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Mexico:" An Export Matke1; Prof'ile ~ ','

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. TECHNICAL INFO MATION SERVICE u.s. DEPARTMENT OF COMMERCE SPRINGFIELD, VA. 22161 U212·IDI REPORT .. ~JCUMENTAnON II. HfIOWT MO• .'PAGE 1 FAER-220 L ...... DItte May 1986 Mex>i.co: An Export Harket Profile ..

L ...... nnI.. Orpftlzlitlon IIteot. No. ~------i~~------~7. Author(.) FAER-220 Donna R. Roberts and Myles J. Mielke 10...... naelllWAftI Unit No. •. "'~"",I,. O,..ftlailtlon Name .ftd Add_ International Economics Division -.---::------~ Economic Research Service u. CcNItr..ct{C) or Qr8nt

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15. Sup""omontary Hal.. \ \. ~;

for agricultural Mexico will1i~ely remain one of the top 10 markets u.s. will products through 1990, altho\'1gh its recent financial difficulties of nonbasic commodities in the next few years. Its reduce its imp~rts underpin steadily expanding population Ilnd highly variable weather will United States expected increases of import.~ of grains and oUseeds. The to retain its present position" as the dominant supplier of is expected trading Mexico's agricultural imports because of the two countries' close relationships and well-· established marketing channels. Economic recovery in the late eighties wi.111argely determine the size and composition of Mexico's agricultural import bUt. \.

17. Doc:umeftt An.I~i. a. Descriptors Commodities Markets Consumption policies Farm population Import Production rade It. Idofttlfiors/Opan.EncteCI Term.T Agricul.tural import bill Prices as of 10/1/85: Economic recovery Paper: Marketing channels Fiche: $5.95 for Papp..r Mexico Cost codes are: and AOl for Fiche Co COSATI FWtci/Group 02-B, 05-C 11...... I .. a.v",~ ClaN ""'It ...... u IL Availability ,,~,~ 68 National Technical Information Service :-. Unclassified a. PrIce 5285 Port Royal Road, Springfield, VA 22161 ....u~ CIns (Thla .....' Unclassified See bo:.;; 17 CIfIT10NAL I'OMI zn (t-771 (Sea AHSt-Z3t.l1) C'em.rtJ NTI$-IIS) United States o oDallas Fort Worth

.~ MEXICO OSan Antonio State Boundaries - Rivers ,,\ Mountainous areas A Indicates State Capitals * National Capital - Mexico D.F., Cuidad de Mex. D.F. a Cities • Principal Ports of Entry J

\ Pacific Ocean GulfofMexico

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Gulfof Campeche

See map on inside back cover for agricultural regions and complete list of Mexican States.

'-'------...~~-----~..-.----.-...... -.. -~.-----~.-.--.... - ..-...- .. .-".,...... -,-~---.- ...... - ··-~ __~_W~'_"~ ..._~ ..____ -..:______MEXICO: An Export Market Prome. By Donna. H. Roberts and Myles J. Mielke. International Economics Division, Economic Research Service, U.S. Department of AgricultW'e. Foreign Agricultural Ecooomic Report No. 220.

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ABSTRACT Mexico will likely remain oae of the top 10 markets for U.S. agricultural products through 1990, although its recent f"mancial difficulties will reduce its imports of nonbasic commodities in the next few years. Its steadily expanding population and highly variable weather will underpin expected increases of imports of grains and oilseeds. The United States is expected to retain its present position as the dominant supplier of Mexico's agricultural imports because of the two countries' close trading I relationships and well-established marketing channels. Economic recovery in the late ei.ghties will largely determine the size and I composition of Mexico's agricultural import bill.

Keywords: Mexico, farm production policies, f&rm consumption - policies, agricultural trade policies, market shares, import If projections. t \ I ACKNOWLEDGMENTS

We thank the analysts in the International Economics Division of the Economic Research Service for their comments and suggestions, especially Oswald Blaich, John Link, Nicole Ballenger, and George Gardner. Thanks also to the many analysts in the Foreign Agricultural Service, especially John Montel, Dee Linse, and Anne Grace, who reviewed earlier drafts of this study. Jim Carlin and Tom McDonald provided editorial assistance and review. Many thanks are extended to Norma Giron, Denise Sanchez, Brenda Powell, Mary Oliver, and Linda Turner for their time and effort in preparing the manuscript.

Washington, DC 20005- 4788 May 1986 PREFACE

Expanding the markets for U.S. agricultural exports is a major goal of the U.S. Department of Agriculture (USDA). In support of this goal, the Economic Research Service (ERS), in cooperation with the Fcreign Agricultural Service (F AS), is preparing export profiles for a number of high-potential markets for U.S. agricultural products. ERS is USDA's major source of agricultural and trade information on foreign countries and regions, while FAS has the key role in helping United States increase its agricultural exports in world markets. Similar profiles have been Of' will be prepared for selected markets in Africa and the Middle East, Asia, and Latin America. See list of titles available elsewhere in this , i publication.

This report presents information and analysis on the prospects for U.S. agricultural exports to Mexico. The study surveys the basic factors underlying agricultural supply and demand in Mexico and presents longrun projections of food and agricultural trade.

SALES INFORMATION

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ii CONTENTS

Page Abbreviations iv Summary vi Introduction 1 Mexico's Demand for Agricultural Products Population 3 Domestic Economy 3 Balance of Payments 4 6 '/ Mexico as a Market for Agricultural Products Agricultural Trade 8 U.S.-Mexican Trade 8 8 The Agricultural Sector Structure of Agriculture 13 Livestock Production 14 Characteristics of Crop Production 18 Production Limita.tions 22 Marketing System 24 25 Agricultural Policies Production Policies 25 Conswnption Policies 26 Trade Policies 31 31 Future Farm Product Demand Food Consumption Patterns 33 33 Trends and Projections for Major Com.modities Prospects for U.S. Exports to Mexico 34 41 Marketing in Mexico Marketing Channels 46 Constraints to Trade 46 48 Conclusions 49 References 50 Appendix: Projection Assumptions and Methodology 54

iii ABBREVIATIONS Spanish

Abbreviation Spanish Name English Name

ANAGSA P.seguradora Nacional Agricola National Crop and Livestock Insurance :r Ganadera, S.A. Company

ANDSA Almacenes Nacionales de National Storage and Deposit Company Deposito, S.A.

BANAMEX Banco Nacional de Mexico National Bank of Mexico BANRURAL Banco Nacional de Credito Rural National Rural Credit Bank

BORUCONSA Bodegas Rurales de CONASUPO, S.A. Rural Storage Company of CONASUPO CECONCA Centres de CONASUPO de CONASUPO Training Centers Capacitacion

CIMMYT Centro Internacional de International Center for the Mejoramiento de Maiz y Trigo Improvement of Corn and Wheat CONASUPERS Supermercados de CONASUPO, S.A. CONASUPO Retail Outlets CONASUPO Compania Nacional de National Popular Subsistence Subsistencias Populares, S.A. Company

CORDIMEX Corderla Mexicana National Sisal Company

DGEA Direccion General de Directorate General for the Economia Agricola Agricultural Economy

DICONSA Distribudores CONASUPO, S.A. CONASUPO Distributors

FERTIMEX Fertilizantes Mexicanos, S.A. Mexican Fertilizer Company

FIRA Fondos Instituidos en Relacion Funds Instituted for Agriculture a la Agricultura (National Bank of Mexico) ICONSA Industrias CONASUPO, S.A. CONASUPO Industries

INMECAFE Instituto Mexicano de Cafe Mexican Coffee'Institute INIA lnstitut9 Nacional de National Institute of Investigaciones Agricolas Agricultural Research

LICONSA Leche Industrializado de Milk Industry of CONASUPO CONASUPO, S.A.

MICONSA Maiz Industrializado CONASUPO, Com Industry of CONASUPO S.A.

PEMEX Petroleos Mexicanos Mexican Petroleum Company

iv Spanish-· ·Continued PRONAL Programa Nacional de Alimentacion National Food Program

SAM Sistema Alimentario Mexicano Mexican Food System SARH Secretaria de Agricultura y Secretariat of Agriculture and Recursos Hidraulicos Water Resources SECOFIN Secretaria de Comercio y Secretariat of Commerce and Fomento Industrial Industrial Development

SPP Secretaria de Programacion y Secretariat of Program and Presupuesto Budgeting

TRICONSA Trigos Industrializados de Wheat Industry of CONASUPO CONASUPO. S.A.

English CPI Consumer Price Index FAO Food and Agriculture Organization of the United Nations GDP Gross Domestic Product

GOM Government of Mexico

GSM-·102 Export credit guarantee program, Office of the General Sales Manager (USDA)

IMF International Monetary Fund

LAIA Latin American Integration Association LAFTA Latin American Free Trade Association

USDA U.S. Department of Agriculture

Conversion Chart

This report uses metric units throughout.

1 metric ton (mt) :; 2.204.62 polUlds. 1 hectare (ha) :; 2.471 acres 1 U.S. dollar :; 310 pesos ("market" rate, 1985 average) :; 257 pesos ("controlled" rate. 1985 average)

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SUMMARY

Mexico's discovery and exploitation of its huge oil reserves, together with one of the highest population growth rates in the world, led to a strong upsurge in food demand in the seventies. A net grains exporter in 1980, Mexico began to rely more on external supplies to provide needed food and feedstuffs.

The United States will continue to be the primary agricultural exporter to Mexico through the eighties because of longstanding trade relationships and well-established marketing channels. Mexico has been among the top three markets for u.S. agricultural commodities in the etlrly eighties. purchasing an average of $2 billion per year. Mexico typically imports 80-90 percent of its imported agricultural commodities from the United States.

Basic commodities, such as com. dry beans. sorghum. wheat, soybeans, sunflower seed. and nonfat dry milk. make up the bulk of Mexico's imports. The United States supplies nearly all of these commodities except for nonfat dry milk. Mexico's purchases of other U.S. commodities totaled nearly $1 billion at the beginning of this decade but have recently slowed because of reduced purchasing power and scarce foreign exchange, the result of the 1982 finandal crisis of deficit spend;rlS. falling oil prices, and rising interest rates. Because of Mexico's continued rapid population growth. its high I· proportion of unproductive land, its rigid land tenure system, and its f h;ghly variable weather, Mexican imports of basic commodities will continue to grow through the midnineties. Mexico is attempting to diversify its foreign suppliers, but in its present financial difficulties, U.S. products are attractive because of the generous credit arrangements extended to Mexico. Those credit guarantees were an effective tool for substantial U.S. exports of grains and oilseeds to I Mexico. The potential for expanded sales of livestock, horticultural, and processed commodities to Mexico is not immediately promising. Growth is expected to resume in the late eighties.

! " I I

vi Mexico An Export Market Profile

Donna H. Roberts Myles J .. Mielke

INTRODUCTION 1.5 million barrels a day. Revenue from petroleum exports and petroleum products The present shortcomings of the Mexican reached $16.6 billion in 1982. economy and its farm sector might cause one to overlook the remarkable economic The Portillo administration, which assumed achievements of the country since World War office in 1976, embarked upon an ambitious II, achievements with few parallels in the . ~lan to turn Mexico's nonrenewable oil world. Mexico's farm sector grew by more resources into sustained industrial growth. than 6 percent per year from 1950-75, Faradoxic.;:1.11y, Mexico'S huge oil reserves following an import substitution strategy of contributed significantly to the severity of its development that many newly industrializing economic difficulties. Inflation beset the countries also pursued. The Mexican farm economy when federal spending exploded, sector demonstrated a capacity to meet the spurring a massive outflow of capital. A crisis demands of an expanding population while followed when the Government continued to generating a large proportion of the foreign pursue its ambitious development plan in an exchange needed to pay for the import of environment of falling oil prices and rising materials for industrial expansion. As the interest rates, borrowing heavily in the opportunity for import substitution diminished short-term credit markets to finance its in the early seventies, Mexico faced the operations. More than two-thirds of Mexico's problem of devising an appropriate growth oil revenues were needed to pay the interest strategy. on its outstanding debt in 1982. Mexico owed over $94 billion to foreign lenders by the end At this point, the Government increased of 1984, second among the world's developing spending, which, rather than stimulating nations in the size of its external debt. sustained growth, led to inflation. the loss of foreign exchange, and (in 1976) the first As the seventies ended, many distortions that devaluation of the peso in 22 years. The need accompany late industrialization in a populous for a solution to those problems was nearly rural society began to demand the attention of obscured by the discovery of Mexico's Mexican officials. These distortions included enormous oil reserves. When the Organization highly skewed income distribution, rapid of Petroleum Exporting Countries (OPEC) population growth, urbanization, malnutrition, quadrupled the world price of oil in 1973, and inadequate services for the segment of the Mexico was still a net oil importer. By 1975, population that did not benefit from the Mexico had begun exporting modest amounts Mexican economic boom. Furthermore, in I of petroleum; by 1982, it was the world's 1979 Mexico's worst drought in more than a fourth largest producer. exporting more than decade focused a.ttention on the agricultural sector, which had been neglected during the *Roberts was an agricultural economist with oil boom. During the seventies, Mexico began the International Economics Division (lBD). to import ever-increasing amounts of basic Economic Research Service, USDA. She is agricultural commodities as demand, now a research assistant at the University of underpinned bya rapidly growing population Minnesota. Mielke is an agricultural made prospero1.!S by the direct or indirect economist assigned to lED. effects of the petroleum boom, and economic

1 growth outstripped the output of the Argentina. The United States benefited most agricultural sector in which growth had slowed from Mexico's increased reliance'on imported from "a glorious gallop to a temperate trot" agricultural products. Before Mexico's [71]·11 financial woes, the two countries' shared border had fostered established marketing The_ rate of expansion of Mexico's irrigation channels, and the competitive price and districts began to slow dramatically. No new quality of U.S. feed grains and oilseeds technology emerged to succeed that of the prompted Mexico to turn to the U.S. market Green Revolution, and domestic terms of for most of its food and feed imports. trade continued to favor other sectors in the Immediately following Mexico's financial economy. The policy debate in the seventies crisis in 1982, the United States dominated the centered on whethel' the Government should Mexican market with the help of USDA credit commit enormous resources to raise living guarantees offered under the GSM-102 standards and move toward food program. self-sufficiency, or rely more on domestic and international market forces to solve the food The recent boom-and-bust cyde highlighted supply problem. When it became clear that the dual nature of the Mexican market. Mexico would have to import nearly 10 million Mexico's 8.gricultural imports from the United tons of basic grains in 1980 in the wake of the States were valued at $2.4 billion in both 1980 drought, the Government moved in the and 1981. During both years, the total was direction of the fil"st opt.ion. split almost equally betwe0n Government purchases of basic commodities (mostly grains In March 1980, Jose Lopez Portillo, president and oilseeds) necessitated by the disappointing of Mexico, postponed Mexico's entry into the 1979 and 1980 harvests, and private imports of General Agreement on Tariffs and Trade many high-valued products, which were (GATT) and introduced the Sistema purchased with an cvervalued peso. In 1982, Alimentario Mexicano (SAM), or the Mexican the value of U.S. agricultural exports to Food System. The goal of the program, Mexico fell by more than SO percent because launched before Mexico's financial crisis of Mexico's record-breaking harvest and three developed, was to achieve food devaluations, which, compared with the dollar, self-sufficiency in a way that would improve diminished the peso's purchasing power by income distribution without damaging nearly 7S percent. Although private sector

I Mexico's agricultural export capacity. The purchases declined in 1983 and 1984 to but a j SAM was to be the principal means of using oil fraction of previous levels, Mexico imported 1 revenues to c~.'eate an enduring productive an average of $2 billion of U.S. farm goods base to serve the whole nation and to cure during these years because of large many of its social ills. The irony associated Government purchases of grains and oilseeds. with the SAM was that it set out to attain food self-sufficiency and to raise living standards, but instead contributed to economic In an environment of rapid inflation and ovorheating during the oil bonanza, lower unsettled international economics, a reliable living standards (because of runaway inflation forecast of key economic variablesls and the subsequent austerity program), and difficult. Among the major debtor countries, greater food, dependency, at least in. the short Mexico. was considered to be the most run [1]. successful in resolving its debt-servicing dilemma and reactivating its economy. Because of the financial crisis, Mexico was Nonetheless, private sector purchases of minor forced to favor countries that offered commodities will not likely strengthen in the financing along with their commodities, near future, given the austerity measures and thereby restricting access to the Mexican foreign exchange constraints currently in market for traditional suppliers like Brazil and place. By 1992, high-·valued agricultural products could show the greatest potential for relative import growth. This forecast 11 Italicized numbers in brackets are cited presumes that once the economy resumes its in the References section at the end of this growth, Mexican consumers will resume report. purchasing products not available domestically.

2 The course of Mexico's demand for major Mexico. Growth in U.S. exports of sorghum, agric'utural commodities will likely differ oilseeds, and oilseed products to Mexico will from the patterns during the seventies. First, depend on competition from other suppliers, the growth in. animal protein consumption principally Argentina and BrazU. The probably will slacken considerably over the pOtential for larger U.S. shipments of higher first half of the eighties. Barring a drought, valued livestock products is good for the late Mexico should be able to produce a larger eighties. U.S. producers of both major and proportion of its feed needs than in the minor commodities will have to remain alert previous decade,-when rapidly expanding meat to take advantage of opportunities presented consumption necessitated larger sorghum and by the large year-to--year fluctuations in the oilseed imports. Per capita human Mexican market. which will be determined by consumption of com, dry beans, wheat, rice, weather. shifting exchange rates, and changing and vegetable oil will probably grow less trade pclicies. rapidly than in the seventies, given the Government's inability to maintain the large consumer subsidies established over-the past MEXICO'S DEMAND decade. Total consumption will still expand FOR AGRICULTURAL PRODUCTS sigrdficantly, however, primarily becalL<;e of Mexico's rapid population growth. The UntU Mexico's financial difficulties began in anticipated recovery in the economy over the 1982, changing demographics, combined with a seeond half of the eighties will also contribute rapidly expanding economy and increases in to the estimated growth in the total demand real incomes for a large segment of the for agricultural products. population, led to changes in the variety, quality, and quantity of food demanded. Production, too, will vary from the trends Mexico's agricultural sector was unable to observed over the past decade. Growth of satisf~ these demands, and food imports Mexican livestock output may slow increased substantially. This surge in import substantially from the 7-percent annual rate demand for food and other p!'oducts was made of the seventies because of dampened demand possible by the rapid rise in the value of and the high cost of imported inputs. By Mexico's petroleum exports. But world oU extension, the rate of growth of feed grain prices began to fall in the early eighties at the production, which e:l..-panded exponentially in same time that interest rates began to peak, the early and midseventies, will likely falter. forcing Mexico to impose stringent austerity Reinvigoration of these two sectors will measures and foreign exchange controls to depend on Govenunent initiatives once Mexico fulfill external financial commitments. regains its economic balance. Food grain Imports of all nonbasic food items ha.ve been production will probably grow onll' moderately severely restricted since 1982, but Melcico's during the eighties, with the prospects for demand for basic commodities, underpinned by significant f~rm1and expansion diminished by population g~owth, continues to outstrip the increasing costs of bringing marginal land Mexico's domestic production capabilities. into production. No significant gains in grain or oilseed yields are expected. The central Population feature of Mexico's crop production is its volatility; production of individual crops fell Mexico's population rose by an average 3 by as much as 60 percent in some drought percent per year over the past three decades, years over the past decade. Because a drought reaching an est.imated 68 million in 1980 (tablo occurs in about 4 out of every 10 years in 1). During the fifties and most of the sixties, Mexico, fluctuating production patterns will the population growth rate tended to likely persist through the eighties. accelerate as the mortality rate declined (table 2). Birth rates have declined because of The gap between domestic production and public famUy planning programs; but of the 20 consumption of all major agricultural most populous countries in the world. none had commodities will probably widen during the population growth rates as high as Mexico's eighties. Corn, Mexico's most important food (ranked 11th) during the seventies. Although a grain, will continue to be the largest source of population explosion is not uncommon for absolute growth in U.S. agricultural exports to developing nations, the duration and

3

.: ,', magnitude of Mexico's population growth is Government S"upported this pattern by unique [34J. Mexico's population wilt probably maintaining consumptio~ policies that favored exceed 100 million by the year 2QOO. urban dwellers, sometimes at the expense of rural producers. Three of 10 people lived i..."1 Mexico's median age has declined'to the point cities in 1950; that ratio rose to 6 of 10 by that 43 percent of the population was less than 1980. Mexico City, the capital and largest 15 years old in 1980. The annual growth in the city in Mexico, has approximately 17 million labor force is expected to remain close to 4 inhabitants, nearly one-·fifth of the total percent throughout the eighties. Employing population. the emerging youthful labor force will be one of the major challenges for the Mexican Mexico's farmers will probably be unable to Government. meet the growth in demand for food resulting from population increases and rural-urban A significant rural-to-urban migration pattern migration. Mexico's land/inhabitant ratio is has reflected greater urban employment and 68 acres compared with 106 for the United income possibilities (table 1). The States. More important, however, is that the United States has 21 acres of arable land per person while Mexico has only 7 [71J. Table I--Population and urbanization, 1930-80 Domestic Economy Itam 1930 1940 1950 1960 1970 1980 The economic growth of Mexico was rapid and Mi II ior. remarkably steady from World War II until the early seventies. Growth in Mexico's real gross Population 16.6 19.6 25.B 35.0 49.4 67.B domestic product (GDP) averaged more than Percent 6.4 percent per year from 1970-75, twice the percentage increase in the population (table 2). Urban II 19.B 21.9 2B.9 39.3 4B.6 60.2 Rural - 80.2 7B.1 71.1 60.7 51.4 39.B National income reached 9,417 trillion pesos (undeflated) in 1982, the equivalent of II Localities of 10,000 or more persons. SOurce: [25]. US$171.3 billion [70J. According to World

Table 2--lncome and population growth, 1970-83 Real per capIta Population Year Gross domestic product disEQsable income 1970 pesos Change 1970 pesos Change Number Chenge Thousands Percent Bi lIi~ Percent Bi II ion E!.!:S~nt 25,800 112.75 1950 117.6 NA NA NA 1/6.1 NA NA 34,990 1/3.51 1960 212.6 49,357 113.50 1910 444.3 117.6 7,723 NA 7,746 0.3 51,060 3.45 1911 462.B 4.2 3.40 502. ! B.5 B,I20 4.B 52,796 1912 5.0 54,565 3.35 1913 544~3 B.4 B,52B 6.1 B,754 2.6 56,366 3.30 1914 577.6 5B,I98 3.25 1915 609.9 5.6 B,921 1.9 9,063 1.6 60,060 3.20 1916 635.B 4.2 3.15 651.1 3.4 9,066 .3 61,952 1971 9,446 4.2 63,B13 3.10 191B 111.9 B.2 3.05 177.2 9.1 10,010 6.6 65,B21 1979 5.9 61,196 3,,00 1980 841.9 B.3 10,610 9OS.B 1.9 ",141 4.4 69,162 2,,~ 1981 NA NA 11,115 2.80 1982 903.B -.5 15,652 2.70 1983 85';;'.2 ,-5., NA NA

NA = not available. II 10-vear average growth rates. Sources: [~, :zell.

