conducted on all nine campuses of the University of California system. The Center's conferences and workshops provide a vehicle for bringing scholars, non-academic development specialists, public officials, businessmen, labor leaders, and journalists together to examine major issues affecting U.S.-Mexican relations. The Center is conducting a major field study of the social and economic impacts of Mexican immigration upon receiving communities in the United States, with special emphasis on health care, education, and labor market participation. Its weekly seminar on U.S.-Mexican Relations attracts leading researchers from throughout the United States and Mexico. There is also an active public education effort, through briefing sessions on recent research for journalists who report on Mexican affairs, public conferences, and a series of bilingual television and radio programs featuring in-depth interviews with the Center's guest speakers and research fellows. Each academic year some fifteen to twenty visiting Research Fellows (scholars and non-academic specialists on Mexico) are in residence for periods ranging from three to twelve months. Over half of the Fellows are from Mexican institutions. Fellowships are awarded at both predoctoral and postdoctoral levels, through a binational competition. For further information, write: Research Director, Center for U.S.-Mexican Studies, University of California-San Diego, La Jolla, Calif. 92093, U.S.A.