4 Bank statistics, Mexico's 1982 GOP ranked large component of Mexico's agricultural 10th in the world (excluding centrally planned, import bill was feedstuffs. As the economy nonmarket industrial countries), ahead of slowed, however, the consumption of nonbasic Australia (US$164 billion) and behind Spain foods plummeted because consumers switched (US$181 billion). In 1982, Mexico's GOP from higher priced livestock products and equaled approximately 5.7 percent of the U.S. imported foods to a more traditional diet GOP of US$3.010 billion. Within Latin based on basic grains and other unprocessed America, Mexico's GOP is exceeded only by foods. Brazil's. The rewards of Mexico's economic boom in the Growth slowed in the midseventies when the seventies were not as equitably distributed as Government's expansionary fiscal policy in some other rapidly developing gene:('ated soaring public sector debt, large semi-industn.aHzed countries, such as Taiwan. current account deficitsrrapid price inflation, In fact, within the Western Hemisphere only in capital flight, and the first devaluation of the Honduras, Peru, and Brazil do the poorest 40 peso (1976) in 22 years, The need for solutions percent of the population receive a smaller was almost immediately obscured by the share of income than in Mexico [11]. The discover'J of Mexico's enormous oil reserves. middle 60 percent of all Mexican households' The value of crude petroleum exports doubled share of personal disposable income, however, each year from 1977 through 1980, peaking at rose from 38.3 percent in 1963 to 41.6 percent $15.6 billion in 1982. Relying on that and an in 1977 (table 3). Mexico City accounted for inflow of foreign investment and external about 20 percent of all Mexican houSeholds loans, Mexico embarked upon an ambitious and slightly more than 35 percent of total development plan that featured huge increases household income. in public expenditures. Several factors converged in 1982 to squash the rapid As in any dynamic economy, Mexico has economic growth: oil prices declined, interest undergone major structural changes. The rates rose, a significant amount of Mexico's evolution of the Mexican economy has been outstanding short-term credit came due, and strongly influenced by direct Government the Government was forced to devalue the involvement. Although Mexico'S agricultural peso three times in 8 months. The economy output expanued, rapid industrialization has registered virtually no growth in 1982 and spurred economic growth since 1950. Between actually contracted by 5.3 percent in 1983. 1950 and 1980, industry's share of GOP rose from 27 to 40 percent, while agriculture's The pattern of growth in real per capita share fell from 19 to 8 percent (table 4). disposable income roughly paralleled the Agricultural output grew by an annual average growth registered by the economy as a whole. of 2.5 percent during this period. well below Given the lackluster performance of the domestic agricultural sector during the Table 3--Femlly income distribution In Mexico seventies, increased agricultural imports by income decile, 1963, 1968, 1977 accompanied periods of rapid per capita income growth. After large jumps in real Income decile 1963 1968 1977 disposahle income during 1972-73, Mexico became a net importer rather than a net Percent of total exporter of grain (principally com and wheat) d i sposab Ie Inco,me for the fint time since the adoption of Green Revolution technology in the midsixties. The I (bottan lOS) 1.69 1.21 1.08 II OI-2O'J) 1.91 2.21 2.21 demand fOT agricultural products soared once III (21-3OS) 3.42 3.04 3.23 again during 1978-81 when tb.e average IV (31-4OS) 3•.42 4.23 4.42 increase in per capita incomes rose by more V (41-5OS) 5.14 5.07 5.73 VI (51~) 6.08 6.46 7.15 than 4.5 percent annually. VII (61-7OS) 7.85 8.28 9.11 VIII (71-8QS) 12.38 11.39 11.98 The increase in real inccrne also triggered a IX (81~9OJ) 16.45 16.06 11.09 37.99 demand for nontraditional food. Mexico's X (top lOS) 41.60 42.05 growing middle class increased its consumption of livestock products such that a Source: (26J.

5 Table 4-Contrlbutions to Mexico's GOP by sector 0960 pesos)

1950=65 160-70 1965::ao 10:::00 Itan 1950 1970 1980 ______Billion pesos ------­ ______Percent ------­ 296.6 512.1 6.4 6.4 6.1 5.6 Total GOP 83.3 150.~ 3.7 2.5 2.4 Agriculture 11 16.0 24.0 34.5 43.5 4.3 43.9 102.2 206.0 7.6 7.1 7.8 7.3 Industries 22.1 6.2 5.8 5.3 Services 11 45.8 84.1 163.5 274.1 6.5 Percant nft na na Agriculture's share of GOP 19.2 15.9 11.6 8.4 na

na =not ~llcable. 1/ Includes crops. livestock, forestry. and fishe~ies. '1./ Includes Gov.,"nment expenditures. SOurce: (281. the 3.3-percent population growth rate. The since 1977. was tied to actual and anticipated importance of Mexico's primary sector petroleum revenues. measured in tenns of its labor force has also diminished. Thirty-two percent of the Balance of Payments economically active population was employed !n agriculture in 1980, compared with 58 Mexico's economic difficulties are most percent in 1950 [28j. One clue to this vividly reflected in its current ;dec1ine in the agricultural sector's importance ba1ance-of-payment problems. The trade lies in the fact that agricultural prices !.,.ew ba.!.ance. despite the oil earnings. progressively more slowly than prices in manufacturing, wo,rsened until the 1982 financial crisis. The construction, and commerce for the past 30 Government's policy of maintaining an years (table 5). overvalued peso contributed most to the deteriorating trade balance. The n.omina1 Since the midsev~nties, Mexico'S energy peso-dollar exchange rate remained virtually industry has contributed to the economy's unchanged during 1977-81 despite a domestic expansion and its instability. Petroleum, coal, inflation rate considerably above that of the and e1e'~tricity accounted for about 8 perc!ent United States, Mexico's major trading partner of Mexico's GDP in 1980, compared with about (table 6). The significant appreciation of the. 4 percent in 1970 [28j. This number real exchange rate over this period also understates the energy subsector's accounted for the decline in the importance, however. The large growth in competitiveness of Mexico's nonpetroleum Government services, public investment, and exports. external borrowing. which detennined the velocity and direction of economic growth As revenues from petroleuP\ exports began to grow during the late sevf"".1:~s, the Table 5--Maxican price Index, 1950-80 Government decided to use oil as a lever for more borrowing to pay for expanding public 1960 1970 1980 investment and other expenditures. This rapicl. Item 1950 growth strategy worked for a few years. but it could continue to be successful only if the 1950=100 price of oil kept rising. When oil prices Manufacturing 100.0 183.8 235.3 1,076.6 leveled off in 1980. the rising trade deficit Construction 100.0 226.2 323.8 1,925.7 accompanied rapidly rising interest rate Conmerca 100.0 201.6 263.3 1,272.1 payments on the accumulated external debt. Agriculture 100.0 171.0 222.8 1,056.6 Crors 100.0 162.5 212.2 1,053.7 most of which had been contracted on a Livestock 100.0 184.8 238.4 1,060.1 short-term. variable rate basis. By 1981. the current account deficit had increased by Source: [~]. nearly 74 percent over the 1980 deficit, while

6 large amortization payments became due By the beginning of 1982, the crisis was (table 7). Anticipating the strains in the imminent. mterest rates continued to rise as balance of payments, many Mexicans lost oil glutted the world market. The more confidence in the peso and began to export Mexico's borrowing requirem~ts intensified, capital as they had in 1976. More important, the more its creditworthiness deteriorated. however, foreign banks th~,\t had previously By February. the Government no longer had adopted an indulgent attitllde toward their sufficient foreign. exchange reserves to Mexican loans began demanding payment. support the peso and its value dropped from 25 to 45 pesos to the dollar. Over the next 6 Table 6--Mexlco's conswner ~rlce Index mon~'1s, the Government tried to regain and exchange rates, 1970-83 control of the economy through public expenditure cuts, exchange controls, further Yearly Nominal Year change rate of devaluations, and eventually rationalization of In CPI 1/ exchange 2/ commercial banks. Nevertheless, external debt rose to more than $80 bUlion, more than Percent Pesos/dollar any other developing country except Bra.zU. In 1970 5.3 12.5 August 1982, Mexico notified foreign banks 1971 4.5 12.5 that it could no longer service its debt. 1972 5.8 12.5 1973 21.3 12.5 Interest payments alone consumed more than 1974 20.5 12.5 two-thirds of Mexico's petroleum export 1975 11.6 12.5 revenues (table 8). With the support of the 1976 27.1 20.2 1971 20.6 22.7 international financial community, Mexico 1978 16.7 22.7 began to restabUize its balan.,ce-of-payments 1979 20.0 22.8 accounts in late 1982. 1980 29.8 23.2 1981 28.7 26.0 1982 98.9 31100.4 To reduce the need for foreign. financing, the 1983 81.8 ~/159.3 Government cut the public sector deficit from over 18 percent of GDP in 1982 to 8.5 percent 1/ December to December changes. in 1983. The Government planned to reduce 21 Rates of exchange are as of Daoember of each this ratio still further in 1985 to 3.5 percent of yeir. 3/ The pesos/dollar ratio is for the free GDP. Imports fell by more than 40 percent in market rate. The Gover/'jment~trolled rate for 1983, due mostly to the sharply devalued peso 1982 and 1983 was 67.1 and 142.0 pesos per and the Government's rigorous import dollar, respectlvelv· Source: qJ. licensing requirements. As a result, Mexico's

Table 7-Mexico's balance-of-payments SI.lm'Mry

1982 1983 Item 1970 1975 1980 1981

"I ilion dollars 5,546 Current account balance -1,188 -4,443 -7,223 -12,544 -4,878 6,79} 23,606 29,079 27,258 26,842 Total exports 3,117 14,821 Petroleum exports 11 0 439 9,449 13,305 15,623 21,820 12,673 Total imports 3,882 9,910 26,206 34,364 7,346 Pt.';' Ii c sector i nteres+ payments 290 1,03? },958 5,476 8,400

Direct foreign Investment 1,189 709 309 (p~lvate, net) 185 204 1,254 8,631 -853 capi taI account 849 5,459 11,948 21,860 Change in reserves -3,106 (minus sign = Increase) -102 -165 -1,151 -1,012 3,185

1/ Crude exports only. SOurces: q, !J.

7 trade surplus rea~hed the unprecedented level will produce mixed consequenc~s for the of $14 billion. The Government raised some economy. taxes (notably its value-added tax) and doubled domestic prices for oil and gas. MEXICO AS A MARKET The attendant economic and social costs of FOR AGRICULnJRAL PRODUCTS this stabilization program are enormous and will no doubt be felt for several years. For Mexico has rapidly a.ssumed an important role the first time in 40 years. real growth in in the U.S. and world economies. Mexico's Mexico's GOP declined in 1983 from the annual population growth rate is estimated at previous year. Unemployment estimates are just under 3 percent with a population of generally unreliable, but are suspected to 76-77 million people in 1985. In a country have risen at least as much as the labor force with few natural resources but perhaps the has grown over the past 2 years, a.bout 8 world's fourth largest oil reserves, Mexico's percent. F1ll'th.er increases in unemployment expanding population has produced demands wei."e averted by a substantial decline in real beyond the productive capacity of the wages. The minimum wage increased by 45 country. Yet, oil has yielded the wealth to percent in 1983, while the cost of living rose pay for those needs. by more than twice as much. Agricultural Trade Mexico's present economic situation can only be described as fluid. The inflation rate still Once a major agricultural exporter, Mexico's hovers near SO percent, and indust!'Y remains agricultural production failed to keep pace weakened by the combination of the world with the growing demand of its population; the economic recession and privately incurred country has relied on imported products to " during expenditures, the Mexican economy expanded this period, even excluding petroleum exports modestly in 1984. Oil will dominate Mexico'S (tables 9 and 10). Coffee ranks as Mexico's economic scene through the eighties, which second most important export product (after crude oll), followed by cotton, tomatoes, other Table 8--Mexioo's foreign debt and debt service fresh vegetables and fruit, and live cattle.

Item 1975 1980 1981 1982 Agricultural imports accounted for 17 percent of total merchandise imports in 1980, 81 Ilion dollars compared with 10 percent in 1970. Mexico's principal agricultural imports consist of Total ex+erl\al d'.dbt 20.1 50.7 74.9 84.6 sorghum, com, other grains, oilseeds, nonfat Pub II c externaI dry milk (NFOM), breeding cattle, and various debt 1/ 8~} 29.2 }}.6 42.7 I n+erEiSt on totaI meat products. externa I dfJbt 1.3 5.4 8.3 11.3 Tota I debt ~;erv 1ce U.S.-Mexican Trade payments 2.1 17.6 29.8 29.7 Exports of goods and services 6.8 23.6 29.1 27.3 Once a minor trade partner with the United Petroleum sector States, Mexico has become our third largest exports 1/ .5 10.4 14.6 16.6 trading partner, behind Japan and Canada. Ratio of debt service Percent The United States supplies about 70 percent of to exports of goods the import needs of Mexico. West Germany 75 103 109 and services 3' ranks second, at about 5 percent [3J. The United States is also Mexico's largest market, II Disbursed only. "1./ Includes crude exports plus petrol8LIII taking about 78 percent of its total exports. prOducts and natural gas. Mexico's second largest export market is Sources: [!, l§., and 69]. Spain, which buys only about 8 percent of its

8 Table 9--Maxico's e~ports and In.,arts

Item 1970 1975 1980 1983 1984

Mi II ion dollars 11 Merchandise exports: 1,373 3,062 15 308 22,312 24,054 Agricultural crops 422 719 1:407 967 1,306 Coffee 74 194 437 424 475 Cotton 124 175 321 1/6 208 Toma'h)Qs 108 133 185 112 221 Livestock and fish 201 173 120 221 154 Metals and minerals 184 208 512 524 539 Petroleum and gas 38 438 10,441 15.143 15,196 Manufact'oJred goods 444 1,525 2,653 5,448 6,843 other goods 84 172 175 ° 16 Merchandi~e imports 2,461 6,582 18.486 8,551 1/ ,254 CoMUl!;lt ion goods 528 444 2.426 614 848 Intermediate goods 798 4,241 11,028 5,740 7,833 Cap ifa I goods 1.135 1,897 5,032 2,197 2,573

11 Valued at f.o.b. pr'/ces. Source: [~l.

Table IO--Foreign trade in agricultural products with Japan, West Germany, and others in relative to total merchandise trade. 1970-80 recent years, the United States will likely Exports of agricultural sroducts Imports of retain its dominance for some time. Mexico's Year Including E)(clu ing agrl.cultural major exports are mostly raw materials and petroIeun petroIeum products agricultural products, including petroleum, coffee, fresh tomatoes, minerals, chemicals Percent of total trade (including petrochemicals), and natural gas. Petroleum accounts for about 75 percent of 1970 48.2 49.8 10.1 1975 29.1 34.0 13.1 Mexico's total merchandise exports. Mexice's 1980 10.1 32.5 16.5 imports consist largely of capital goods, such 1984 5.4 14.7 15.1 as specialized industrial machinery. power-generating machir.~ry and equipment, Source: ql. telecommunications equiPl(:ent, and transportation equipment. Il..lports also exports. Mexico and the United States include intermediate products and raw exchanged more than $27 billion worth of materials. goods in 1980 and $17 billion in 1983 [67J. From 70-90 percent of Mexico!s agricultural The two countries have become uniquely trade is with the United States (tables 11 and interdependent over the past decade because 12). Mexico is frequently the second largest the United States, as the world's largest agricultural supplier to the United States energy consumer and food exporter, shares a (behind Brazil), and in the early eighties, has 2,000-mile border with the world's fourth typically ranked in the top five markets for largest petroleum producer, a country that U.S. farm exports. Traditionally, Mexico had must turn increasingly to external markets to an agricultural trade surplus with the United feed its people. States. This gap narrowed slowly until 1979 when farm trade balanced out at about $1 The United States overwhelmingly dominates billion for each country. In the eighties Mexico's imports despite the declared policy (except for 1982), the United States showed a of the Mexican Government to reduce its net surplus in farm trade each year. Mexico'S dependence on the United States and divert rapidly growing food and feed demands v.111 more of its trade to other countries. Although likely cause the trade balance to remain in the Mexico has signed bilateral trade agreements U.S. favor for some time.

9 Table II--Mexico's 8)(ports and the U.S. sh'Jre Aerchandlse exeerts AgrIcultural exegrts Year Total To U.s. U.s. share Tofal To U.s. U.s. share Ca) Cb) (b/a) Cc:) Cd) Cd/c)

--h.,OOO OOllars--- Percent ----1,000 OO!!ars---- Percent 1969 1,385 932 67 609 409 67 1970 1,373 833 61 512 386 75 1971 I ,36~ 840 62 514 384 75 1979 8,819 6, ISO 70 2,076 1,229 59 1980 15,308 9,467 62 1,795 1,059 59 1981 19,420 10,530 54 1,664 1,102 66 1982 20,929 II, j 16 53 1,448 i, !58 SO 1983 22,312 12,988 58 1,402 1,279 91 1984 24,054 13,962 58 l,n7 1,278 74

Sources: q and 67]. - Tabl9 12--Mexico's imports and tne U.S. share 11

Marchand I58 i ~rts Agricultural i!!!!2rts Year Total To U.s. U.s. share Total To U.s. U.S. share (a) (b) (b/a) ('I::) (d) (d/c)

--I,000 OOllar5-'-- Percent ---I ,000 OOllar5----- Percent 1969 2,078 1,297 62 140 79 56 1970 2,461 1,566 64 2:54 141 60 1971 2,254 I,~ 61 215 124 58 1979 12,503 7,540 60 1,206 1,024 85 1980 19,431 12,15\i 63 3,062 2,468 81 1981 23,930 15.859 66 3.346 2,432 73 1982 14,422 8,969 62 1,694 1,156 68 1983 8,551 5,4!l4 64 2,196 1,942 88 1984 II,254 7,365 65 2,342 2,015 86

11 Valued at f.o.b. prices. Sources: [1 and 67].

Agricultural Exports Tebla 13-l1.S • .grlcultural In.,ort5 fran Mexico, principal carmoditles Coffee continues to be Mexico's principal agricultural export; almost 30 percent of u.s. Ccnmodlty 1975 1980 1981 1982 1983 imports fmm Mexico consist of ,coffee (tables 9 and 13). However, Mexican c'Jffee Mi Ilion dol !!!,!. constitutes only about 10 percent of total u.s. Beaf and veal 18.6 0.6 2.1 0.9 3.5 coffee imports. No notable problems exist in Live cattle 25.1 88.8 68.3 115.0 138.9 Frash tanatoes 64.1 131.0 237.3 173.4 227.2 the trade in coffee, which enters the United Frozen/fresh States free of duty and does not compete with strawberries 19.2 24.9 25.0 15.9 14.8 Molasses 22.0 16.7 3.7 6.0 4.5 U.S. products. The Mexican Coffee Institute. Cocoa beans and INMECAFE, controls exports in conformance chocolate 5.0 21.6 9.1 4.7 19.3 with the Intemation(!l Coffee Agreement Coff. 138.4 311.3 248.3 264.4 27'6.7 FIlK!rs 16.1 18.0 I '.1 14.5 7.0 quota system. other 200.1 446.4 497.2 563.2 597.1 Total !I 508.7 1,059.0 1,102.0 1,158.0 1,279.0 Another vah\8ble export crop for Mexico is fresh tomatoes; which account for over 12 1/ Totals may not add due to rounding. ~rce: [§lJ.

10 percent of Mexico's agricultural export the continuation of the northward flow of earnings. The United States is the major cattle. Cattle exports were still controlled by market for Mexican tomatoes and other· an armual quota and licensing procedure, and vegetables, including cucumbers, peppers, export taxes were charged. eggplant, squash, and asparagus. During the winter, Mexico is virtually the sole foreign The United States generally levies low import supplier lof fresh vegetables to the U.S. duties on Mexican goods. Fo!' complementary market, accounting for SO percent of U.S. products, such as coffee, cocoa, bananas, and. supplies. Mexican production of winter other tropical products, few trading problems vegetables is concentrated in the fertile exist. Most of these types of commodities valleys of the western state of Sinaloa [see enter the United States free of duty, at times map on inside front cover]. This industry is under the Generalized System of Preferences very modem, basing product!on on exporting (GSP). Mexico is one of the major to the United States. Because of competition beneficiaries of the U.S. GSP system for both Vllti.th U.S. suppliers, trade in these products has agricultural and industrial products, although been one of the contentious issues in many of its noncomplementary horticultural U.S.-Mexican agricultural trade relations. products ea-e excluded from the GSP because Mexico provides more than half of the U.S. Other produce exported by Mexico includes imports of these products. strawberries and citrus fruits. Strawberry production, concentrated in central Mexico, and frozen strawberry exports have been so Agricultural Imports large as to force the United States to establish a quota system. Changing market conditions Mexican agricultural imports in 1980 were resulted in the quota neNer being imposed on more than double those of 1979, and over four Mexican frozen strawberries. In recent years, times greater than in 1975. In the early Mexican exports of strawberries have declined eighties, Mexico's import bill averaged because of both the deteriorating quality of approximately $2.5 billion (table 12). The bulk Mexican produce and a shortage of domestic of the imports, and the greatest growth area, sugar for processing. The major Mexican is in basic commodities such as grains, citrus exports are frozen orange juice oilseeds, and nonfat dry milk (NFDM). Mexico concentrate, fresh oranges, limes, and was once a net grain exporter and essentially grapefruit. The United States is the major self-sufficient in the production of com and market for these exports. beans, its major staple crops. Production increases have not kept pace with growing Live cattle, another major export, enter the demand, and several years ofadverse weather United States as feeder cattle to be finished and poor production reduced Mexican stocks of at feedlots before slaughter. Until 1979, these important commodities to critical Mexico supplied beef to the United States levels. The result was the dramatic increase based on a specific country quota under the in imports of com, beans, sorghum, and wheat, U.S. Meat Import Act of 1964 Oater almost exclusively from the United States superseded by the Meat Import Act of 1979). (table 14). Sorghum and com ranked fourth The growing demand for meat within Mexico and fifth among total Mexican imports in resulted in a Mexican domestic shortage of 1980, and com amounted to more than 27 meat and in the cessation of exports in the percent of U.S. agricultural exports to Mexico late seventies. that year.

Mexican imports of oilseeds have also been The Mexican Government attempted to stop growing rapidly. The principal imported the export of live cattle early in 1979 so as to oilseed is soybeans, but cottonseed and satisfy the demand fm' beef in Mexico City sunflower seed are also imported. Mexico and other metropolitan areas. This effort was does produce soybeans, sesame seed, and largely unsuccessful. Much of the beeJ is cottonseed, but not in sufficient quantities to produced in northern Mexico where meet both food and feed requirements. The transportation costs, price differentials, and United States was the primary supplier of established marketing procedures all dictated oUseeds (table 14).

11 Mexico is also a deficit dairy producer and Mexico in securing basic commodities, relies heavily on imported nonfat dry milk to primarily by establishing couttacts between meet consumer needs. This is the only major U.S. exporters and the Mexican Government, Mexican agricultural import for which the by pennitting the use of USDA facilities for United States has not been the dominant the holding of public tenders, and by working supplier (table 15). Mexico purchases most of jointly to resolve problems that arose in the its dry milk from Canada, Ireland, Australia, shipment of goods. This agreement has been and New Zealand. renewed each year since 1980, with the amount and selection of commodities modified The U.S.-Mexican Supply Agreement of 1980 to reflect Mexico's import needs for that resulted in a USDA commitment to assist particular year.

Table 14--Mexic~'s grain and oilseed Imports, 1969-83

Grain imports Oi Iseed Imports Yaar Total Fran the U.S. market Total fran the U.S. market United States share United States share

------1,000 tons------Percent ------I.r~ tons------Percent 1969 87 77 88 44 30 67 1970 607 541 89 182 156 86 1971 25('1 246 98 87 86 100 1979 3,320 3,299 99 422 422 100 1980 7,954 7,815 98 1,418 1,347 95 1981 6,920 6,073 88 1,500 970 65 1982 2,283 2,160 95 1,143 1,093 96 1983 8,747 8,102 93 1/1,351 !l1,338 99

1/ Does not includa oilseed products. Sources: q, 66, 67).

Table 15--U.S. share of Mexico's agricultural imports, 1969-81

Cannodity 1969-71 average 1974-76 average 1979-81 average All sources U.S. share All sources U.S. share All sources U.S. share

Mi Ilion Mi II ion Mi Ilion dollars Percent dollars Percent dollars Percent - live animals " .0 83 38.1 93 46.7 70 Meat and products 5.4 92 18.9 88 61.8 83 Dairv and eggs 25.4 34 68.1 21 209.0 30 Cereal and products 23.5 92 353.6 84 965.0 95 Fruit 7.8 75 ".7 81 30.6 83 Vegetables 7.8 75 37.2 75 208.8 98 Sugar and products 2.2 71 3.1 80 136.6 76 Coffee, tea, cocoa, spices 4.0 20 6.4 36 12.7 29 Feedstuffs 21.6 41 27.9 59 79.5 96 Fats, shortening 9.8 96 23.1 96 34.9 91 Beverages and tobacco 8.0 32 28.2 28 66.0 5 Hides and skins 17.6 99 31.7 I 87.0 98 Oi Iseeds 10.3 99 73.6 79 335.8 83 Rubber, gums 10.3 0 1.6.9 0 36.3 4 Texti Ie fibers 14.3 10 1·'\.5 21 35.2 20 Animal and vegetable materials 10.6 80 25.3 79 48.8 74 Animal fats and vegetable oils " .9 82 50.6 88 67.2 93

Sources: [66 and 67).

12 More important, however, the United States The search for remedies began. In March granted Mexico $1. 7 billion in credit 1980, the Government announced a guarantees under the GSM-102 program in comprehensive food and fiber plan, the SAM, fiscal year 1983, when Mexico's weakened to achieve self-sufficiency in basic foed and foreign exchange situation clearly' threatened feed products by 1985. However, in the wake its ability to import foods~uffs. These credit of falling oil prices, skyrocketing interest guarantees enabled the United States to regain rates, and rising debt service, SAM proved to all of the Mexican sorghum and soybean be too costly. When Miguel de la Madrid markets, which Argentint:.. and Brazil had Hurtado became president in 1982, he pledged captured in recent years. The GSM-102 a return to "economic reality,"and indicated allocation for fiscal year 1984 was $790 that his administration would be more million. Nevertheless, Mexico purchased amenable to relying on trade to satisfy about 600,000 tons of Argentine gr~ins and Mexican farm product demand. oilsceds, partly as a result of lower prices. These purchases also. represent an attempt by Table 16--Seiected indicators of agricultural the Government to diversify its trade change, 1960-80 11 partners. Despite these efforts, the United Annual change States will likely remain Mexico's major Item supplier of agricultural products through the 1960-10 1970-73 1975:::ao decade. Percent Total agriculture: THE AGRICULTURAL SECTOR Output 4.4 4.0 4.3 Crops 4.5 2.3 2.1 Livestock 21 4.2 7.0 7.0 Mexican agriculture by any standard was a Total fOt..'CJ- 5.0 4.5 4.7 success from 1940-65 when armual production rose at an average rate of 5.7 percent, which SaIected COIi~ itv groups: was a faster and greater mlStained rate than in Stlbsiste!'lC'... crops H 4.5 .3 3.2 the history of any other Latin American Export 'crops !I 3.2 2.7 1.7 countrJ [71J. During this period, employment Livestock feed 21 15.1 30.1 1.4 increased, incomes rose, and the nation began to advance the social and economic well-being 11 Constructed from annual production data of its population.. multiplied by a 1969-71 price weight. 21 These growth rates are suspect: when SARli completed the livestock census in 1979, Beginning in 1965, a number of factors began production figures were revised by as much as 40 to converge to retard growth in the farm percent but only back to 1972. Consequently, the 1969-71 base period still reflects the old sector (table 16). The greatest factor was' the series, while 1972 forward reflects another data slowdown in the expansion of irrigated area as series. the costs of bringing marginal land into 31 Corn and dry beans. !I Sugarc~ne, tobacco, cotton, sesame, production increased (table 17). Furthermore, cantaloups, tomatoes, green peppers, straw­ as the expansion of irrigation slowed, yield berries, coffee, cocoa beans, and henequen. improvements were not enough to assure a 51 Sorghum and soybeans. continuing growth of output or of farmers' Source: [68J. incomes. lable 17--Dlstrlbutlor. of total harvested ansa Before 1970, Mexico had sufficient resources between IrrIgated and ,ral n-fed acreage to feed itself and to export substantial Total Irrigated ante Year harvested Rain-fed Irrluaflon amounts. As growth in the supply of farm area area districts other Total commodities began to slow, the demand for them started to accelerate, stimulated at first 1.000 hectares by a population of over 45 million growing at a 1960 11,364 Nfl, 1,752 Nfl Nfl rate of 3.6 percent per year in the early 1970 14,975 Nfl 2,484 Nfl Nfl 1975 15,488 Nfl 3,081 seventies and later by a society made more 1960 Nfl Nfl prosperous by its oil exports. By the end of 17,824 13,239 3,397 1,188 4,585 the seventies, the country had become an Nfl e not ovallable. importer of basic foodstuffs. Source: [69J.

13 .,.' ::t. ",~.!:,,~~,,;:~;:;:~.:(.~~~;~');~~,:'r:~:;:~.;?~?~ '~?~~'l:? .:':?: ':'~~':~-!":'~'~' ,>~.:.~ 'Ott> .~.,:,.~:~,

'f~t~;:; ,

Structure of Agriculture farming methods. The Government also resettled some individuals (colonos) on Just before the 1910 revolution, about 97 federally owned land under Government percent of the land in Mexico was owned by sponsorship and offered them the chance to 830 people or corporations; about 500,000 buy the land (table 19). small and medium-scale fanners held 2 percent of the land and municipalities held the The land tenure law stipulated that land could rest. Approximately 3.5 million peasants were not be expropriated from private owners if it landless. After a half century of land reform, was within certain limits: 100 hectares of the 1970 census showed that 4.,5 million irrigated land; 200 hectares of unirrigated peasants were landless, the increase following land; 150 hectares of cotton; 300 hectares of Mexico's high birth rate. Approximately 2.9 bananas, sugarcane, cocoa, fndt trees, million people owned or had usufructuary henequen, and a few other perennial crops; or rights to land (right to use and earn income the amount of land necessary to maintain 500 from land without ownership). head of cattle. This did not, however, mean that land in excess of these amounts would be A unique form of landholding, the ejido, expropriated and, in fact, many holdings still developed in Mexico in the wake of the exceed these limits. Only a legally qualified revolution. After the Government village within a 7-mile radius of the land in expropriated most of the holdings of the large question c.).n petition the Government to begin landowners, it redistributed them to expropriation proceedings. communities that had owned them earlier (table 18). The Government retains title to Both private farmers and ejidatarios the land so that the wealthy cannot regain typically own 1-5 hectares (table 20). control of it. The peopk to whom the plots Numerous private farmers work on tiny plots are given are called ejidatarios, who of 1 hectare or less, Nine percent of private typically work 1:he plots as individuals. The farmers own more than 20 hectares. compared land cannot be sold, but remains in the custody with 1 percent of ejidatarios who own that of the individual for life, provided the peasant much. Most ejidos are subsistence farms, farmer continues to work the land. The plot but over 6 percent, located principally in the can be bequeathed to the ejidatario's heirs. irrigated northwest region, are modern (table This practice has led to extreme 21). Only about 8 percent of private farms are fragmentation of agricultural land in some termed modern, with the remainder split states. nearly equally between traditional and "'~1 subsistence farms. (For definitions, see Some collective ejidos evolved in areas footnotes to table 21.) More than half of where cultural traditions favored collective Table 19--Distribution of farms by type I of tenure, 1970 Total Ij farm area Ejidos Co Ionos Private Operator Number Area Percentage of area 1 1.000 hectares 1,000 TholJsands hectares Percent 1930 131,594 8,345 6,000 117,250 1940 128.749 28,923 6,069 93,757 Owners 931.5 62,244.0 44.5 I 1950 145,517 38,894 7,554 99,069 Renters NA 3,669.8 2.6 1960 169,084 ~4,497 8,735 115,852 Co Ionos 14.7 1,017.1 .7 I 1970 139,868 60,533 9,191 70,144 Occupants without land titles 20.4 1,747.8 1.2 Percent Ejidos 22.7 69,724.1 49.8 Other 23.6 1,465.4 1.0 I 1930 100.0 6.3 4.6 89.1 Total, 1,012.9 139,868.2 100.0 1940 100.0 22.5 4.7 72.8 1950 100.0 26.7 5.2 68.1 1960 100.0 26.3 5.2 68.5 NA =not available. 1970 100.0 43.3 6.6 50.1 Note: Farm totals in tables 19 and 21 are not consistent due to chan9€'~~ in diefinitions of farm categories. Source: (57). Source: [57J.

14 Mexico's farms are subsiste1."hce farms; they characteristics that restrict its potential. earn only 20 percent of total farm income. Most soils need additional nitrogen and phosphorus for crop cultivation. Although arid Physical Characteristics and semiarid areas in northern Mexico have the best soil, the continuous use of ground Mexico has a land area of about 192 million water is causing some of it to become saline hectares, 30 million of which are arable. and unusable. Water for further irrigation About 23 million hectares are cultivated, and developments is relatively scarce. The another 7 million are pot6ntial farmland. Z./ Mississippi River normally has more volume Of the remaining area, 74 million hectares are than all the Mexican rivers combined[31}. rangeland (some of it extremely dry), 44 million hectares are forested, and 45 million Water resources are poorly distributed for are either too dry, too wet, or too steep for agricultural use; water is plentiful in the agricultural production [57. 71}. southern part of the country but is needed in the north~ Precipitation is poorly distributed About 40 percent of the arable land has high geographically and seasonally. Also, rainfall is to moderate crop production potential with highly variable, exceeding or falling short of adequate rainfall, irrigation. and water normal by 30-50 percent in 1 of every 3 years. control. The remaining 60 percent is too steep, severely eroded, or has other physical The varying climate of Mexico supports a wide variety of crops and livestock. In the 21 The cultivated area includes 5 million northwest and north, winter temperatures are hectares of irrigated land, developed at a cost cool enough to grow cotton, sorghum, of about 90 percent of the public·sector's soybeans, dry beans, and corn (see map on investment in the agricultural sector over the inside back cover). In the tropical highlands past three decades. and coastal plains of central, southern, and Table 20--Size of holdings by type of southeastern Mexico, agricultural potential is land tenure, 1970 determined largely by altitude. At low elevations, tropical crops, such as coffee, Area E'idos Private farms sugar, and pineapples. are (~ultivated. Above Parceis Area Parcels Area 1,800 meters, wheat, deciduous fruit, and temperate climate vegetables can be grown in Percent the winter. In the summer, cotton caT.!. be grown on 60 percent of the tropical area, and 0-1 ha 1:S.:S 2.1 :S4.1 1.6 corn and other less demanding summer crops 2-5 ha 46.1 27.0 34.7 7.6 th,e 6-10 ha 28.2 40.4 12.1 7.4 on 80 percent of area. 11-20 ha 8.4 2:S.7 9.7 12.9 21-100 ha 1.0 6.8 7.3 :SO.O Regional Characteristics 101 ha and over 0 o 2.1 40.5 Population and agricultural activity have Source: [511. concentrated in the center of the country,

Table 21--Farm profile, 1970 Share of total Item Total Ejido Private Farm units Cropland Farm income

------.---­ 1,000 farms ------­ ------.---- Percent ------­

TotaI f t....1'11S 2,f.l5 1,858 957 100 tOO 100 Modern II 201 120 81 7 19 44 Traditiooal21 1,140 676 464 40 47 :s6 Subsistence ~I 1,474 1,062 412 5:S :S4 20

1/ Farmers using modern technorOgY. 21 Fanners producing cash crops by antiquated methods. II Fanners producing little for the cash market. SOurce: [48].

15 where fertile plateaus are complemented by this area has the highest ratio of cropland to relatively favorable weather. Almost 25 arable land in the country. Some areas within percent of Mexico's arable an'.a is located in this region have been so intensively farmed for the center, and 45 percent of the agricultural centuries that yields are very low with no labor force work in that area. Small farms immediate prospect of a significant increase. that lWJW corn and dry beans dominate the region (tables 22 and 2~l). Adequate rain and Although arid and semiarid conditions naturally fertile soil generally produce dominate in the northern regions. heavy public acceptable yields, with only moderate help investment in irrigation and other from irrigation. improved seeds. and infrastructure has made the Pacific North fertilizer. ·Agricultural activity is intense. and region the most productive for Mexican

Table 22--Regional distribution of harvested area of selected crops, selected y~rs, 1970-80

Comnodity Pacific Pacific Paci fie North North Central Gulf Peninsula and year North Central South r..entral

Percent Corn: 1970 1.7 23.5 15.3 4.2 14.4 24.B 13.7 2.5 1975 1.2 21.5 IB.3 4.0 9.4 29.7 1980 13.B 2.0 2.3 22.2 19.7 1.9 B.O 29.6 13.7 2.B Dry beans: 1970 2.4 30.3 10.1 3.3 27.0 17.6 7.7 1.6 1975 3.9 17.4 10.0 10.B 33.7 1980 19.3 3.9 1.1 4.9 13.9 6.1 15.B 33.2 15.B B.9 1.2 Rice: 1970 23.3 14.1 15.1 11.5 32.1 4.0 1975 33.9 II .0 19.0 1980 5.1 23.2 7.B 31.6 10.4 8.9 4.B 15.3 29.1 Wheat: 1970 60.1 7.3 20.6 3.1 B.9 1975 60.5 6.4 17.5 1.9 14.9 1980 62.8 7.1 13.5 3.0 13.6 Sor8hum: I 70 18.2 21.2 4.2 .7 24.8 31.0 1975 7.2 41.6 11.1 1.7 1980 19.8 18.7 9.2 25.8 4.5 1.7 16.9 41.9 Cotton: 1970 59.6 5.8 7.0 17.8 9.8 1975 47.4 6.9 12.5 24.3 9.0 1980 55.9 4.1 9.7 23.7 6.8 Soybeans: 1970 95.1 2.9 2.0 1975 89.6 i .8 1980 8.7 76.9 12.4 10.8 Safflower: 1970 85.5 3.9 2.0 8.7 1975 85.2 2.0 2.2 1980 10.7 59.3 3.5 .8 36.4

-- = negligible. Note: Pacific North: Baja california Norte, Baja California Sur, Sonora, and Sinaloa. Pacific Central: Nayarit, Jalisco, Colima, and Hichoacan. Pacific South: Guerrero, Oaxaca, and Chlapas. North: Chijuajua, Coahuila, and Nuevo leon. North Central: Aouascalientes, Ourango, San luis Potosi, and Zacatecas. Central: Guanajuato, Hidalgo, Quer&taro, Mexico, Puebla, Mora los, Tlaxcala, and Distrito Federal. Gul f: Tamaul ipas, Tabasco, and Veracruz. Peninsula: Campeche. Yucatan, and Quintana Roo (see map on inside back cover for location of regions). Source: £581.

16 agriculture. This area produces most or· suitable for raising sorghum, which has soared Mexico's wheat and soybeans, and yields are in recent years because of the livestock among the highest in the world (table 24). sector's increasing demand for feedstuffs. Intensive use of fertilizers, extensive irrigation, and large private operations \vith Limited development of irrigation facilities in access to 'scarce credit have pushed cropland the North Central region made most crop productivity to twice the national average. growing much less versatile and However, irrigation has been highly price-responsive than elsewhere in northern inefficient, largely because subsidized water Mexico. This area's agriculture is domin~ted rates and land tenure disputes have by dry beans and dairy cattle. discouraged private investment to repair and modernize irrigation canals. Agriculture in Mexico's tropical regions is poorly developed despite reasonably good The Gulf region's vast semiarid pastureland potential. The Gulf states are the most makes it a center of commercial livestock advanced of these regions, and the crops are production. Tamaulipas's dry climate is more diverse than in any other area except the

Table 23-Regional distribution of crop production, selected years, 1970-80

Conmodity Paci fic Pacific Pacific North North Central Gulf Peninsula 811d year North Central South Ce·..,tral

Percent Corn: 1970 1.•4 35.6 11.9 3.1 7.6 20.3 17.2 1.9 1975 1.8 27.4 15.9 3.0 4.6 31.2 14.5 1.6 1980 1.8 27.6 18.0 1.5 3.9 33.0 12.8 1.4 Beans: 1970 5.9 27.9 8.8 4.6 21.2 14.6 15.7 1.3 1975 8.4 29.5 12.8 19.4 18.8 2.9 6.7 1.6 1980 8.4 20.4 6.6 11.1 28.4 13.9 10.3 .9 Rice: 1970 28.4 13.3 11.9 19,.9 24.2 2.4 1975 41.3 12.3 15.5 8.3 16.9 5.6 1980 34.7 19.9 6.4 7.9 12.4 18.6 Wheat: 1970 73.8 4.7 10.7 2.1 8.7 1975 70.4 3.5 11.9 1.0 13.2 1980 67.5 4.8 12.2 1.1 14.5

Sor~hum: I 70 17.6 25.4 4.4 .8 24.6 27.4 1975 7.7 40.1 11.2 1.6 18.9 20.5 1980 8.8 37.5 3.8 1.5 19.8 28.6 Cotton: 1970 64.1 6.4 6.2 14.7 8.6 1975 48.9 6.5 10.3 24.4 10.0 1980 64.7 3.1 6.4 19.8 6.1 Soybeans: 1970 97.1 2.3 .6 1975 92.8 2.2 4.9 1980 81.7 13.9 4.5 Safflower: 1970 90.1 2.9 1.9 5.3 1975 ·91.6 2.2 2.7 3.5 1980 74.5 5.3 .8 19.5

-- = negligible. See table 22 for footnotes. Source: [581.

17 · Table 24---f:'stimated yields of selected crops Pacific North. Eve n so, more than half ofthe by regi~~, 1910, 1975, and 1980 11 cropiand in the Gulf !'egion risks flood· dan:1age because of insufficient water control proj1ects. Reg ion and comnod i tv 1970 1975 1980 Rain-fed agriculture on ::''Ubsistence plots Tonslhectare characterizes the he~V'ily populated Pacific Paci fic North: South region. The region's physical Beans 1.28 1.01 0.98 charact~r1stics are especially diverse. Most Corn 1.76 1.88 1.39 farmers cultivate com and graze livestock Rice 3.29 3.40 4.07 Wheat 3.18 4.24 4.44 herds on steep, badly eroded slopes, while Cottonseed 1.43 1.46 1.66 commercial farmers cultivate crops like Safflower 1.13 1.66 1.44 cotton, coffel'~, and rice along the coastal dam. Sesame .65 .77 .50 Soybeans 1.96 1.80 2.22 Sorghum 2.73 3.03 3.29 Th~~ Yucatan Peninsula has the least favorable climate and soil for crop production in the Pecific Central: Beans .48 .79 .85 tropical regions. Henequen fiber had been the Corn 1.80 1.60 2.27 only commercial crop produced in the Rice 2.54 3.12 7.13 Yucatan, but some vegetables are now Wheat 1.98 1.98 2.76 produced there to supply resort areas on the Cottonseed 1.47 1.33 1.40 Safflower 1.20 1.24 1.71 coast. Sesame .64 .52 .60 Sorghum 3.39 2.14 4.95 In the Central, Pacific South, and Yucatan Pacific SOI/,th: Peninsula regions, worker and land Beans .46 .60 .62 productivity are well below the national Corn .93 1.10 1.69 Rice 2.13 2.28 2.69 average because of the large number of small Cottonseed 1.18 1.11 1.08 holdings, the large and technologically poor Sesame .65 .44 .53 rural labor force, and the inadequacy of North: Government spending for irrigation, flood Beans .14 .84 •41 control, training, and credit. Corn .87 .94 1.50 Wheat 1.60 2.49 3.14 Cottonseed 1.10 1.42 1.26 Livestock Production Safflower 1.56 1.43 I. 13 Soybeans 1.53 2.18 2.34 Largely because of the land-extensive nature Sorghum 2.98 2.99 2.88 of cattle production, political and legislative North Centra I : restrictions on the size of landholdings have Beans .41 .26 .49 been in almost constant conflict with Corn •63 .62 .89 continued development of the cattle industry. Wheat 2.16 1.96 1.23 Cottonseed 1.16 1.56 1.48 The Agrarian Reform Code (which dates back Sorghum 3.14 2.67 3.14 to the Mexican revolution) and its subsequent Central: modifications perrnit ranchers to own only as Beans .44 .07 .51 much land ,as needed to support 500 head of Corn .91 1.32 2.04 cattle. In some of the drier areas, this means Rice 4.68 4.55 6.18 25,000 to 30,000 hectares [71J. Wheat 2.99 3.50 4.41 Sorghum 2.81 2.12 4.00 Ranchers once ran the risk of having their Gulf: grazing land reclassified as farmland (and Beans 1.08 .80 .67 Corn 1.50 I.:n 1.11 therefore subject to a 200-hectal'e maximum Rice 2.04 2.04 3.01 for rain-·fed land or a 100-hectare maximum Safflower 1.00 .38 .61 for irrigated land) if they planted forage crops Soybeans .54 .99 .87 Sorghum 2.50 3.12 2.33 or made any improvements that might be construed as a conversion to cropland in the Peninsula: eyes of agrarian reform officials. This code Beans .42 .69 .43 Corn .92 1.02 .92 clearly limited the adoption of more Rice 1.60 2.03 2.37 productive technology. In 1981, the Government recognized the limitations of the 11 ~ee table 22 for footnotes. code and passed the Law for Agriculture and

18 Livestock Development. This law encouraged fed primarily on rangeland or pastureland, the.production of fodder crops on pastureland, some supplements, such as feed concentrates but provided for the expropriation of idle lands and forages, are also supplied. This region [561. Even so, the agrarian reform laws supplies most of the beef consumed in the remain on the books, meaning that the Federal District and other population centers interpretation and enforcement of these legal of the central highlands. contradictions are entirely discretionary and usually determined by political Swine and Pork Production considerations. The Mexican swine industry changed Cattle Production substantially in the last 15-20 years. The industry was once dominated by many About a third of cattle production is in the small-scale, traditional pork producers who north, near the U.S. market. Most of the used low-producing breeds and easily cattle are shipped live and purchased by U.S. attainable inputs fo~ feed. A large and feedlot operators. The more common breeds growing segment of the swine industry, include Hereford, Aberdeen, Angus, Charolais, however, has adopted modern swine production Santa Gertrudis, and some crossbreeds. systems (technical and semitechnical), which have been responsible for most of the growth The most numerous production systems are in output [8}. cow-calf operations. Beef cattle feedlots are not common, although possibilities exist for Although data for the swine industry are development in areas bordering the United inadequate and contradictory, they suggest States where imported feed grains coUld be that pork output advanced rapidly in the used more cheaply. Generally. however. a sixties and seventies. A large portion of the scarcity of feed, unfavorable cost/price gains was due to more efficient feeding, relationships, restrictive tenure laws, and increased litter size, and reduced death rates cattle export restrictions inhibit the in the more advanced production systems. The development of large-scale feeding operations modern pork producer generally uses more in the northern regions. productive breeds, such as Hampshire, Duroc, and Yorkshire. In technical production Approximately 25 percent of Mexico's cattle systems, animals may be confined in buildings herds span the temperate region of central and with heaters, air conditioning, and automatic west-central Mexico. Because of Government feeders. These animals typically receive a incentives to producers of basic food and feed well-balanced diet. Feedout times (birth to crops, land-extensive cattle production market) of 5-112 to 6 months have helped to systems have increasingly given way to more increase output. In semitechnical production intensive confined or semiconfined production systems, fewer purebred swine are used, and systems. A large variety of cattle breeds production facilities are not as modern; feed is graze on fall-seeded grains during the winter generally a combination of both compound and on crop residue follow1Ilg harvest [l3}. feed and locally produced forage. Average Farmers use feed supplements during the f eedout times for these types of producers remai'1.der of the year. About 30 percent of vary from 6 to 12 months. Mexico's domestic beef production comes from this area. The technical and semitechnical hog production systems account for about 15 and Cattle production is a major activity in the 45 percent of total·pork production, Pacific South, Gulf, and Peninsula regions, respectively [13}. Most of the advanced where nearly 40 percent of Mexico's cattle are production systems are located principally in raised and about 40 percent of Mexico's beef the northwest, in the states of Sonora and is produced. In the wet tropical region, Zebu Sinaloa. Although located in major grain and Criollo cattle graze and receive little or sorghum and oilseed zones, this region is no feed supplements [13}. The dry tropical distant from major pork product markets. The region principally supports Zebu and CrioUe semitechnical production systems are and some European breeds such as Hereford, concentrated in the west-central area, but can Aberdeen, and Angus. Although the cattle are be found throughout the country.

19 The traditional swine production systems still occurred in Mexican poultry production. The accotmt for about 40 percent of total pork Government even entered feed production and production. Animals are raised on kitchen other poultry input industries in an attempt to scraps, forage, and locally produced crop regulate market activities. Poultry producers residue. Productivity tends to be low with the tended to locate near major consuming centers use of native breeds and the absence of to ease transportation difficulties. modem inputs. Feedout times often exceed a year. Feed manufacturers who received subsidized feed inputs were expected to pass the subsidy The Poultry Industry on to poultry producers. The various agricultural feed input subsidies available to Mexico's poultry industry, once dominated by feed manufacturers were a major incentive for traditional p1'oducers, like the pork industry, is poultry producers to integrate into feed now a large, relatively efficient, production. In 1980, an estimated 58 percent concentrated, integrated industry. Over the of the feed used in poultry meat production past 20 years, increased use of balanced feed came from integrated operations [13}. This and other technologically advanced inputs, subsidy program is no longer in effect. along with improved husbandry practices, increased poultry production. The high feed Poultry meat prices ha.ve been, for the most conversion efficiency of poultry made the part, free of Government controls. However, industry's products available to a rapidly as a means of removing seasonal price growing population at relatively low prices fluctuations in poultry meat, the Mexican [7}. Government occasionally placed temporary price ceilings on domestic poultry meat and Major structural changes accompanied this authorized imports to stabilize domestic progress. Poultry production became prices. increasingly concentrated within a relatively small group of large producers. The average Egg Production broiler operation contained between 2,000 and 10,000 birds. Of nearly 2.000 broiler Much like the poultry meat industry. Mexico's operations. 2 percent produce over 60 percent egg industry has developed over the past 20 of national poultry meat [13}. Both poultry i years from small-scale rural production into a ! producers and pou1try feed producers have large commercialized, integrated industry. begun to vertically integrate their operations. Increased use of balanced feed and other r technological advances, along with improved The Government aided the developing poultry husbandry practices, sharply increased egg industry [32]. Subsidies for feed helped to production per hen. offset input costs. 'J.I The Government I imposed quotas on domestic breeding stock to The states of Sonora and Sinaloa contain the I prevent overproduction, which commonly largest commercial egg production facilities. Although these operations are located in a I il.1 The most important subsidy to poultry major soybean-producing region, they are far production was for feed whose price was kept from the major markets of the central and low through low prices of inputs to feed west central parts of the cOtmtry. However, producers, primarily for sorghum and eggs can be transported es.sUy and the soybeans. The amotmt of the s-absidy varied distance apparently has had lit.tle effect on depending on grain and oilseed market the growth of the region's egg industry. Both conditions. The CONASUPO resale price of Sonora and Sinaloa have superior climates for feed was generally below domestic market egg production. Othel' major egg production prices. Also, imported feed was sold at states, Jalisco and Puebla, are ne.ar both feed acquisition price plUs handling and storage. centers and major markets. The average egg The imported price was usually greater than operation contained between 10,000 and the domestic market price. which provided an 50,00e birds. Ten percent of the operations, additional subsidy. Also, CONASUPO, during all of which had more than 100,000 layers. certain periods, supplied added subsidies in produced over 4S percent of national egg transportation and handling. output [13].

20 Strictly regulated by the Government, price Unlike the highly speci~~lizecl dairy cattle.-,' controls are in place throughout the enterprises in the United States, tliosem egg-·marketing chain from the producer to the Mexico vary widely in both type of produCtion consumer level. The Government holds that system and levels of output; Of a total dairy eggs are a basic food product that should be an cattle herd of about 8 million animals, about 7 integral component of the low-income million are low milk-yielding mix~d-tii"eed. consumer's diet. When the economy ,CrioUo cattle and 1 million are specialized experienced increasing inflation during the dairy cows (erio110 crosses, Holstein, Jersey, seventies, controlled egg prices lagged well .\nd Brown Swiss). Daily milk output per cow behind increases in overall consumer price r,anges from 1 liter for grazing Crio110 cows to levels·1l 2,:0 times that for advanced dairy operations [13]. To maintain egg production profitability during periods of rapidly increasing input More than 65 percent of a11 dairy cattle pr.:~es, the Government initiated input graze. These animals supply about 25 percent subsidies to compensate for the sma1l of the nation's milk production. About 20 increases in sale prices. Feed manufacturers percent of Mexico's dairy cattle herd is under and integrated egg producers received major a semiconfined system. The semiconfined feed components, such as grain sorghum and animals produce about 15 percent of national oilseed meals, at subsidized rates; this subsidy milk production. Close to 60 percent of was removed in November of 1984 [32]. Mexico's national milk production comes from Also, the Mexican Government entered the 15 percent of the dair,y herd managed mixed--feed manu.facturing in an apparent under modern confined systems [13]. About attempt to exert some control over the prices half of these systems are located in Mexico's and output of feed. temperate zone in the center of the country, and a third are located in the arid/semiarid CONASUPO handles an estimated 15 percent region in the north. of the total national egg supply. It usually purchases eggs from small- and medium-sized In land-extensive, grazing production systems, domestic egg producers, and imports eggs the chief feed is grass on ranges or pastures. (fresh or dried) on behalf of the Government Sma11 amounts of 10ca1ly produced forages and when necessary. CONASUPO also acts as a concentrates supplement grazing. Larger wholesale egg distributor and operates its own quantities of supplementary feed are fed, chain of retail stores (mobile stores and including alfalfa and forage from oats, com, supermarkets, or CONASUPERS). grain sorghum, barley, and beets on Mexico's more modern dairy farms. Dairy Industry The dairy producers who mix their own feed Estimates from the Secretariat of Agriculture usua1ly receive some portion of the grain and and Water Resources (known by its Spanish oilseed meal from CONASUPO at subsidized initials as SARH) and the National Milk prices. When the dairy producer buys prepared Institute, indicate that domestic cowmilk feed, it is at a Government-regulated price, production·increased by more than 4 percent reflecting a subsidy to the feed manufacturer annually in the seventies. Mexico's dairy herd by CONASUPO. This subsidy includes recorded a 2.3-percent annual growth in the discounted grain and oilmeal prices. seventies, but a major source of the growth in cow milk output can be attributed to the The Government maintains that milk is modernization of the daL"Y industry, away essential to the Mexican diet and fundamental from the land- extensive, low-yielding type of to the physical development of the younger system to a higher yielding, intensive, and population. Fluid milk prices are under strict confined feeding system. Government control to assure that milk is available to all consumers, especially the lower income groups. 4t Between 1970 and 1980, retail prices for eggs increased 121 percent, whnreas general Milk producers argue that slow;y rising price prices increased 362 percent (table 34). c{~i1ings do not keep pace with more rapidly

21 rising input prices. As a l"csult, fluid milk percent of com area receives pesticides production has declined as margins have [69}, declined, shifting raw milk to the production of cheese. butter, cream, and other dairy Ejidos and agricultural communities farm products whose prices are not controlled two-,thirds of the com area, a fourth is grown [32}. by private farms with more than 5 hectares, and the rest by private farms with fewer than To provide adequate domestic milk and milk 5 hectares [57/. product supplies, Mexico has turned to the international market. The Government Dry beans are grown mainly by the imported such products as powdered milk, ejidatarios, who produce about 70 percent of evaporated milk, and cheese, among others, on all dry edible beans; private farms of more a large scale throughout the seventies and into than 5 hectares provide most of the the beginning of the eighties. An remainder. Most subsistence farmers with overwhelming majority of foreign dairy fewer than 5 hectares grow co~n and beans, ,products are imported and marketed by although their production is {'.ot a significant CONASUPO. percentage of national production [57}. About 6 percent of dry beans grow in federal Characteristics of Crop Production irrigation districts and slightly more than 20 percent of the bean area is planted with Total cropland averaged 17.8 million hectares certified seed. Farmers use pesticides on during 1979-81, the base period from which slightly under 70 percent of the area planted the projections were derived (see "Future to beans [69}. Mexican dry bean yields are Farm Product Demand"). Grains and oilseeds just under both world and Latin American accounted for three quarters of total cropland averages [49}. The North Central and the during the base period. Three grains (com, Pacific Central and Central regions produce grain sorghum, and wheat) contributed to over about 65 percent of dry beans, and the rest three-fourths of all grain area, and three grows throughout the country; the Pacific oilseed crops (safflower, soybean, and sesame) North has the highest yields. accounted for just under three-fourths of oilseed land. Wheat was grown on about 6 percent of Mexico's harvested crop area in 1982. The Grain and Dry Bean Production Pacific North accounted for about 60 percent of wheat area and 70 percent of wheat Com, grown throughout the country, production. The Central and Northern regions occupied 54 percent of total Mexican were also important wheat-producing areas. cropland, according to the 1970 agricultural census. The com area expanded by only about The area devoted to wheat declined slightly in 0.26 percent per 'ear throughout the the seventies, averaging about 737,000 seventies, and averaged 7.95 million hectares hectares in the early eighties. This decline, per year during the df:icade. Com yields (about however, was offset by higher yields, which 1.3 tons per hectare) I.'ose 2.2 percent per increased 2.9 percent annually through the year, which resulted in total production seventies and averaged nearly 3.5 tons per expanding at about 2.5 percent per year for hectare by the end of the decade, one of the the same period. However, yields remain far highest average yields in the world [49}. below both the world and Latin American Approximately 90 percent of the whea{~ area averages [49}. was irrigated, and nearly 93 percent of that was fertilized [32}. Farmers used the Com grows on all farms, from small improved seed of the high--yielding dwarf subsistence plots to larger commercial farms, varieties in all cases, and most farms welre principally on rain-fed land. The Central fully mechanized. Farmers applied pesticides region produces more com than any other to about 60 percent of the area planted area, but the highest yields occur in the [69}. The Government has used a variety of Pacific Central region, especially in Jalisco, measures either to encourage or discourage the leading com-producing state. Only 10-12 wheat production over the years, principally percent of com land is irrigated, but 60 price supports, water allocation, and credit.

22 According to the 1970 census, private farms of Sorghum has gradually replaced other grains, more than 5 hectares contained nearly 62 such as com and wheat, as the basic crop of percent of the wheat area, private farms of the mixed-feed industry. Sorghum production less than 1 hectare contributed 1 percent, and increased dramatically for two important ejidos and agricultural communities had the reasons. The first was the inability of balance of the crop [57}. Mexican. com production to keep pace with the increased population growth. As a result, Rice was grown on about 1.3 percent of the Mexico needed all of its com for human harvested cropland in 1970. Two states, consumption and sorghum replaced com in the Sinaloa in the Facif-io North region (where feed industry. The second major factor was yields are highest) and Ver~cruz in the Gulf the sustained high growth rate of the livestock region, accounted for about 40 percent of the industry, which kept demand for feeds at a rice area. The Pacific Central region was high level. These two factors combined to another important producing area. Rice area increase sorghum. production, which grew by expanded slowly, 0.3 percent per year almost 4 percent per year during the seventies. throughout the seventies to average about 157,000 hectares by 1979-81. During the same Oilseed Crops time period, yields rose 3.6 percent annually, and averaged over 2.3 tons (milled) per Soybean production emerged as Mexico's hectare. Paddy rice yields were far above the favored oilseed during the seventies. Three world and Latin American averages [49J. factors f-!lvor soybean production. First. Rice production grew about 3.2 percent soybeans rotate well with winter wheat in the annually throughout the seventies, and important States of Sonora and Sinaloa. averaged 364,000 tons (milled) by 1979/81. Soybeans provide greater profitability relative to other crop alternatives, especially when Agricultural communities and ejidos grew adequate water supplies are available for nearly 70 percent of the rice. Private farms irrigation. Second, soybeans have a lower of more than 5 hectares accounted for 29 labor input requirement than other crops, percent of the crop and private farms of fewer especially cotton. Growers experienced an than S hectares raised 1 percent of the rice acute shortage of field labor in northwestern [57]. Farmers applied pesticides to about 80 Mexico in the late seventies as continued percent of the land planted. in rice [69J. migration of workers to the United States cut Approximately 4S percent of rice area is deeply into the labor supply. Third, and irrigated [32]. possibly most important, soybean production grew in response to the demand for soybean Grain sorghum is the major feed grain grown meal by the poultry and livestock industries. in Mexico, following a rapid expansion since t1',le late fifties. The Matamoros area of Soybean production grew about 4.7 percent Taro8.ulipas (Gulf region) accounted for more annually throughout the seventies, when huge than 30 percent of Mexico's sorghum increases in area planted offset slight yield production. Sonora in the Pacific North and declines. More than 7S percent of all soybeans Guanajuato in the Central region were the are grown on large private commercial farms other major producin.g areas. Sorghum yields, in the Pacific North region. Farmers irrigate highest in the Pacific Central region, approximately 60 percent of the area planted principally Jaiisco. are nearly three times the to soybeans. Farmers mostly use certified world average and slishtly above the Latin seed and apply pesticides to 7S percent of the American average [491. Thirty-five to 40 area planted [69J. Soybean yields are nearly perce!'it of BC:-g..l1um cropland is irrigated, and twice the world average and slightly more certified seed is used for aU sorghum than the Latin American average [49]. production [32, 69]. Private farms of more than 5 hectares produce slightly mOTe than Safflower production expanded rapidly, half the sorghum. The rest is grown on increasing by 12 percent per year during the ejidos and communal farms [57]. Fifty seventies because of the upturn in planted percent of the crop is harvested in the spring acres. Ejido and communal farms grew and summer; farmers harvest the remainder more than 60 percent of the safflower, and the during the winter and spring. balance was grown on private farms of more

23 than 5 hectares157J. More than 70 percent water irrigation districts. With· Mexico's, oCthe:areaplanted to safflower is irrigated. present firum~i~ "condition, many·, " .' Other illputsi' 'Sl.\Chas certified seed and capital-illtensive'projects are qnlikely to be . fertilizer; bposted'yields'to among, the highest und~rtakensoon to elq>and .the land base (table in the worI4£49J.The,Paeific:North region 25). " produces',nearly'75 percentaf the'nationaL ' total. '_ " The best sites for dams and canals have , , already.been developed oV'eI' the past 35 Mexico'is,oneo:f:,~'1e few. countries in the years. Future irrigation projects will bring world that pi'oiiucessafflower for its only less productive land into use. In hlgh~quality vegetable oil. When .production December 1980,' the World Bank estimated, declined.

Ground water tables in some' irrigation Rain-fed > 6.22 6.61 4.73 1.26 18.82 districts (especially in the Northwest) are Total drawn doWn to the point where:use' generally cap~~lty 2/ 13.67 8.83 6.91 2.96 . 32~37 exceeds normal replacement. Increasing Irrlga1u(f . 4.66 2.20 2.80 .40 .10.06 salinity levels in·the soil and water supplies Rain-fed 9.01 6.63 4.11 :l.56 > 22.31 have added,to the problem. Togethet,these' 1/ Until 1990. ' . factors preclude any significant· expansion of II IncludeS soil . use classes I-IV. irrigation in or around established ground:... Source: [!2J.

24 cost of additional irrigated land, together with The private sector had about 3.5. million toI;lS Mexico's high proportion of unproductive land, of capacity, includingfarmerassoQiations and will frustrate all but the most intense efforts the agro-industrial complex. Public;sectgr to achieve food self-sufficiency in the eighties. capacity is held mainly by the CONASUPO , subsidiaries, BORUCON5.A (Bodegas Rurales Marketing System CONASUPO), and ANDSA(Almacenes Nacionales de Deposito).aesides these . The agro-industry subsector is an important permanent facilities, storage space is rented, part of the national marketing system. For and temporary facilities are..used. Published example, nearly 100 companies produce w.l.ta indicated that the grain storage capacity poultry and animal feeds for market, absorbing of those two agencies totaled about 6.3 million most of the domestic and imported supplies of tons at the end of 1980 (table 26). sorghum, along with byproducts from oilseed and cereal processing. A typical estimate of the loss of corn held on farms for home consumption or for sale in The Government's tax and credit policies local markets was 10 Percent of total weight promote the growth of agro-industrial over a 6-month period. The comparable figure activity. Certain features of the grain supply for beans was 15 percent. Average weight and price management program, however. losses reported by the private agro-irid~trial appeared to"have an opposite effect, which sector, over a 6-month.storage period, may have slowed the rate of improvement in including in-out handling, are about 4.5 grain storage and marketing.. An important percent for wheat, 6-7 percent for corn, and feature of the program was that food and feed 7-8.5 percent for sorghum [44}. processors operated under a mixture of . circumstances which included official selling prices for products, competition with AGRICULTURAL POLICIES CONASUPO plants, reliance on CONASUPO for raw material supplies, and a variety of Mexico's diverse agriculture, in both . financial transfers for which processors would production and organization, emanates from qualify. FOIl' example, wheat millers have had its rugged and complex topography, varied to place orders for wheat with CONASUPO climate, and wide differences in the size and months in advance, making payment at the nature of farms. Agricultural policies and time of the order. Adjusted flour prices programs have attempted to strike a workable typically lag changes in milling costs. The balance between two objectives: to increase system thus may have generated financial production and exports and to improve the burdens for millers.

Because of difficulties with delivery schedules Table 26--CONASUPO storage capacity. for CONASUPO, mills have had to plan a . 1977, t979, and 1980 storage capacity beyond requirements. Feed plants faced markets that were strongly Item 1977 1979 1980 conditioned by lags in the adjustment of official prices for the products sold by their ANDSA II clients (such as dairy farmers). And if Warehouses (number) 827 832 827 Storggg cafacity interruptions oC.curred in the subsidy-based (I, mt 4,243 4,213 4,387 component of their cash inflow, feed plants had to absorb the financial losses. For BORUCONSA 2/ Warehouses (number) 1,238 1,580 1,686 exampl~, the difference between the support Storage capacity prices, which private plants were obligated to (J,OOO mt) 1,334 1,491 1,951 pay farmers for sorghum, and the official Combined stor~ price for sorghum for use in animal feed, was capacity (I, mt) 5,577 5,704 6,344 payable to plants by CONASUPO. II In 230 locations, mainly the principal Firm. data on installed grain and oilseed centers of popUlation•. storage capacity were not available. 'il Smaller, rural storage faci I ities. Estimates ranged from 10-12 million tons. Sourr.e: [491.

25 living conditions of the rural population. The By the late seventies, however, officials felt main programs, implemented to achieve the that more resources and research should be production objectives, have emphasized directed toward rain-fed and tropical increasing productivity, continuing land agricultural lands, areas that had been development and reform programs, assisting in neglected. In 1977, the Government pricing and marketing efforts, and protecting established the rain-fed districts program agricultural products from imports. Those within the Secretariat of Agriculture to programs have been supported by research, improve production on nonirrigated lands. credit, and extension and education activities. However, until early 1980, emphasis continued Consumers have benefited from price ceilings on irrigation and irrigation technology. and a governmentaJ. distribution system for basic food commodities. Production Policies

The goal of achieving self-sufficiency goes Shortfalls in agricultural product?on C1:."1d the back to the late forties. From then until the heavy reliance on imports of basic foodstvffs midsixties, the Government invested heavily in prompted a reorientation of Mexican food ~nd. agricultural infrastructure. New lands were agricultural policy through the SAM program opened and irrigation was expanded in the in March 1980. The plan sought to avoid some northwestern and northern areas of the of the problems that plagued other country. Other Government programs, some large-scale, oil-exporting countries, such as supported by the Rockefeller Foundation, the distortion of consumption habits toward resulted in the development of high-yielding less essential items and a growing dependence wheats. Much of the basic research on agricultural imports. emphasized technology associated with irrigated.production. These activities, along A comprehensive food profile of Mexico, with ample credit policies and price-support completed in 1979, was the foundation of levels (generally above the world price levels), SAM's goals. Compared with previous surveys, spurred expansion of com and wheat the profile revealed significant changes in production. By the early sixties, Mexico nutrition patterns since the late sixties. exported those commodities but had to use About 35 million Mexican diets failed to attain export subsidies to promote sales. Mexico'S minimum per capita daily nutrition requirements of 2,750 calories and 80 grams of Because of the heavy financial burden and a protein. Of those 35 million people, more than general change in the attitude of economic half were seriously malnourished, 13 million in planners and Government officials during the rural areas and 6 million in urban areas. midsixties, progl'ams shifted from agriculture toward industrial development. Mexican The SAM targeted a large part of its program officials also believed that no global food on the rain-fed districts, a once-neglected shortage existed or would likely occur. sector with the poorest and most malnourished. Most of the small landholders By the midsixties, the rate of expansion in and landless workers lived in these areas. The harvested area had declined because much of Government decided that the rain-fed the easily developed large land tracts were in districts had greater potential than irrigated production. Real farm prices failed to keep up areas for marginal increas~s in production. with increasing costs, and overall Government These areas are m.ostly in the central investment in the farm sector declined. highlands. Through the late sixties and early seventies, the Government expressed little concern about The SAM's goals of self-sufficiency in com this change in developments. In 1973, the and beans by 1982 and in other basic foods by combination of a poor domestic grain crop, the 1985 involved expanding a!;'ea devoted to sharp increase in world oil price~, and a poor staples and increasing yiel; i,..... In 1980 and world grain crop focused dom€l:stic attention 1981, the SAM program in led higher on the farm sector. GOVei1llllent investment guaranteed prices, about a Laird more credit, in agriculture began again to increase, but not preferential interest rates, and lower crop at the rate of the forties and fifties. Many of insurance premiums (by 3 percent). The the new investments again went to irrigation. Government subsidized fertilizer and certified

26 ',f',,, >

seed costs by 30 and 7S percent, respectively. and distributional network as the principal The programs included a concept of shared obstacle to achieving this goal. This network risks, whereby the Government guaranteed the included excessive participation by brokers, farmer a minimum

The passage of the Agricultural Development o Promote producer organizations that can Law in 1981 was a significant development in control and exploit their own productive Mexico's agricultural policy. This law resources. permitted producers on communal and private farms to pool resources to form larger, more o Resolve all land title disputes. efficient production units for easier access to credit. Other features of the law penalized o Revise charges for water and equipment in the owners of idle land, encouraged production irrigation districts to reflect actual costs. of forage crops on grazing land (an activity that earlier had been a basis for o Promote more intensive livestock expropriation), and discouraged the division bf production. properties into units of fewer than 5 hectares. The law also reinforced the shared-risks The annual agricultural plan announced by program. SARH in 1983 provided for average support price increases of 85 percent, while input The costs for subsidizing physical inputs and costs were expected to increase by 120 crop insurance, while maintaining high price percent. The situation improved in 1984, as supports and substantial consumer subsidies, the average support price for major rose by more than 500 percent during commodities was raised by 66 percent 1977-81. In real terms, the cost doubled and (October 1983 to October 1984) while the amounted to a 150-percent increase as a share general inflation rate was 63 percent for the of total Government spending [69]. When same period. Ceiling prices for tortillas, the de la Madrid government took office in bread, sugar, and other basic foods were raised December of 1982, it retained the basic substantially, but these too are being eroded objectives of the Portillo administration, but by inflation. In contrast to 1980-82, when an abandoned the costly SAM program in view of average $3.6 billion was spent on the the country's economic problems. The de la agricultural sector each year, about $1.9 Madrid administration instead announced the billion went for financial support of the National Food Program (PRONAL) in 1983. agricultural sector in 1983 and an estimated Like the SAM, PRONAL's production $2.7 billion was earmarked for 1984 [69}. objectives revolved around developing domestic food production in the rain-fed areas Price Supports but not neglecting the irrigated areas. Whereas SAM focused on production, PRONAL Mexico has long employed price supports to focuses on consumption in view of the stimulate agricultural production. In the late nutritional problem in Mexico, which became sixties, price supports, in combination with even more acute during the recent economic high-yielding varieties, improved production crisis. SAM's goal was self-sufficiency; to the point that Mexico was able to export PRONAL's is "food sovereignty," described as significant amounts of both wheat and corn access to food, whether domestically produced even when world prices dropped below or imported, to permit normal physical and domestic support pdces (exports had to be mental development of the population. subsidized). Support prices remained PRONAL singles out the existing marketing unchanged but were allowed to erode through

27 .______---l inflatiqn. Some upward adjustments were TIlI'oughout the seventies, Mexico',s price made·during:the late seventies, especially supports for com. wheat. sorghum. and when shortages began to appear after poor soybeans remained above U.S. farrn gate harvests. When these shortages emerged with prices (table 28). By' 1981, with SAM fully in worrisome regularity toward the end of the place. the domestic price for com in Mexico decade, the rate of.increase in support prices was more than double the U.S. price. Wheat. was accelerated. In real terms, however, sorghum, and soybean prices were 37. 67. and prices remained below 1970 levels (table 27). 95 percent higher. respectively. in Mexico Not until the SAM was introduced in 1980 did than in the United States. Except for wheat, the agricultural sector regain some lost Mexican support prices also exceeded world ground. Nevertheless, .,even after huge export prices throughout the seventies and increases in 1980 and 1981, the support prices early eighties. But Mexico's financial crisis in for com. beans, rice. and sorghum were still 1982 and the subsequent peso devaluations below 1970 levels in real terms. reversed this trend, and Mexican support prices have remained below both U.S. and world prices. Table 27--Support prices in nominal and real terms

Conmodity Nominal Real and year support price support price Table 28--lnte~national ~rain and oilseed (J 970:: I00) prIce comparIsons Pesos/ton Conmodity Mexico Un i ted States World Corn: and year 11 7../ }./ 1910 940 940 1975 1,500 1,054 1 1980 4,450 816 Dollars/ton 1981 6,550 1,002 1982 8,850 705 Corn: I 1983 11 19,200 834 1970 75 52 58 1 1975 140 100 119 j Dry beans: 1980 193 122 125 I 1970 1,750 1,750 1981 262 98 131 I 1975 6,000 2,634 I 1982 154 106 109 1980 10,000 2,362 1983 128 !/l33 136 1981 16,000 2,447 1982 21,000 1,681 Wheat: 1983 11 33,000 1,449 1970 64 48 63 1975 140 130 181 Wheat: 1980 154 144 191 1910 800 800 1981 184 134 196 1975 1,150 971 1982 121 129 167 1980 3,550 699 1983 121 !/l29 170 1981 4,600 704 1982 6,930 552 Sorghum: 1983 11 18,200 799 1970 50 45 51 1975 128 92 118 Rice: 1980 126 116 129 1970 1,100 1,100 1981 157 94 126 1975 2,500 1,664 1982 91 99 109 1980 4,500 B86 1983 83 !/l17 129 1981 6,500 994 1982 8$600 685 Soybeans: 1983 11 21,000 922 1970 104 105 117 1975 280 181 220 Sorghum: i980 348 278 296 1970 625 625 1981 452 222 288 1975 1,600 887 1982 268 209 245 1980 2,900 571 1983 206 !/301 282 1981 3,930 601 1982 5,200 414 1983 11 13,600 597 11 Support price. 2/ Farm gate price. season average. "5/ Average worldwide export price. World Bank. 1/ As of October 1983. ~/ Prel iminary. Source: (521. Sources: £.52, 54, 68].

28

-.~.-"-~-.--.- Input Subsidies totaled 9.6 million head (the equivalent of 25-30 percent of the total tractor power used The-Government has offered numerous and in agriculture). The existing stock of tractors substantial input subsidies to agriculture to and draft animals averaged about. 1 encourage adequate production and to keep horsepower (hp) per hectare of cultivated food. prices low for Mexico's urban and rural area, according to the 1970 Census of poor. Input costs (principally fertilizer, Agriculture; but tractor supply varied- widely, improved seed, ct'edit, irrigation, fuel, and with shortfalls greatest inthe southeast. -Half crop insurance) rose far less than crop priceI') of the nation's fanners used their own draft over the the 'past 30 years (table 29). animals as the mainsource of power, 25 Livestock product prices gained slightly, percent of the farmers owned tractors, and compared with costs over the same period. the remaining 25 percent depended on animals Subsidies have encouraged the consumption of or tractor custom services. modem inputs over the years and outlays for such items became important elements of Diesel fuel prices (nominal terms) remained production costs on more advanced farms. unchanged for manyyears. But in constant terms, diesel prices declined 60 percent from Fertilizer prices have declined in real terms 1965-80. In late December 1981, the nominal since 1965. The real price of urea fell, on a price of diesel fuel increased to 2.5 pesos per 1960 base, from 1,231 pesos per ton in 1965 to liter, and in mid-1982,the price reached 4 687 pesos in 1978, and to 550 pesos by 1982 pesos per liter, bringing the real price of [69]. This decline in fertilizer prices diesel up to approximately the real rate that resulted in an increasingly favorable prevailed in 1965 [69]. In mid-1981, diesel fertilizer/grain price ratio in Mexico prices were about is percent of those in the compared with other countries (table 30). ~ United States.

Tractor draft power increased signifi<..antly Seed prices for almost all basic grains are during the seventies, in part because of lower regulated by the Government from production prices relative to farm product prices (table through distribution. With regare to market 31). Farmers owned about 173,000 tractors in prices for grains, improved seed prices fell late 1980, about 27 percent above the number slightly in 1981 (table 33). However, no owned in 1976 (table 32). Over the same persistent trend in the relationship has period, the number of work animals increased developed, even though the quality of the seed by roughly the same percentage and by 1980 supply has improved significantly through the t years. !

'J./ The 1981 data for phosphate fertilizers Area planted with certified seed for rice, show Mexican producers to have a similar Wheat, and dry beans increased during the I _price advantage in relation to the United seventies, reaching 58, 86, and 23 percent, States and other countries. The Government respectively, as a share of cultivated area by 1, ! stimulated the consumption of fertilizer, 1978. All of cotton, soybean, safflower, and ! which doubled between 1970 and 1980, to an sorghum are planted with improved seeds. average of 58 kilos per hectare [47]. Orily 18 percent of the harvested area of com,

Table 29--lndexes of Input and product prices (1950=100) Index of nominal product prices Index of nominal input prices Year Crops Livestock Total Crops Livestock Total

1950 100.0 100.0 100.0 100.0 100.0 100.. 0 1960 162.5 184.8 171.0 142.5 192.7 164.7 1970 212.2 238.4 222.8 230.3 190.0 135.8 1975 422.2 467.0 441.3 214.3 436.2 331.0 1980 1,053.7 1,060.7 1,056.6 566.6 1,003.0 799.1

Source [49].

29 however, was planted with certified seed in Credit provided by public institutions is 1978/47J. organized by the Bank of Mexico through what is known as the Fl R A (Funds Established in Farm credit comes from both public and Relation to Agriculture). Funds are channeled private institutions. Credit from private through BANRURAL, which makes short--term institutions goes mostly to private farmers loans available to ejidatarios; the National because ejidatarios and most of the Foreign Commerce Bank (Banco National de comuneros cannot offer their land as Commercio Exterior). which finances exports; collateral (since the Government holds title to the National Agricultural Insurance Agency the land). Private institutions provided about (ANAGSA). which makes loans available for 25 percent of the credit allocated for crops in crop insurance; and others. BANRURAL's 1976. but by 1981 (with the SAM's high price rates vary according to the type of bOITowt~r supports in place), that amount rose to 37 (cooperative or individual), type of 'enterprise, percent. Private institutions, however, have and income. In light of Mexico's r~cent high always provided 75-80 percent of the credit inflation rate, real interest rates for these needs of the livestock sector [69J. loans have generally been negative. Irrigation districts administered by SARH T&ble 3O--Relative cost of purchasing fertilizer account for a substantial portion of irrigated in terms of farm product farming. Water charges, seldom Countrv and vear Corn Wheat Cotton volume-related. have been levied on users at rates substantially below the cost of providing Ki l2!)rams !I the service. MexiCo: 1973 3.07 4.23 0.26 1978 2.01 1.39 .21 Table 32--Troctors, draft animals, and horsepower 1981 1:.1 2.11 .99 .10 on farms, 19r:z:~ United States: 1973 2.10 2.34 .20 I tel\! 1972-76 1977 1978 1979 1980 1978 4.17 3.39 .29 average 1981 3.12 2.33 .20 Thousands World: 1973 1.35 1.93 NA Draft animals 7,726 9,302 9,442 9,465 9,lA,> 1978 4.09 3.73 .34 Tractors 126 141 150 161 11:; 1981 3.85 2.78 .2:1 1,000 horsepower Animal power 11 3,863 4,651 4,721 4,733 4,822 NA = not available. Tractor power 8,832 10,205 10,897 11,698 12,630 11 Kilograms of product required to pay for Total power 12,695 14,856 15,618 16,413 17,452 kilogram of nitrogen fertilizer. ~ These figures do not reflect a provision, in the SAM production incentive program which made 11 Estimated on the basis of 0.5 horsepower (hp) per ferti Ilzer available to fanners at a 30-percent horse, mu Ie, or ox. discount if used for basic grains. For rain-fed Sourca: [~l. land, no limit existed on the amount of area per farm which qualified for the discount. For irrigated land, the limit was 20 hectares per farm. Table 33--Relative cost of purchasing improved seed in terms of grains Table 31--Ralative cost of purchasing f~rm tractors in terms of wheat Year Beans Corn Wheat Sorghum

~______~67~h~p___~89~h~p~~I~20~h~p Kil~~l1

~!I Average: 1966-70 2.10 3.19 2.25 7.68 1975-78 (average) 88 173 200 1971-75 1.82 3.98 2.02 6.79 1979 95 241 306 !976-79 2.22 4.15 2.09 8.97 1980 90 142 159 1980 3.00 4.27 2.39 7.59 1981 64 101 118 1981 2.25 3.66 1.82 5.60 ------,------II Tons of wheat required to purchase a farm 1/ Ki lograms of product required to pay for tractor. kiTogram of improved seed.

30 Between 1960 and 1973, the latest year for 34). CONASUPO subsidies grew from $554 which data are available, tho Government million in 1980 to more than $1.9 billion Ll'l subsidized between 30 and 76 percent of total 1984. irr!gation costs in federal irrigation districts. During 1970- 73, the Government absorbed an CONASUPO provides subsidies all along the average of 42 percent of the credit costs marketing chain for these basic commodities [49}. Since farmers in the federal irrigation to the extent that marketing margins are districts are among the richest in Mexico, the typically negative. This means that, in de la Madrid administration is considering addition to price controls, the Government eliminating much of this subsidy. also has control over marlceting costs. The Government purchases a portion of domestic Consumption Policies agricultural production and most imports of basic commodities, owns and operates Regulation of retail prices of "the Mexican processing plants, and operates an increasingly basket of basic commodities" i.s carried out by important network for distribution and retail the Government through CONASUPO. Corn sales. The present administration hopes to products (principally tortillas), wheat flour, reorganize consumption subsidie~ so that they beans, sugar, rice, bread, milk, and vegetable reach target groups more efficiently and oil are among the basic items. effectively through PRONAL.

For many years, retail prices of basic Trade Policies commodit.ies have been kept at low levels (price ceilings varY for different locations). The principal objective of Mexico's overall This was justified originally as assistance to trade policy is to avoid emulating the poor families. Over the past decade, prices of import-dependent economies of so many of many agricultural commodities deemed the world's major oil-':exporting nations. essential to the diet of the poor, like tortillas, Another majCt,r policy concern is to diversify milk, and eggs, grew more slowly than the Mexico's trade relationships and become less consumer price index because of CONASUPO's dependent on the United States as a supplier extensive intervention in the market (table and a market.

Table 34--Mexican retail price indices for selected commodities

Item 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980

Index (1970 = 100) Consumer pr ice index 100 105 110 123 153 176 204 263 309 365 462 Rice 100 104 105 187 247 251 286 296 320 406 NA Corn 100 102 106 149 195 254 254 347 353 4~2 NA Torti lias 100 100 104 143 176 225 266 290 290 334 NA Wheat 100 100 102 123 161 187 220 265 298 na ~A Wheat flour 100 100 101 106 163 214 240 265 314 324 NA Vegetable oi I 100 102 102 145 199 198 230 248 289 326 NA Beef 100 112 121 152 178 193 201 274 350 470 513 Pork NA NA 100 127 159 169 190 252 300 371 399 Poultry NA NA NA 100 121 136 151 193 237 280 319 Eggs 100 100 100 lOB III 135 141 163 190 218 221 Dry beans 100 90 94 154 215 192 218 224 315 392 NA Unpasteurized milk 100 109 113 128 168 172 226 268 285 373 NA P~steurized milk 100 100 105 128 161 165 221 274 279 343 NA Powdered mil k 100 100 121 123 159 200 219 272 332 NA NA

NA = not available. Sources: [~, 21, and 631.

31 (j~ti1 recently, CONASUPO, a semi­ many products, separate and more lenient aU:tonomous governmental organization, waf) import requirements exist for the border areas the sole authorized importer of most grains, so as not to encourage Mexican border oilseeds, and dairy products. Private millers, residents to purchase food in the United States. processors, and livestock producers relying on imported feedstuffs complained about Mexican import tariffs tend to be high, inadequate and ill--p1anned imports. compared with those imposed by developed CONASUPO had followed a policy of countries. However, they are not out of line purchasing a third of its needs directly from with those generally found in the developing foreign governments, another third through world. Mexico has not been a member of public tenders, and the final portion through GATT (the General Agreement on Tariffs and contractual arrangements. Now import Trade) and was thus not subject to the decisions are made by a committee that disciplines required by that international includes CONASUPO and other governmental trading institution. Thus, Mexico often and private industry representatives, but the adjusted its import duties or licensing Government maintains control on the final requirements without prior consultation with import decision. CONASUPO continues to its suppliers, and also without obligation to give preference to government-to-government compensate for any trade impairment that transactions, but no longer has predetermined may result. Nonetheless, in light of its limits on its use of public tenders. present economic situation, the Mexican CONASUPO continues to issue the tenders for Government has begun to liberalize import and grains and oilseeds, at times on behalf of export restrictions in the hope that markets importers [32]. §/ will open up for their exports. Furthermore, it has recently applied for GATT membership. Mexico's agricultural import policy is based on its goal to provide the basic necessities of life Mexico has been one of the few countries to its population. While it aims to establish using an official price system for some of its self-sufficiency in the production of basic duty valuations. "Official" prices, which often foodstuffs, starting with corn and beans, the have little relation to actual market values, Government has acknowledged its need to serve as the basis for calculating ad valorem import these goods until domestic production duties. In most cases, the "official" prices are is sufficient. This includes mostly grains, substantially higher than actual invoice oilseeds, tallow, lard, and nonfat dry milk. In prices. Mexico does not accept actual invoice January 1980, the Mexican Governmen~ sought prices unless they are higher than the official an agreement with the United States that price. This results generally in tariffs that are would more formally recognize the purchases higher than the stated rate. In July 1979, that the Mexicans needed to make from the many items were exempted from this United States. Since then, three such practice. However, the official valuation agreements have been signed. Through these system has been maintained for use on imports agreements, the Mexican Government hopes to of items that are produced in Mexico, items assure ttl.e people that supplies of basic foods that are exempt from import licensing, and win be.a.vailable. luxury goods not produced in Mexico [32].

For nonbasic commodities, products Many agricultural exports from Mexico require competitive with those produced in Mexico or licenses and are subject to export taxes. For considered luxury items, imports into Mexico some items, like coffee, licensing is often used are very rc...:ltricted. Horticultural products, to restrict exports until domestic needs have canned foods, nuts, and specialty items ~re been met and domestic price objectives often not granted the required import permit obtained. However, for horticultural products, and are thus kept out of the country. For achieving domestic price objectives does not seem to be as important as avoiding import §/ Private importers of oilseeds and grains restrictions that could be imposed if U.S. are now allowed to import for their own growers feel threatened by excessive imports account as long as an import license is from Mexico. Exported tomatoes must meet granted by the Commerce Secretariat quality and grade standards established by the (SECOFIN). Mexican Horticultural Producers Union. These

32 standards are almost always more stringent Because several factors are expected to than those imposed by U.S. marketing orders, converge to slow domestic livestock which apply to imports as well as U.S. production, the growth in. demand for feed producti0n. grains and protein meal is expected to slow. Per capita human consumption of com. dry Exports of beef and live cattle from Mexico beans, wheat, rice, and vegetable oil will grow are also closely controlled to maintain a less rapidly in the near term than during the balance between filling export commitments seventies because of higher real prices, given and assuring adequate beef supplies for a the Government's inability to sl.lbsidize growing domestic market. Through licensing, consumption as much as during the seventies. beef exports have been effectively restricted Again, however. total consumption of these since early 1979 in response to perceived commodities will grow because of population shortages on the Mexican market [32]. increases.

Mexico is a member of the Latin American Food Consumption Patterns Integration Association (LAlA), the successor of the Latin American Free Trade Association Mexicans spend a large proportion of their (LAFTA). It grants preferential duty rates on income on food. The 1977 National Survey of specified imports from member countries and Income and Household Expenditure found that at times also waives the licensing or official nearly 45 percent of Mexico's total national valuation requirement. Although Mexico is a household monetary expenditures were on food member of LAlA, its trade with other LAIA and beverages. The survey also found that countries has not expanded not.iceabiy despite although lower income groups spent a larger frequent proclamations to shift away from percentage of their income on food than U.S, dependence. higher income groups, higher income consumers spent far more in absolute terms on U.S.-Mexican agricultural trade relations are agricultural commodities. This reflects the complicated by the fact that Mexico is tendency for the higher income classes to variously a major supplier of complementary consume not only greater quantities of food, products to the United States; a stiff but also more costly items like meat, milk, competitor for some commodities produced com, wheat, vegetable oil, and sugar. within t.he United States; and, particularly in recent years, a principal market for U.S. farm Although expenditures on com amounted to exports. On the other hand, Mexican import only 10 percent of the average household's restrictions for basic products differ food budget, corn is by far the principal considerably from those for competitive component of the Mexican diet (table 35), products, further complicating the trad~ Corn is the primary source of both calories relationship. There is thus no overall trading and protein for Mepdco's poor. Com, dry relationship; instead, the relationship depends beans, chilies, tom~toes, and onions constitute on the type of products involved. the traditional Mexi6an diet. Wheat consumption grew rapidly in recent decades, FUTURE FARM PROPUCT DEMAND paralleling the rapid rise in production due to the successful adoption of high-yielding wheat Mexico's economic conditions are expected to varieties. Wheat is consumed mostly by higher improve only slightly over the next few years income urban consumers. Rice is most popular (see appendix for projection assumptions). We in the Gulf region, where it is produced. anticipate little growth in per capita consumption of animal pr<>tein, and lower Per capita consumption of livestock products income groups are expected to shift from beef is moderate in Mexico. For example, per ana. pork to lower priced viscera cuts and capita yearly consumption levels for beef and variety meats. Nonetheless, those born 10--15 poultry were 16 and 6 kg, respectively, in years ago, when Mexico's population growth 1979--81. By comparison, Brazilians consumed rate exceeded 3 percent per year. are now 18 kg of beef and 9 kg of poultry; Venezuelans entering their peak caloric consumption 22 kg of beef and 15 kg of poultry; ;:md U.S. years. Total consumption levels are thus consumers, 35 kg of beef and 23 kg of poultry. expected to increase. Consumption of beef, pork, and eggs expanded

33 quite rapidly in the seventies, while per capita estimates that the average Mexican diet is consumption of poultry and milk grew very above world and Latin American levels in little. terms of calorie and protein intake [20}.

The Mexican appetite for sugar, at 43 kilos per Trends and Projections person per year, is one of the highest in the for Major Commodities world. Mexicans get most of their sugar in the form of soft drinks. Government policy Because livestock production has been encouraged sugar consumpti.on since it is a hampered by land tenure restrictions, major source of ca.lories for some segments of chronically high feed prices, and fundamental the population. Mexico exported sugar infrastructure problems, Mexico has changed through the early seventies; but by 1981, over the past decade from a net exporter of refined sugar imports had become one of the Hvestock (principally feeder cattle and beef) costliest items of Mexico's food import bill. to an importer. Although Mexico is still a Mexico has recently returned to moderate exporter of feeder cattle, it now self-sufficiency in sugar after several years of imports large amounts of nonfat dry milk and imports. i.ncreasing amounts of eggs, broilers, tallow, hides, live slaughter cattle, and pork. Imports One Government survey revealed that 35 of inputs such as breeder cattle and hatching million Mexicans fell short of minimum daily eggs have grown substantially over the past nutritional requirements of 2,750 calories and decade as well. Except for nonfat dry milk, 80 grams of protein. Of this 35 million, 13 which is mostly supplied by Ireland, the United million rural dwellers and 6 million urban Kingdom, and Canada, Mexico purchases dwellers were malnourished [44}. A recent n.3arly all of its livestock imports from the study by the Food and Agriculture United States. Organization of the United Nations, however, Livestock and Products Table 35·--Per capita dai Iy consumption of calories and proteins, 1979-81 average Beef traditionally has been the principal meat in the Mexican diet as well as a large Comnodity Consumption export earner. However, its dominance has declined in relation to other major livestock Grams/day/person products over the past two decades. and pork production surpassed beef carcass output in Calories from: the seventies. Corn and products 328.9 Wheat products 122.8 Rice 21.9 The beef industry, with notable exceptions, Dry beans 41.5 has not undergone the radical changes of other Tubers 37.5 livestock enterprises. Unlike the movement Vegetables 86.6 toward confined feeding and modern Fruits 251.0 production systems common with poultry and Beef 23.1 Pork 18.3 swine, most Mexican cattle continue to be Poultry 17.4 produced under traditionalland--extensive production systems. As a result, beef Mutton/goat 4.9 Eggs 21.7 production'remains highly dependent on Mi Ik 214.7 weather and corresponding conditions of Cheese 3.9 pasture and range. Lard 1.9 Seafood 28.8 The Mexican Government has become Vegetable oj I 25.6 increasingly concerned about the ability of the Sugar 118.4 Mexican beef cattle industry to supply the Total calories 2,890.0 domestic market with sufficient quantities of beef at a reasonable price. The northern Total protein 75.0 regions of Mexico have historically exported feeder cattle to the United States due to the Source: [20]. type of cattle operations there and the

34 geographic closeness to U.S. markets. To sustain such imports, the Government will prevent shortages in Mexico's domeStic beef probably allow prices to rise and win adopt market, the Government implemented live other policies to dampen demand or to restrict cattle export controls (quotas) and beef access of Mexicans to meat supplies. Even if exports have been suspended since 1979 the real price of beef increases by 5 percent [32]. In fact; in the late seventies and early per year, Mexico will still have to import eighties, Mexico was forced to import beef almost 70,000 tons of beef by 1992. cattle for slaughter and beef carcasses from the United States, Guatemala, and Costa Rica Pork consumption levels are almost in order to satisfy domestic demand. 11 identical to those for beef and have been for more than a decade, even though pork prices Although retail beef prices rose more rapidly rose less than beef prices. Despite substantial than several of the basic food products in the production gains made in the seventies, pork seventies (table 34), per capita consumption consumption grew so much that Mexico increased appreciably. Consumption gains are imported more and more pork and pork projected to slow measurably through the products. Imports are primarily edible offals, midnineties, actually declining in the late lard, skins, and variety meats, which all playa eighties (table 36). Behind this departure from significant role in the diet of a large segment trend is the fact that Mexico's calf crops are of the populace. Mexico has also begun to expected to be small for the next 2-3 years. import live animals, particularly breeding Tn addition, beef production is expected to be stock. Nearly all of these imports come from constrained by prohibitively high costs of the United States. Despite the need to imported inputs (sl,.,;ch as breeding cattle, import, Mexico also exports some pork fceding supplements, medicines) and limited products, chiefly special cuts destined for access of producers to foreign exchange. Japan and, occasionally, the United States (but not since 1979). During this rebuilding phase of the cattle cycle, domestic supplies of beef are expected Pork consumption is expected to exceed to fall below 1982 levels and prices- will rise. production through 1992 (table 37). A decline Even with a ['educed growth in income, the in real incomes in the short run will constrain income elaflticity for beef is suffidently high per capita consumption because of pork's high so that consumption could exceed projected incotne elasticity. For the same reason, per production levels. Since the foreign exchange capita consumption will accelerate as the situation is unlikely to improve enough to economy expuuds in the early nineties. Growth in pork production is presumed to -11 According to some sources, beef imports follow a 4--6 year cyclical pattern of expansion from Guatemala and Costa Rica were and contraction with the next peak expected arranged at the presidential level to allow for in 1988--89< As with beef, current trends in payment of petroleum purcr. ~es. consumption and current prices would cause

Table 36--Beef supply and utilization Table 37--Pork supply and utilization

Item 1969-71 1979·~1 Projections Item 1971-73 1979-81 Projections average average 1987 1992 average average 1987 1992

I ,000 metr i c tons 1,000 metric tons Production 568 1,048 1,133 1,365 Consumption 1/ 519 1,049 1,156 1,435 Production 522 1,052 1,190 1,476 Net trade '5/ 41 -I -22 --69 Consumption II 525 1,064 1,208 1,505 Net imports - .3 12 17 28 Ki logram~/year Per capi ta Ki logramsNear' consumption 10.9 15.5 14.3 15.9 Per capita consumpi- ion 10.7 15.8 15.0 16.7

II Assumes an increase in real beef prices of 5 percent per year. IIAssumes an increase in real pork prices of ~I Negative values indicate net imports. 2.5 percent per year.

35 pork consumption to exceed projected The Government will probably continue its production by 67,000 tons in 1992. 111e drain eKtensive intervention in the egg industry to on foreign exchange from such large imports hold down costs of this source of protein for of pork will likely prompt the Government to the poor. Retail price increases will probably restrict imports and to raise pork prices. A continue to lag behind increases in production price increase of about 2.5 percent per year costs. POl' that reason, the gap between would hold imports to a more acceptable level production and consumption is eKpected to of about 28,000 tons. expand in the late eighties (table 39). Like other livestock products, per capita egg Poultry meat. production for most of the consumption is expected to fall in the near seventies was sufficient to meet domestic term because of the effects of a high positive demand. However, in recent years Mexico has income.elasticity ami contracting per capita been forced to tum to the foreign market to incomes. By the early nineties, increases in alleviate seasonal or regional shortages. Most per capita consumption are foreseen because of Mexico's poultry imports have been of an expected upturn in the economy. Mexico fertilized eggs and live birds for breeding. could again pe self-·sufficient in eggs if the Government permitted producer prices to Poultry meat production is expected to increase in line with general inflation. But if increase by just under 3 percent per year Government policies continue to reduce the through 1992 (table 38). Due to poultry's high real price of eggs by 2 percent per year, income elasticity, per capita consumption is Mexico will have to import approximately projected to expand in the early nineties. 76,000 tons of eggs by 1992. Because the poultry industry can respond quickly to changes in demand, Mexico will Milk is an important part of the Mexican face a rough balance 0~tween production and diet. A~tempts to keep prices low have consumption and not likely have to import resulted in shortages of domestic milk and poultry meat until the late nineties. By 1992, regional and seasonal shortages contributed to Mexico will need to import about 36,000 tons a continual dependence on large quantities of of poultry meat to make up for seasonal and imported milk and other dairy products. regional shortages. Mexico produced about 90 percent of the milk Egg production was sufficient to satisfy it consumed at the beginning of the seventies, domestic demand during most of the seventies; but was only 80 percent self-sufficient by the Mexico even exported sizable quantities of end of the seventies. This gap is expected to eggs in 2 years. By the end of the decade, widen further (table 40). Per capita though, Mexico's imports of both hatching consumption rose by about 10 percent during eggs and fresh eggs for human consumption the seventies, while retail prices increased were increasing. By the early eighties, Mexico much less than food prices or the general was including eggs in the U.S.-Mexican trade inflation rate. If the Government continues to agreements to reinforce its intent to assure subsidiz,e milk consumption in the same sufficient domestic supplies. Table 39--Egg supply and utilization Table 38-~oultry meat supply and utilization

Item 1969-71 1~79-81 Projecti,ons Item 1973 1979-81 Pro~ections average average 1987 1992 average 196 1992 1,000 metr i c tons 1 000 metr i c tons 1 Production 326 638 679 799 Production 264 371 438 520 Consumption 1/ 329 688 746 876 Consumpt i on 268 380 436 556 Net imports - :5 50 67 77 Net trade 11 -4 -9 2 -36 Ki IQgrams/~ear Per capita Ki IQgrams/year 10.2 9.2 9.7 Per capita consumption 6.7 consumption 5.0 5.6 5.4 6.2 11 Assumes real price decreases of 2 percent 11 Negative values indicate net imports. per year.

36 If . fa~.hion as in the seventies, M.exico would need foreign supplies is expected to prompt th/~ to '~mport about 3.8 million tons of fluid milk Government to provide ad,5~ed incentives to (equivalent to a~proximately :325,000 tons of producers. With the recent emphasis ori nonfat dry mUk) by 1992. If instead, the production in rain-fed areas, yields are Government allows real milk prices to rise by expected to grow slowly as the area expands 0.5 percent per year, consumption will be on lower yielding land. dampened such that imports of approximately 3.3 million tons of fluid milk (equivalent to Human consumption is expected to expand in " 275,000 tons of nonfat dry milk) would be line with population increases. The necessary. Government's predilection for subsidizing consumption would offset the expected decline Grains and Legumes from a slightly negative income elasticity in combination with moderate income growth Com consumption by humans has been (table 41). The gap between domestic corn groWing at about 3.5 percent per year -since production and consumption is therefore 1969-71 and averaged 10.4 million tons in expected to widen through the eighties, as 1979--81. Little corn was fed to livestock productkm lags behind population growth and during the sixties, but by the late seventies, as corn used for animal feed increases. feed use accounted for about 20 percent of However, little is expected to be lost in the total consumption. Virtually all feed com was degree of self-sufficiency. imported. Dry beans are also an integral part of the Corn area is expected to expand rapidly during Mexican diet. Per capita consumption the eighties because of import substitution diminished over the seventies principally policies. The urge to lessen dependence on because the Government chose not to import significant amounts of dry beans until 1980, even though production was declining and ~. Table 40·--Fluid mi Ik supply and uti Iization drought years brought shortages.

1969-71 1979-81 Pro~ections Per capita consumption is expected to remain average average 19lr 1992 steady through the early nineties. However, the gap between production and total 1,000 metri c tons consumption will widen (table 42), A very slight increase is projected for the bean area, Production 5,296 7,028 7,471 8,248 but by 1992 the area harvested will still be Consumpt ion 1/ 5,578 8,507 9,594 11,502 Net imports - 282 1,479 2,123 3,254 below the 1969-71 average. A slight increase in yield growth is projected as well. Few K.i lQ9rams/llear modem inputs are presently used by most dry Per capita consumption 113.9 125.9 119.0 127.6 bean producers, so the potential for yield growth through the use of modem technology remains large, 11 Assumes an increase in real price of milk to consumers of about 0.5 percent per year.

Table 4!-~rn supply and utilization 1969-71 i979::al Projections Item Units average average 1987 1992

Area harvested 1,000 ha 7,750 7,950 8,377 8,696 Yield mtlha 1.0 1.3 1.4 1.6 Production 1,000 mt 8,138 10,433 12,179 13,620 Food consumption do. 7,408 10,400 12,304 13,659 Feed consumption do. 136 2,600 3,105 3,989 Net trade 1/ do. 594 -2,586 -3,230 -4,028 Per capita-consumption kglyr 151.2 153.9 152.6 151.5

11 Negative values indicate net imports.

37 Dry beans is one of the few commodities for was in the seventies. Wheat consumption per which Mexico could achieve self-sufficiency. person will grow very slowly through the Very little would be required for incentives, as eighties and will peak by 1990. Nonetheless, was demonstrated by the production response total consumption will increase by more than 3 to the SAM program in 1982. The response percent annually because of population was so great that Mexico actually exported growth. The difference between production small amounts of beans, although the country and consumption is expected to grow as there remained a net importer. In the absence of is little room for improvement in yields, and such incentives, Mexico will probably import expansion in area is limited by the availability about 180,000 tons yearly by 1992. of irrigation water. Imports of nearly 1.4 million tons may be. needed by 1992. Wheat is another important grain consumed in Mexico, used mainly in bread and pastries. Rice is consumed mainly in the urban areas by Total wheat consumption has expanded by upper middle and higher income groups. Rice about 5.2 percent annually since the early consumption expanded by about 3.2. percent seventies to average 3.5 million tons by 1980 annually since 1969--71 to an average 364,000 (table 43). Only about 5 percent of the wheat tons by 1979-81 (table 44). is used for animal feed. Area expansion will probably increase more Growth in per capita consumption during the rapidly than in the seventies because of plans eighties is expected to be about half of what it to encourage rice production in the Gulf

Table 42--Dry bean supply and utilization 1969-71 1979=81 Projections Item Units average average 1987 1992

Area harvested 1,000 ha 1,967 1,733 1,795 1,840 Yield mt/ha 0.5 0.6 0.6 0.7 Production 1,000 mt 1,000 985 1,122 1,239 Consumption do. 1,027 1,040 1,230 1,421 Net imports do. 27 55 108 182 Per capita consumption kg/yr 21.0 15.4 15.3 15.8

Table 43--Wheat supply and utilization 1969-11 1979=81 Projecfions Item Units average average 1987 1992

Area harvested 1,000 ha 747 737 876 991 Yield mt/ha 2.7 3.6 3.8 4.0 Production 1,000 mt 2,032 2,664 3,367 3,980 Food consumption do. 2,097 3,483 4,218 5,097 Feed consumption do. 72 150 200 257 Net imports do. 137 969 1,051 1,374 Per capita consumption kg/yr 42.8 51.6 52.3 56.5

Table 44--Rice supply and uti lization 1969-71 1979=81 Projt-¥;'fTOriS""-- Item Units average average 1987 1992

Area harvested 1,000 ha 152 157 180 199 Yield mt/ha 1.7 2.3 2.~ 2.5 Production 1,000 mt 258 364 433 490 Food consumption do. 279 380 450 524 Net imports do. 21 16 17 34 Per capita consumption kg/yr 5.8 5.6 5.6 5.8

38 region, where there is more abundant rainfall projects will probably be undertaken by the and spring flooding that can be used to Government in the eighties, the soybean area advantage. But as this shift occurs, national will probablYI expand only moderately at best yields are expected to grow more slowly (table 46). The Government has programmed because yields will be lower in the Gulf region an expansion of soybean area in the rain-fed than in the irrigated areas of the Pacific areas of northeast Mexico, but yields obtained North. there will probably be much lower than the current national average. With limited income growth and a low elasticity of demand for rice in Mexico, per Mexico has had a considerablH amount of capita consumption is not expected: to expand excess crm;hing capacity in recent years and, significantly through the early nineties. given present expansion plans of the Rather, total consumption will grow primarily processing sector, this excess crushing as a function of population growth. As a capacity will increase throughout the result, the gap between projected production eighties. The oilseed-processing sector. and consumption will not widen substantially. therefore, is constantly pressuring the Government to limit imports of finished Sorghu.m consumption is expected to grow products. The Government is generally by more than 50 percent over the forecast receptive to this request because oilseed period chiefly because of expected increases imports cost less than imports of vegetable in milk and egg production and the increased oils and meal. Therefore, Mexico wil1 use of confined feeding of hogs. Despite probably import oilseeds rather than their anticipated yield and area increases, Mexico's finished products as much as possible. import needs will be a million tons larger in 1992 than they were in 1979-81 (table 45). Cottonseed production is projected to drop by 1992. Government incentives directed at OUseeds and Products spurring production of basic food crops placed cotton at a disadvantage in the competition Soybeans, along with sesame and safflower, for the limited irrigation water over the past were singled out from all of Mexico's oilseed .few years. Low world market prices in crops for special attention in the SAM combination with the rising cost of both labor program. However, expansion of soybean and pesticides also discouraged production in production will be limited by available water the late seventies. supplies in northwest Mexico. Frequent droughts, combined with the heavy irrigation Safflower production is expected to grow requirements of the winter wheat crop, caused much more slowly than in the seventies. major fluctuations in soybean production Safflower competes with winter wheat grown throughout the seventies in contrast to in the irrigation districts of the Pacific Mexico'S steadily increasing soybean North. When water supplies are plentiful, consumption. For example, during the 1980/81 farmers typically grow a winter wheat­ crop year, soybean production plummeted 60 soybean combination; in drier years, they percent while consumption grew by more than produce safflower only. Significant area 10 percent. Since no new massive irrigation expansion would have to be tied to expanded

Table 45··-Sorghum supply and uti Ii zation 1969-71 1979::a 1 Projections Item Units average average 1987 1992

Area harvested 1,000 ha 913 1,133 \ ,347 1,524 Yield mt/ha 2.5 2.8 3.2 3.5 Production 1,000 mt 2,246 3,266 4,310 5,305 Feed consumption do. 2,216 5,367 6,510 8,364 Net trade II eto. 30 -2,101 -2,200 -3,059 Per capita-consumption kg/yr 44.9 48.4 53.5 58.9

!! Negative values indicate net imports.

39 Table 46---Oi I seed production 1969-71 I979::a I ProJect! ons Item Units average average 1987 1992

Soybeans: Area harvested 1,000 ha 148 248 347 440 Yield mt/ha 1.8 1.7 1.8 1.8 Production 1,000 mt 271 430 624 814 If Cottonseed: 1 Area harvested 1,000 ha 563 363 339 322 I Yield mt/ha 1.4 1.6 1.6 1.6 Production 1,000 mt 774 576 544 523 I ,i Safflower: I Area harvested 1.000 ha 130 387 415 436 I Yield mt/ha 1.2 1.4 1.4 1.4 I Production 1,000 mt 162 521 566 601 1 other oj I seeds: JJ I, Production 1,000 mt 249 281 294 302

JJ Copra, sesame, and sunf lower seed. irrigation areas, which is not anticipated in Table 47--Oilmeal and vegetable oil supply the eighties. Yields are already among the and uti Iization highest in the world. so growth there is limi.ted as well. Item 1969-71 1979-81 Pro~ections average average 198 1992 Oilseed product consumption grew substantially during the past few years due 11000 tons largely to Mexico's rapid population growth Oi lmeals: 1/ and increased production of meat and dairy Production 610 938 1,160 1,383 products (table 47). Mexico is slowly Consumption 870 1,829 2,142 2,687 developing into a sophisticated market for fats Net trade '// -260 -891 -982 -1,304 and oils. Processed vegetable oils that have Vegetable oi I: been highly refined and deodorized are Production ""il 326 469 522 571 preferred by consumers. who are becoming Food consumption 263 667 774 955 more quality conscious. This is particularly Industrial evident in major urban areas where modern consumption 51 89 125 159 retail outlets provide a variety of products Net trade '// 12 -287 -377 -544 containing fats and oils in different sizes and packaging materials. The present trend in 11 Measured in 44-percent soybean meal consumption is toward more liquid vegetable equ j va Ieni.5. Inc 1udes s;:)ymea I, cottonseed mea I • safflower meal, copra meal, sunflower meal, oils for use in both commercial and household sesame meal, and fishmeai. cooking and away from hardened fats such as ~I Negative values indicate net imports. hyd:rogenated shortenings and margarine [32}. 31 Production is from domestical IV produced oiTseeds. The increase in consumption of vegetable­ achieving such growth. And much will depend based fats and oils in recent years has been on the introduction -and success of products closely related to Mexico's income and not now being heavily marketed such as salad population growth. A modest increase in per dressings. mayonnaise, and spreads. capita consumption has also taken place. Per capita consumption of vegetable fats and oils Growth in oilseed meal consumption in Mexico rose from 7.S kg in 1970 to 9.9 kg in 1979-81. is tied to the steady expansion of the livestock Consumption of fats and oils is projected to sector and the consequent increase in the grow at perhaps 3 percent annually through demand for balanced feed rations (see the rest of the eighties. Population growth appendix). The demand for livestock products will, of course, be a critical factor in reflects population growth to some extent; but

40 more important, it reflects the increase in Mexico's sorghum imports come primarily consumer incomes and the consequent demand from the United States, but as Mexico'S for animal protein. Soybean meal accounts for external purchases began to increase in the approximately 70 percent of all oilseed meals late seventies and early eighties, Argentina consumed in Mexico. Almost all soybean meal began regularly supplying about 25 percent of is used in poultry and hog feeds. Smaller Mexico's import needs. The United States amounts of cottonseed, safflower, and regained 100 percent of the Mexican sorghum sunflower meals are consumed by cattle; these market in 1982 because it was able to offer oilseeds have lower protein and higher fiber financially strapped Mexico credit guarantees content than soybean meal, making them more (through the GSM-102 program) whil":h easily digested by cattle. Argentina could not offer because of its own difficult financial situation. Nonetheless, Human consumption of soybean products Argentina supplied 15 percent of Mexico's represents no more than 2- 3 percent of total sorghum imports in 1984. consumption. However, Government efforts to provide sufficient protein for its urban and Mexico has imported minor amounts of rice rural poor will inevitably lead to an increase in from the United States in the past. But in human consumption of soy flour. Mexicans in recent years, as import needs have grown, both the private and public sectors are aware Mexico has elected to import rice from the of the rapidly increasing costs of animal Orient and Costa Rica because of prices. proteins and are looking closely at texturized soy protein and cereal foods fortified with soy Until recently. Mexico imported all of its protein. The distribution network of . barley (both malt and feed) from the United institutional facilities and retail outlets for States. Sales totaled $38 million in 1980, and soybean products continues to expand in major have reached as high as $45 million. Canada urban centers in order to handle an increased provided all of Mexico's barley imports during volume. the 1984/85 marketing year (July-June).

The remainder of this categorv is balanced out Prospects for U.S. Exports to Mexico by minor amounts of wheat flour, nonwheat flour. prepared breakfast foods, breads, What follows is a description of the trade biscuits and other miscellaneous products patterns that developed over the seventies in supplied almost exclusively by the United each of the 17 food categories as delineated States. The most important areas of by the United Nations (see app. table 4 for expansion lie with the major food and feed import detail.) We also show the possibilities grains. for increased U.S, exports of the commodities through the early nineties, whether through Oilseed imports by Mexico have been expanding Mexican demand or through unprecedented in recent years. The value of increasing the U.S. market share. the Mexican oilseed market quadrupled over the last half of the seventies. Two-thirds of Primary Import Categories this category is soybeans. The United States typically supplies 70-100 percent of Cereals and preparations constitute the Mexico's soybean imports, with the balance principal component in Mexico's agricultural being provided by Brazil or Argentina. The import bill. 'The United States is the major United States is the sole supplier of Mexican supplier of these commodities, with 83--97 cottonseed and sunflower imports. which percent of the market over the past decade. mushroomed in the early eighties. Canada's Canada and Argentina have been our major share of Mexico's oilseed market consists of competitors in the past, although together approximately $8 million of linseed and their share has never exceeded 16 percent of rapeseed exports. the total. Canada, Argentina, and Australia suppJied most of Mexico's imports of wheat Mexico has negotiated with both Brazil and for feed during 1983 and 1984. Com Argentina to import soybeans and sunflower imports are almost exclusively of U.S. origin seed in recent years to diversify its sources of with minor purchases from Argentina. supply and to reduce its dependence on·the

41 United States. Nevertheless, the United United States. Mexico's imports of poultry States will probably continue to be the meat and pork usually totaled nearly $20 dominant supplier of oilseeds to Mexico million in the latter seventies; the United through the eighties. The Mexican States was the sole supplier of these products. oilseed-crushing industry prefers U. S. oilseeds because of their high oil-yielding The outlook for sales in this category is characteristics and quality consistency. mixed: Mexico's purchases of low-cost variety meat and offals are expected to Mexico has been willing to pay higher prices increase in the near term at the expense of for Argentine and Brazilian soybeans to higher priced beef and pork imports. In the diversify its sources of supply. If one longer run. however, the level of Mexican considers the quality difference betwe~n South imports of meats and preparations depends on American and U.S. soybeans, the price the Government's adopting the necessary difference is even greater. The most likely measures for increasing productivity in the conclusion to be drawn is that Mexico, for domestic livestock sector. Unless the political or other reasons, will allocate a Government stimulates domestic livestock percentage of its annual oilseed import production by the end of this decade, which requirements to non-U.S. origins. would entail imports of numerous inputs such Nonetheless, Mexico will still have to look to as breeding animals, medicines, and feed the United States for 80-90 percent of its supplements, Mexico's meat imports will likely total oilseed import needs. For meal and oil exceed the levels of the latter seventies and imports, Mexico will continue to rely almost early eighties. A more detailed discussion of exclusively on the United States. prospects for Mexico's beef, pork, and poultry import needs was presented earlier in "Trends Live animal imports by Mexico did not grow and Projections for Major Commodities," p.34. significantly in the last half of the seventies. Cattle are the main component of this Dairy products and egg imports quintupled category, with the United States supplying 6S in value during 1975-80. The EC is the major percent and Canada 3S percent. Canada has supplier with nearly 40 percent of the market; long supplied Mexico with most of its imported the United States and Canada have about 30 dairy cattle, principally Holsteins. The United and 20 percent. respectively. The value of States sells Mexico nearly 100 percent of its Mexico's dried milk and cream imports imports of sheep, goats, swine, and poultry. has surpassed the $100 million mark in recent years, with Ireland alone supplying about half. The prospects for increasing U.S. sales of live animals are not promising in the near term, CC!.nada, the United Kingdom, and New given Mexico's recent devaluations and foreign Zealand are the other principal suppliers, exchange shortages. However, as Mexico mainly through subsidized government-to-­ regains its financial balance, the potential for government sales. The Ee and New Zealand live animal exports to Mexico could be supply the Mexican butter market, worth substantial. Once the Mexican populace again about $50 million in 1980. begin to enjoy real increases in income, demand for protein could expand at the rapid The value of Mexico's purchases of eggs rate of the seventies. The Government will quadrupled over the last half of the seventies likely prefer importing breeding animals to $4.5 million in 1980, with the United States (especially dairy cattle) rather than importing virtually the sole supplier. The United States beef, pork, nonfat dry milk, and other also supplies approximately a third of Mexico's livestock products. evaporated and condensed milk and cream imports, with Canada supplying the other Meat and preparations imported by Mexico two-thirds, totaling about $3S million in 1980. more than doubled during 1975-80, with the United States providing more than 90 percent. Continued growth of Mexican imports depends Nearly all the meat is fresh, chilled, or frozen on investment in the domestic livestock sector rather than dried, canned, smoked, or salted. and the continued availability of subsidized The largest component of this category is exports from suppliers. The products in this edible offals. supplied exclusively by the category represent the largest opportunity (in

I 42 . ! dollar terms) for U.s. exporters. Nonetheless, Mexico's fresh fruit imports which. besides U.S. exporters are at a disadvantage with apples, include small amounts of oranges, subsidized exports from the EC and Canada. lemons, grapefruit, grapes, and pears.

Secondary Commodities The United States supplies approximately half of Mexico's imports of nuts, valued at about Mexico's total imports of nonbasic food items $7 million in 1980, with Brazil and Spain totaled more than $1 billi',:m per ')Teer in the providing the rest. Dried and preserved early eighties, when an c't,)ervCl.lued P(~So made fruit imports together account for- about $7 these imports lucrative. Th(} United. States is million, with about 98 percent of Mexico's the chief supplier of most of these products, purchases coming from the United States. which range from almonds to yeast. Me,.dco Prospects for significantly expanded sa.les in represents an important market for U.S. this category are not bright. Since the producers of these commodities, and ranks in Mexican Government holds that nearly aU the top 10 markets for cheese, fresh fruit, items in this category compete with domestic canned vegetables, inedible tallow, and cattle production or are luxury items, imports will hides. probably be restricted to the border areas where they are presently confined. Any For nonbasic commodities, however, imports concession by the Mexicans in this regard into Mexico are very restricted. Products that would likely have to be accompallied by a are considered to be competitive with those reciprocal action by the United States produced in Mexico (and usually the regarding Mexican fresh or processed interpretation of what competes with Mexican horticultural products. products is very liberal) or are considered luxury items, such as canned foods, nuts, and Vegetable imports soared in value from specialty items, are often not granted the about $9 million irt the midseventies to $240 required import permit and thus kept out of million in 1980. Mexico's imports of $225 the country. For example. peaches and million of dry beans, almost a11 from the cherries are usually granted entry only if they United States, accounted for nearly all of this are being imported as a complement to increase. Prior to 1980, the value of Mexico's Mexican fruit for further processing in fruit imports of vegetable products totaled cocktail or for juice. Mexico has been an approximately $20 million. Hops was one of important customer for U.S. hides and skins the principal commodities in this category; only because they are later re-exported as Mexico's purchases of hops averaged around $7 leather products. million during the late seventies. Most of the hops and other fresh vegetable imports, such Many of these minor commodities, which show as potatoes, tomatoes, roots. and tubers. up in U.S. trade statistics as exports to Mexico are supplied by the United States. Mexico's move. in fact. into the so-called nfree zones" prepared vegetable market was worth about along the U.S. border. For many products, $4 mUlion toward the end of the seventies. sepa..!'Q;t~ and more lenient import The United States has about three-quartf:rs of requiremlents exist for the border areas. this market, with Spain supplying most of the These imtlOrts are allowed in order to rest. There will probably be few opportunities encourage Mexican border residents to for U.S. exporters to expand within thi~; purchase food in their own country and to category, except for dry beans. supply the restaurants and hotels that cater to millions of tourists each year. Other possibilities appear tied to reciprocal , trade agreements between the United States Fruit and nut imports rose from $11 million and Mexico. The possibility of expanding our in 1976 to $23 million in 1980. The United exports of hops to Mexico would likf:ly hinge States is the major supplier with 81 percent of on allowing MexicC'.n beer greater aecess to the market. Brazil is our major cQmpetitor the U.S. market. In the unlikely event that with approximately 10 percent. Most of this Mexico would ease import restrictions on U.S. category is fresh fruit, with apples being the potatoes, the market potential for the most important component ($4 million in commodity (for processing into chips in 1980). The United States supplies nearly all of Mexico) could be significant toward the end of

43 ! ,f the d~cade, given that per capita incomes are products in this category are minor. No major t .~ expected to increase once again after 1985. opportunities for U.S. exporters are foreseen for these commodities. I Sugar and prepar,ation imports come chiefly r from four countries, depending on whether the Animal feeding stuffs, which come chiefly sugar is refined or raw. 'Three-fourths of this from the United States (95 percent), more category is unrefined sugar, with the United than quintupled during the last half of the States essentially the sole supplier ($139 soventies to reach $100 million in 1980. mUlion in 1980). The remaining fourth of this Almost 70 percent of this category is U.S. category is refined sugar, supplied by Brazil shipments of protein meals. Almost all of (one-third), South Korea (one-fourth), and the the balance is fodder, tlxclusively from the Ee (one-fourth). Nonchocolate sugar United States. Imports of fishmeal totaled prepaTations and candy is a $4 million market, only $226,000 in 1980; but, in the past, Mexico with the United States essentially the sole imported as much as $18 mUlion of fishmeal, supplier. principally from Peru.

This category presents intriguing prospects for The outlook for significant expansion of U.S. U.S. exporters. As recently as 1977, Mexico sales of fodders to Mexico is not encouraging. was a net sugar exporter. But income growth, Mexico'S livestock sector is expected to consumer subsidies, and reduced production contract sharply over the near term, and incentives quickly eroded Mexico's surplus growth in the latter half of the decade is not production. By the early eighties, Mexico expected to be particularly robust, given the found itself with one of the highest per capita Government's present policies toward the consumption levels in the world, mostly in the livestock sector. Fodder sales may receive a form of soft drinks. Sugar became one of the boost during Mexico's drought years. most costly items of Mexico's total agricultural import bill. In 1980, when world Fats and Shortening imports declined from sugar prices topped U.S. domestic support approximately $25 million in the midseventies prices, Mexico imported U.S. refined sugar. In to $20 million in 1980. P..endered pig and subsequent years, however, the world price has poultry fat account for 40 percent of this dipped far below the U.S. support pr:i.~e, such category. It is a $12.8-million market which that U.S. refiners can no longer compete with has not grown in recent years. The United other suppliers. States is the sole supplier of this product. Imports of miscellaneous food preparations Even though the Government considers sugar totaled $8.4 million, or 26 percent of t.his to be an important source of energy in the category, and sauces and mixed Mexic",n diet, it has been forced to cut back seasonings ($4.8 million or 15 percent) have on the subsidy for sugar consumption exhibited strong growth. doubling over the (especially to the soft drink industry) because past 5 years. Again, the United States of skyrocketing ;costs. If high-fructose com supplies almost all of these products to syrup becomr.;:s an economical alternative to Mexico. The United States dominates most sugar by Mexico's industrial consumers, U.S. minor categories, such as soups, yeast, and exporters would likely benefit. vinegar. There are few opportunities for expanded sales in this category for U.S. Coffee, tea. cocoa. and spice imports exporters since external purchases of most of expanded moderately throughout the these products are allowed only within seventies, reaching approximately $10 million Mexico's border zones. in 1980. The three largest items in this category are cinnamon ($4 mUlion), Beverages and tobacco imports tripled in pepper ($2.4 mUlion), and chocolate ($1.4 the late seventies to $70 million. France and million). Sri Lanka provides nearly all of the the United Kingdom are the principal cinnamon, Brazil provides nearly all the suppliers, with nearly 80 percent of the pepper, and the United States supplies nearly market. More than 30 percent of this all the chocolate and chocolate products. The category is wine, primarily from France and United States also ships $1.2 mUlion in "other Spain. Sales of U.S. wine went from $75,000 spices" to Mexico. Shipments of other to $280,000 between 1975 and 1980. The

44 group is aliotted but has not recently important commodity in this United State/) is United wine_under Mexican trade cotton. purchased entirely from the filled its quota for coaon About two-thirds of this category States. Mexico was a $7A-million regulations. in 1978, but by million in 1980) represent imports of market for the United States ($48 to $6 million. Sales alcoholic beverages from the 1980 sales had declined distilled equally between cotton linters United Kingdom and France. The U.S. share are split almost waste, uncombed." Mexico of this market has declined in recent years, and "cotton imports these cotton byproducts, from the I and was only 1 percent ($585,000) in 1980. I United States to supplement its own which it exports States supplies almost a11 of substantial cotton production, f The United form. Since the unmanufactured and manufactured both in bale and textile Mex.ico's is a wool importer and I tobacco imports. Mexico usually imports no United States itself large cotton exporter, this category i unmanufactured tobacco and is, in fact, a Mexico a major market opportunities for U.S. sizable exporter. Mexican imports of offers no manufactured tobacco products, principally exporters. almost $12 million in 1978 ! cigarettes, reached material r to just under $1 million in 1980. Crude animal and vegetable before falling United States, worth $50 imports are illegal under present imports from the I These have remained fairly constant I Mexican trade regulations, so market million in 1980. are not over the past decade at about 75 percent. opportunities for tobacco products animal Even if the Mexican One-.fourth of this category is "c,rode I expected to materialize. specified." The United • for alcoholic beverages stagnates over matter. not elsewhere market 90 percent of these products to few years, significant opportunities States supplies the next and the EC supplying the I U.S. wineries and distilleries exist through Mexico, with Canada 1 for accounted for about 40 usurping part of the EC's market share. remainder. Seeds percent of the category. with the United of this I valued at nearly $100 States supplying about 90 percent Hide and skin imports, in 1980). Live almost exclusively from market (worth $18 million million in 1979. were a $6-mi.llion States. More than 90 percent of plants and bulbs represented the United the United States is bovine hides. with calf, goat, market in 1980; Spain and this category of this market, making up the balance. have 58 and 38 percent and sheep skins purchases of "other of hides and skins are controlled by respectively. Mexico's Imports materials" totaled $S milli.on annual quotas of around 2 million hides. Apart crude vegetable United States and the EC had from imports under quota, imports in any iIl 1980; the of 40 and 37 percent, weigh:;:' class of hides may enter freely if they market shares are subsequently exported in leather product respectively. In order to stimulate growth of U.S. form. to present the best this category, the United States Exports of seeds seem exports in for U.S. exporters. In likely have to concede greater access to market opportunities would. U.S. seed exports to Mexico for Mexican leather and leather 1982 the value of its market over the previous year at products. rose by 23 percent the same time that Mexican imports in every plummeting (because of and gums imported by other category were Natural rubber 1981 harvest). Most of the exceeded $50 million in 1980. the favorable Mexico result of larger sales of and Indonesia together account for increase was the Singapore varieties of corn and sorghum seed. 85 percent of this market. U.S. sales in improved about should continue throughout the category 'reached $2 million in 1980. No This trend this Mexico's desire to stimulate market opportunities are foreseen in this eighties. given basic grains sector. category since the United States does not growth in the produce these commodities. Animal fats and vegetable oil imports the latter half of the imported by Mexico were quadrupled in value over Textile fibers States is clearly the at $25 million in 1980, more than seventies. The United valued apprOXimately 9S percent double the 1975 level. Three-fourths of this major supplier with In 1980, imports totaled $100 category is wool, supplied almost of the market. About half of this category is exclusively by Australia. The second most million.

45 tallow from the United States. U.S. sales of task can be drawn from the percentage of tallow to Mexico have nearly tripled in recent total supply (domestic production plus net years. The United States also dominates the imports) which is subject to its direct control vegetable oil market in Mexico, which makes through purchased domestic output and up almost al1 of the rest of this category. imports (table 49). However, Mexican Mexico purchases minor amounts of olive oil producers are not required to produce certain from Spain, and castor oil and vegetable crops nor to sell their harvest to CONASUPO. i waxes from Erazil. Prospects for vegetable In fact, perhaps 20--25 percent of total bean i oil exports to Mexico were treated in an .1 and com production and 5 percent of the earlier section of this study. output of less traditional crops, such :.:;; wheat, ! soybeans, safflower, and cottonseed, never enter formal market channels. MARKETING IN MEXICO I Producers may sell to nongovernment millers The agricultural marketing system in Mexico and processors at prices above the support is a mixture of public and private sector levels, but the processed or semifinished involvement. The Government is largely products of these processors are frequently responsible for the purchase. storage, subject to maximum price controls. Eligibility importation, and sale of basic commodities. for Government subsidies designed to offset Private enterprise is mainly involved in the the differel'!ces between the processor's costs commercialization of nonbasic and export and the ceiling price of the product can commodities. depend upon compliance with the support price for the raw commodity. Marketing Channels Livestock Products The Mexican Government started in 1934 to regulate agricultural marketing in order to Livestock may be imported into Mexico by assure that low-·income groups could afford to either private buyers or by Government purchase the necessary foods. The major agencies. Well-established private importers, agency in marketing agricultural commodities including producers themselves, often travel is CONASUPO. CONASUPO was established to the United States to select and purchase as an autonomous agency in 1956 for that livestock directly. These buyers normal1y purpose, and reports to a Cabinet-level have purchased U.s. cattle before and committee. developed an ongoing business relationship with one or more U.S. cattle dealers. Basic Commodities The main import channels for livestock are CONASUPO purchases grains and oilseeds individual ranchers, the regional Uniones de from producers through its rural purchasing Ganaderia (Livestock Unions), and the ejido centers at support prices set by the associaticns. Mexican ranchers buy breeding Government. CONASUPO and another animals directly from u.s. producers, and Government agency together operate an some ranchers act as brokers and purchase extensive series of storage facilities, as well animals for resale in Mexico. The livestock as grain and oilseed processing plants (table unions usual1y hold livestock auctions on a 48). CONASUPO also operates retail outlets regular basis, which many u.s. producers for many ''basic'' products, primarily to assure attend to purchase feeder cattle and to meet that supplies at Government-suggested prices with Mexican ranchers interested in buying wil1 be available in rural and urban areas. breeding stock. The ejido associations Retail prices for agricultural products purchase breeding animals through the Banco considered to be basic to the Mexican diet, Rural [32J. including flour, beans, tortillas, bread, some cooking oils, sugar, and milk, are subject to Exporting to Mexico's Free Zone Government-imposed price ceilings [18J. The Government established several free An indication of the market strength of zones in 1939. Tllese are specially designated CONASUPO and the scale of its management areas into which numerous imports, considered

46 Table 48-~ONASUrots agencies, objectives, and infrastructure

Agency Main objectives Infrastructure

DICONSA Provide producers a fair price for their Consists of six regional offices located in the production. principal commercialized centers of Mexico. Also operates 1,700 grocory stores located in Minimize marketing margins of agricultural both rural and urban areas. products. Provide consumers agricultural products at low prices. ANDSA Establishment of warehouses in principal Manages more than 800 warehouses with demographic areas, in order to maintain approximate capacity of 2.3 million metric stocks of agricultural products. tons. Coordinates efforts with BORUCONSA. Allocate capital resources to increase production and merchandising. BORUCONSA Organize and promote the development of Manages 1,700 warehouses with capacity of 2.0 peasant production. million metric tons. Inform peasants of CONSASUPO-guaranteed prices. Provide facilities for transporting peasant production. Distribute agricultural inputs such as ferti Ii zer. CECONCA Assist peasants in different activities such Provides educational programs in CECONCA as production process, application of centers to promote rural development. fertilizers, water management, conservation and management of grain and seeds. PROMOTORA Influence integration of peasants into new Provides technical assistance as well as infra­ potential areas of production. structure. Coordinates programs with the National Rural Credit Bank and SARH. ICONSA Processing of agricultural products such as Consists of several production plants and five vegetable oil, corn flour, wheat flour, feed regional sales agencies. Coordinates with grains. DICONSA, ANDSA, and other Government-related agencies. Preserve and distribute these products for domestic consumption and export. Develop more diversified products for low­ income consumers. lICONSA RegUlate and modernize ihe milk product Cons i s·ts of two product i on p Iants that process market, and increase both production and approximately I mi II ion Iiters of mi Ik per consumption by low-income families. day. Operates about 800 distribution points. MICONSA Regulate and modernize the products derived Consists of five plants. Coordinates with from corn. DICONSA, ANDSA, and ICONSA. TRICONSA Provide different wheat producys to low­ Operates principally in Mexico City since income consumers at low prices. practically all its production is consumed by Mexico City's popUlation.

Sou rce: [.!!!. ]•

47 essential for development of the areas, may their large and growing population and enter duty-free. In 1971, the Government well-established designated marketing channels. But as free zones the States of Baja whether the volume California of numerous food and Norte, Baja California Sur, agricultural items customarily Quintana Roo, imported into Northwest Sonora, and the the free zones-·-products like fresh "Frontera" or border meats, region. The "Frontera" canned goods, lard, and alfalfa--··will continue includes areas within 20 kilometers of the to grow depends upon Mexico-U.S. the Government's and Mexico-Guatemala borders. development plans for the free zones. Numerous food and agricultural products Constraints to Trade prohibited in the interior of Mexico are allowed to enter the free zones under a quota The Mexican Government system (See controls trade "Constraints to Trade," which through a system of liceroSes, tariffs, follows.) These imports and usually enter duties, the former being the most effective duty-free or with only partial payment of control on trade. duties. A potentially important An import permit, which takes 4-6 nontariff barrier could weeks to obtain, evolve because the is generally required. The domestic transportation system product lists and was not quotas will vary within each originally designed to facilitate foreign region due to differences in population, trade. pl'oduct requests, local production, and domestic supply and demand factors. Import Regulations Population growth and higher wages have Permits or licenses are significantly boosted consumption required for virtually of food all nonbasic agricultural and livestock products in the border urban areas. The imports. All applications for import licenses United States exported $350 million of must be filed by the Mexican importer with agricultural products to Mexico's free zones in SECOFIN. 1982 until SECOFIN bases its decision to the peso devaluation provoked a grant import requests steep decline in Mexican on opinions from various purchasing power. SARH agenci.es such as Current agricultural policy DGEA, Directorate discourages General for Plant Sanitation, National agricultural imports into the free zones and Commission for Fruit Promotion, National allows only imports of food and agricultural Seed Production products Corporation, National Plant that are absolutely essential. The and Seed Varietal Certification scarcity of dollars, Committee, especially dollars and others, depending on the nature exchanged at the preferential of each rate, is also a petition. Most of the quality standards and detriment to agricultural exports into the free packaging requirements zones. in force for food and agricultural products are drawn from USDA requirements. For some However, products, should Mexico successfully resolve phYt;osanitary certificates or health its financial crisis, tests are the border areas are required. (Additional trade barriers facing expected to emerge again U.S. as strong markets exporters were detailed earlier in the "Trade for certain agricultural products because of Policies" section.)

Table 49-~NASUPO purchases of domestic grain andoilseed supplies

Year Beans !I Maize !I Sorghum Wheat Soybeans Rice

Percent 1970 5.0 15.0 3.9 40.7 1975 19.4 • 24.8 13.3 1.9 1980 28.8 36.8 33.6 10.2 26.2 32.8 55.0 6.0 28.2

-- = negli9ible• !I These fIgures would be higher if adjusted to reflect production for household use. withheld from the market by farmers Source: [63].

48 Before granting an import permit, the Mexican the increasing volume of Mexican exports, Government cO'rlSults domestic producers of particularly petroleum products; the lack of the same or similar products. The perception cargo-handling facilities; poor coordination of of what products compete with domestic financial management; and administrative production is generally quite liberal. A bureaucracy. request for an import permit will often be rejected if the product in question is only Mexico's inadequate transportation system remotely similar to a domestically produced caused major bottlenecks in the flow of food one. SECOFIN also consults 'hith CONASUPO imports in 1980. More than 45,000 U.S. and to decide whether, by whom. and in what Canadian ·railcars were stranded in MexIco at quantity basic commodities should be one point in 1980. A special cooperative imported. With livestock and livestock effort between Mexican and U.S. governments products, SECOFIN requests an opinion from was necessary to untangle the snarl. The the Undersecretary of Livestock, the Mexican present system, if not improved, will continue National Cattlemen's Confederation, to limit trade volume. Directorate General of Livestock, Directorate General of Animal Sanitation, and DGEA CONCLUSIONS [31]. Mexican market access strategies in the Transportation eighties will have to be flexible and innovative if the U.S. share of Mexico's agricultural Mexico has one of the most comprehensive import market is to grow and expand. While transportation systems of any country in Latin the de la Madrid administration may be America. The railroads and highways form a relatively more favorable to trade network linking all economically important liberalization, the United States must realize areas to the major seaports, and connect with that any gains made in the Mexican market the United States at 12 border cities. will carry associated costs. Mexico continues Nonetheless, Mexico'S transportation to object to restrictions on its agricultural infrastructure is inadequate to handle the exports to the United States. In turn, Mexico large trade flows of recent years (petroleum will expect the United States to moderate and gas exports; food and machinery imports). perceived trade restrictions if it expects greater access to the Mexican market. Congestion on Me.~ico's rail lines extends to the U.S. border, where carloads of imported In addition to continued USDA support of supplies and materials face delays as long as 2 cooperator activities, other avenues to weeks or more. This problem is due, in part, consider include: to the fact that Mexico's railroad system was not built to facilitate foreign trade, but for o Government-to-government supply easy control of border traffic. So the single agreements. Mexico traditionally has lines laid at all border crossings are now favored this type of purchasing unable to handle the trade traffic between th~ agreement. Recent grain purchase United States and Mexico. In addition, agreements with Brazil, Argentina, and outdated unloading facilities delay the Canada reflect this preference, as well as turnaround of supply trains. a desire to diversify suppliers. Mexico has more than 50 ports, 5 of which are o Mexican and U.S. cooperative purchasing free ports. Congestion here is also a major arrangements. Some Mexican officials problem and trade must be staggered to have expressed dissatisfaction with prevent bottlenecks in the limited port Mexico's current method of purchasing by facilities. Although there are 36 deep water public tender. Over the past few years, ports, none has a good harbor, and dredging is Mexico has indicated an interest in seldom adequate. Eighty percent of total developing more formalized purchasing tonnage is handled by only five ports: arrangements with U.S. grain cooperatives. Tampico, Veracruz, Guayamas, Mazatlan, and Manzanillo (see map). Other factors o Use oj GSM-301. To promote greater contributing to bottlenecks at the ports are import volumes of U.S. grains, the United

49 States could help finance storage in REFERENCES nonproducing regions alor~l~ the border for use as transportation and ci~tribution 1. BaUey, John, and Donna Roberts. points during periods of exceptionally high "Mexican Agricultural Policy," Current demand. Assistance could also be provided History, volume 82. number 488, with respect to barge grain handling. December 1983, p. 410. Barge transportation could both reduce total import costs as well as provide 2. Banco de Mexico. Official statistics. delivery opportunities in other, more various reports, 1970-83. shallow draft port areas. Bulk storage construction at strategic points would also 3. Banco Nacional de Comercio Exterior. have to be undertaken in order to ensure Official statistics, various reports, the return of U.S. barges. 1969-83.

0 Barter deals. Although both countries 4. Banco Nacional de Comercio Exterior. are against this type of arrangement at "The Mexican Foodstuffs Systems," present, a grains-for-petroleum barter Comercio de Exterior de Mexico, arrangement may sometime appear more volume XXVI, number 7. July 1980, pp. lucrative. 243-49.

0 USDA's GSM-102 program. The S. . "Sumario Estadistico," GSM-102 program, under which the U.S. Comercio de Exterior de Mexico, Government guarantees loans provided to Volume 33. number 4. Apri11983, pp. Mexican agricultural importers, will no 370-78. doubt remain an effective tool for maintaining the large U.S. share of the 6. . "Mexico's Balance of Mexican basic commodities market in the Payments," C omercio de Exterior de near future. Mexico, volume 28, number 11, November 1982. pp. 381-87. The gap between production and consumption of most basic commodities will probably widen 7. Banco Nacional de Mexico, S.A. over the next decade, and the United States (BANAMEX). "La Industria Avicola," will retain its position as Mexico's principal Examen de la Situacion Economica de source for food imports. Mexico's imports of Mexico; Mexico, D.F., February 1981. basic commodities will likely continue to fluctuate as they did in the seventies, but the 8. . "La Actividad Porcicola, absolute size of the fluctuations will likely be Perspectiva Favorable," volume LVII, greater. Based upon this expectation, it might number 669, Mexico, D.F., August 1981. prove more fruitful for the United States to focus on the logistics of moving needed 9. Barkin, David. "EI Uso de la Tierra commodities quicldy and cheaply between Agricola en Mexico." Working Pa.per in countries. With respect to nonbulk U.S.-Mexican Studies, Number 17, commodities, export opportunities will no Program in United States-Mexican doubt exist over the next decade. However, Studies, University of California, San I I U.S. traders and policymakers will have to be 'Diego, 1981. , , alert to these possibilities as they occur and flexible and innovative enough to ensure that 10. , and Gustavo Esteva. EZ U.S. producers are able to take advantage of Papel del Sector Publico en la changing situations. Comercializacion y Za Fijacion de

I Precios de los Productos Agricola , I I Basicos en Mexico, United Nations, ! Comision Economica para America Latina, June 19, 1981. 11. Bergsman, Joel. Income Distribution 22. Hertford, Reed. Sources oj Change in and Poverty in Mexico. World Bank Mexican Agricultural Production. Staff Working Paper No. 395, 1940-1965. FAER-73, U.S. Dept. Agr., Washington, D.C., June 1980. Economic Research Service, August 1971.

12. Boltvinik, Julio, and Raul Pessah. La 23. Interamerican Development Bank. Asignacion de Recursos Publicos a la Economic and Social Progress in Latin Agricultura en Mexico, 1959-1976. America: The External Sector, various United Nations, Comision Economica issues. para America Latina, February 10, 1981. 24. Looney, Robert E. Income Distribution 13. Burst, Andrew. "An Economic Analysis Policies and Economic Growth in of Mexico's Dairy, Livestock and Poultry Semi-industrialized Countries: A Industries: Implications for Feed Comparative Study oj Iran. Mexico, Demand." M.S. thesis. University of Brazil, and South Korea. Praeger Missouri-Columbia, December 1982. Publishers, New York, 1975. 14. • and Eduardo Segarra. "An 25. . Mexico's Economy: A Analysis of Mexican Agricultural Price Policy Analysis with Forecasts to 1990. Policies." Agricultural Economics Westview Press, Boulder, Colo., 1978. Paper Series, Department of Agricultural Economics. University of Missouri-Columbia, October 1981. 26. Lustig, Nora. Politicas de Consumo y Distribucion del Ingreso, Tercer 15. Camara Nacional de la Industria de Avance. Sub-project No. 10. Si.St~ma TransforITlacion, Seccion de Fabricantes Alimentario Mexicano, Mexico, D.F. de Alimentos Balanceados para Apri11980. Animales. La Industria Alimenticia Animal en Mexico (en ciJras). Mexico, 27. Meyer, Sherrie. "Financial Troubles Shadow Mexican Market." Farmline, D.F., 1980. volume III, number 11, U.S. Dept. of 16. Chase Econometrics. Mexico: Agr., Economic Research Service, Executive Summary. Various issues. December 1982.

17. Cisneros, M. Rodriguez. 28. Naciona1 Financiera, S.A. La Economia Caracteristicas de la Agricultura Mexicana en CiJras. Mexico D.F., Mexicana. Mexico, D.F., 1974. various issues. 29. . "Plan Nacional de Desarrollo 18. Compania Nacional de Subsistencias Populares, S.A. Que es CONASUPO? 1983-1988," El Mercado de Val ores, volume XLIII, Supplement to number 24, Mexico. D.F., 1978. June 13, 1983. 19. Elias, Victor J. Government Expenditure on Agriculture in Latin America. international Food Policy 30. Norton, Roger D. "Future Prospects for Research Institute. Research Report 23, Mexican Agriculture." The Washington, D.C., May 1981. Southwestern Review, volume II, number 1. 1982, pp. 101-28. 20. Food and Agriculture Organization of the United Nations. Food Balance 31. Office of the Counselor for Agricultural Sheets: 1979~·81 Average. Rome, 1984. Affairs. Mexico and its Agriculture: A Developing Market. U.S. Embassy, 21. Green, Rosario. "Mexico: Crisis Mexico City, various years. Fiananciera y Deuda Externa," C omeraio de Exterior de Mexico, volume 33, 32. . Agricultural Attache number 2, February 1983, pp. 99-107. Reports, various dates.

S1 33. Oficina de Asesorest:.ei Presidente. 43. • EI Desarrollo Agropecuario Sistema Alimentario Mexicano. de Mexico: Pasado JI Perspectivas. MexicoD.F., March 1980. Volume 3: La Oferta de Productos Agropecuarios. Mexico D.F., 1982. 34. Poleman, Thomas T. Food. Population. and Employment: Some Implications for 44. • EZ Desarrollo Agropecuario Mexico's Development. Cornell de Mexico: Pasado JI Perspectivas. Agricultural Economics Staff Paper No. Volume 5: La Problematica 78-19, Cornell University, Ithaca, N.Y., AZimentaria. Mexico D.F., 1982. August 1978. 45. . EZ Desarrollo Agropecuario 35. Presidencia de 1a Republica de Mexico: Pasado JI Perspectivas. Coordinacion General de Programas para Volume 6: EZ Empleo de Mano de Obra en Productos Basicos, and others. Serie las Actividades Productivas Productos Basicos 1. Alimentos, Analisis Agropecuarias. Mexico D.F., 1982. JI Expectativas. Mexico D.F., January 1981. 46. • EZ Desarrollo Agropecuario de Mexico: Pasado JI Perspectivas. 36. Reed, Thomas A. "A Study of the Volume 8: Di.';ponibilidad JI Uso de Mexican Food System as a Strategy for Recursos Naturales. Mexico D.F., 1982. Reaching Self-Sufficiency in Basic Foodgrain Production." M.S. thesis, 47. . EZ Desarrollo Agropecuario University of Texas at Austin, August de Mexico: Pasado JI Perspectivas. 1982. Volume 10: Empleo de Insumos. Mexico D.F., 1982. 37. Secretaria de Agricultura y Recursos Hidraulicos, Memoria 1977-1982, 48. . EZ Desarrollo Agropecuario volumes I-III, Mexico D.F., 1982. de Mexico: Pasado JI Perspectivas. 4 Volume 11: Tecnologia y 38. Secretaria de Agricultura y Recursos Productividad. Mexico D.F., 1982. Hidraulicos, Comision del Plan Naclonal Hidraulico. Plan NacionaZ Hidraulico 49. . EZ Desarrollo Agropecuario 1981. Mexico D.F., 1981. de Mexico: Pasado y Perspectivas. Volume 12: Politica Agricola. Mexico 39. . Plan Nacional Hidraulico D.F., 1982. 1981. Anexo 1: Indicadores Socioeconomicos. Mexico D.F., 1981. so. . EZ Desarrollo Agropecuario de Mexico: Pasado y Perspectivas. 40. . Plan Nacional Hidrauli.:o Volume 13: Perspectivas de la Demanda 1981. Anexo 2: Disponibilidad de Agua JI JI de la Oferta de Productos Suelo. Mexico D.F., 1981. Agropecuarios. Mexico D.F., 1982.

41. Secretaria de Agricultura y Recursos 51. Secretaria de Agricultura y Recursos Hidraulicos, Direccion General de Hidraulicos, Subsecretaria de Planeacion, Centro de Estudos en Agricultura y Operacion, Departamento Planeacion Agropecuaria. EI Desarrollo General de Economia Agricola. Boletin Agropecuario de Mexico: Pasado JI Interno, volume VII, number 50, Mexico Perspectivas. Volume 1: EZ Sistema D.F., December 1980. Agropecuario en el Desarrollo Economico de Mexico. Mexico D.F., 52. . "Consumo Aparentes de 1982. Productos Agricolas, 1925-1982." Econotecnica Agricola, volume VII, 42. . EI Desarrollo Agropecuario number 9, Mexico D.F., September 1983. de Mexico: Pasado JI Perspectivas. Volume 2: La Demanda de Productos 53. . "Panorama sobre el Agropecuarios. Mexico D.F., 1982. Comportamiento del Sector

52 Agropecuario Nacional 1977-1979 y Manual de Estadisticas Basicas, Sector Algunas Consideracions sobre el Mercado Agropecuario y Forestal, Primera Internacional." Econotecnica Agricola. Parte. Mexico D.F .• 1979. volume IV. number 1. Mexico D.F .• January 1980. 63. . Coordinacion General de los Servicios Nacionales de Estadistica. 54. . "Determinacion de los Geografia e Informatica. El Sector Precios de Garantia para los Productos Alimentario en Mexico. Mexico D.F., del Campo." Econotecnica Agricola. January 1981. volume VI. number 11. Mexico D.F .• November 1982. 64. Segarra. Eduardo. "An Analysis of Mexican Agricultural Price Policies: 55. . "La Produccion Agropecuaria The Inclusion of Cross-Commodity y Forestal en el Mundo y la Participacion Effects." Unpublished M.S. thesis, de Mexico." Econotecnica Agricola. University of Missouri-Columbia, 1982. volume VI. number 7. Mexico D.F .• July 1982. 65. Solis, Leopoldo. Economic Policy Reform in Mexico: A Case Study for 56. . "Reglamento de la Ley de Developing C01.Ul.tries. Pergamon Press, Fomento Agropecuario." Econotecnica Elmsford, N.Y.: 1981. Agricola, volume VI. number 2. Mexico D.F.• July 1982. 66. United Nations. "Partner Country Trade Statistics for Mexico." Unpublished 57. • El V Censo Agricola computer run. 1983. Ganadero y Ejidal de 1970. Mexico D.F.• 1974. 67. U.S. Department of Commerce, Bureau of the Census. "Monthly U.S. - Mexico 58. . "La Produccion Agricola en Trade Statistics." Unpublished computer Mexico en los Ultimos Diez Anos." runs. Econotecnica Agricola. volume IV. number 8. Mexico D.F .• August 1980. 68. U.S. Department of Agriculture. Agricultural Statistics. Washington, 59. • Estadistica de Subsector D.C., various years. Pecuario en los Estados Unidos Mexicanos, 1972-1977. Mexico D.F., 68. . World Indices of October 1981. Agricultural and Food Production. Statistical Bulletin. Economic Research 60. . Estadistica de Subsector Service. various issues. Pecuario en los Estados Unidos Mexicanos, 1977-1979. Mexico D.F .• 69. World Bank. Data bank on Mexico. January 1982. 70. World Bank. World Development 61. . Informacion Agropecuaria y Report. Various issues. Forestal 1981. Mexico D.F .• June 1982. 71. Yates. P. Lamartine. Mexico's 62. Secretaria de Programacion y Agricultural Dilemma. The University Presupuesto. Coordinacion General del of Arizona Press, Tucson, 1981. Sistema Nacional de Informacion.

53

;",. APPENDIX: PROJECTION ASSUMPTIONS intervention in the market- --must have in AND METHODOLOGY order to subdue consumption to a level where domestic supplies and an affordable volume of Food Consumption imports could satisfy it (app. table 2). In this manner, it was not necessary to predict the The first iteration of projected consumption precise tool (or combination of tools) that levels for 1982-92 in Mexico incorporated Mexican policymakers would employ over the population growth, real disposable income next decade. growth, and income elasticities as the principal indicators of the growth in demand Feed Consumption for human consumption of 10 commodities. Disposable income is projected to increase at Feed grain and protein meal requirements . a slower pace than in the seventies, wei'e forecast by using estimates of future contracting until 1984 before expanding by meat, milk, and egg production in Mexico 1.0-3.7 percent annually throughout the together with assumptions about the future remainder of the projection period. growth in the percentage of the production of Population growth is expected to slow as well, livestock commodities using modern feeding from the 3.6 percent that prevailed last technology and product/feed conversion ratios decade to an average annual rate of 2.5 (app. table 3). Total grain requirements were percent (app. table 1). then translated into requirements for individual grains (corn, wheat, and sorghum) by In sonie cases, the above methodology yielded use of ratios that prevailed in the base period. unlikely results. Probable policy changes were All demand projections for oUmeals were then estimated in a second iteration in terms calculated in 44-percent soymeal equivalents of price parameters, and the effect was instead of estimates of the demand for each introduced into the demand formula. For individual oilseed. example, beef consumption in the first iteration would have exceeded estimated Production domestic supplies by 170,000 tons by 1992, a highly unlikely scenario given expected world Production projections for the five livestock supplies and prices a decade hence. Using the commodities included in this study were made price elasticity for beef, the second iteration by extrapolating past trends (including cycles) estimated what necessary effect on prices in herd sizes and slaughter and extraction that f>..4exican policy--whether in the form of rates. Area and yield projections for the four regulation of beef imports or another type of grains, one pulse, and six oUseeds included in

Appendix table I--Macroeconomlc assuq>tlons used in the projections Rea I per cap I fa Year Gross domestic product d Isposab leincana population 1910 pesos IChange 1970 pesos Change NumbBr Change Bi II ion Percent Bi" ion Percent Thousands Percent

1980 841.9 8.3 10,670 5.9 67,796 3.0 1981 908.8 7.9 11,141 4.4 69,762 2.9 1982 903.8 .5 10,888 -2.3 71,715 2.8 1983 856.2 -5.3 9,981 -8.4 n,652 2.7 1984 854.5 -.2 9,497 -4.9 75,567 2.6 1985 885.2 3.6 9,663 1.8 77,456 2.5 1986 926.9 4.7 9,985 3.3 79,392 2.5 1987 977.8 5.5 10,214 2.3 81,298 2.4 1988 1,031.6 5.5 10,591 3.7 83,168 2.3 1989 1,076.0 4.3 10,785 1.8 85,080 2.3 1990 1,135.2 5.5 11,180 3.7 87,037 2.3 1991 1,189.6 4.8 11,447 2.4 88,952 2.2 1992 1,249.1 5.0 11,788 3.0 90,909 2.2

Source: (l§.l.

54 Appendix table 3-Assumptions underlying feed thia report were made using exponential time grain and protein meal consumption projections trends as guidelines. The resulting oilseed production projections were then converted Protein Conmodity Percent of Grainl meall into meal and oil by use of historical crushing conmodlty product product and extraction rates. At this point, projected fed ratio ratio fishmeal production was added to the oilseed Percent --- B!±l2 --­ meal total. The meals were then converted 1979-81 avg: into 44-percent soymeal equivalents in order Beef 7 6.20 2.25 to accotmt for the different protein levels of Pork I 1/ 15 5.50 1.00 II-Y 45 6.50 .60 each meal. Finally, the pasture requirements Poultry 100 2.45 1.00 for cattle and the area for annual crops that Hi Ik 55 .37 .06 underpin the supply projections were checked Eggs 97 2.75 1.00 against estimates of total arable land in 1987: Mexico, and were fotmd to be well within Beef 7 6.20 2.25 these botmds, allowing substantial area for the Pork I II 25 5.50 1.00 II-Y 45 6.50 .60 other annual and pereIL'lial crops >tlot included Poultry 100 2.45 1.00 in this study. Milk 55 .37 .06 Eggs 97 2.75 1.00 A~ndix table 2--PArameters used for project1ng human 1992: consurrp=tIon Beef 7 6.20 2.25 Pork I 1/ 35 5.50 1.00 Projected 11-11 45 6.50 .60 Conwnodity II\C1Q1119 Own prIco -"nual real 2.45 1.00 el.sticlty .I.sticity change Poultry 100 In prices Hi Ik 55 .37 .06 Eggs 97 2.75 1.00 Percent Beef 0.951 -0.680 3.0 II Semi-technical (I) and technical (II) Pork .848 -.647 2.5 prOduction systems. See the "Agricultural .945 -.~37 o Poultry .5 Sector-li vestock Production" section for Milk .650 -.294 definitions• Eggs • 686 -.~93 2.0 Corn -.300 -.454 1.0 Drv beans .230 -.162 o '6eat .~ -.393 o Rice .300 -.198 o Vegetable oi I .705 -.264 o

Sources: [~. !I. n, and auttlor's estimatesJ.

55 Appendix table 4--Mexlco's agricultural imports and the U.S share, 1969-82

Conmoditles 1969 1970 1971 1972 1973 1974 1975

1,000 dollars Live animals 11,156 9,872 12,328 15,227 24,830 35,998 37,813 U.S. 9,502 7,632 10,318 11,746 20,230 33,273 36,214 Meat &preparations 5,130 6,110 5,092 5,061 9,349 16,457 18,031 U.S. 4,782 5,736 4,483 4,166 8,630 16,049 15,354 Dairy prod. &eggs 14,595 24,7rJ9 36,100 48,231 50,221 104,510 41,873 U.S. 7,5:f5 8,101 10,279 20,990 8,647 10,269 16,225 Cereals &preparations 8,559 42,577 19,432 73,583 166,788 488,154 474,297 U.S. 7,493 38,557 18,774 72,786 166,640 467,349 330,445 Fruits 8,184 7,292 7,861 5,974 7,447 10,926 13,348 U.S. 5,814 5,893 5,802 4,616 5,787 8,046 11,308 Vegetables 5,053 8,266 5,425 4,337 6,341 38,479 65,013 U.S. 4,829 7,660 5,149 4,065 5,890 37,227 38,073 Sugar & prepara't-ions 2,297 1,989 2,176 2,148 3,236 3,582 3,064 U.S~ 1,578 1,399 1,643 1,659 2,086 2,916 2,028 Coffee, tea, sp Icas, cocoa 4,560 3,418 4,132 4,482 2,223 6,791 4,931 U.S. 858 883 647 897 1,185 2,009 2,116 Feedstuffs i 1,629 18,704 34,773 22,097 19,238 38,337 28,259 U.S. 3,923 5,032 17,579 10,488 13,500 24,808 14,909 Fats, shortenings, &misc. 9,439 11,787 8,181 8,475 13,772 22,637 23,350 U.S. 9,077 11,505 7,688 7,942 13,269 20,983 22,674 Beverages , tobacco 5,393 5,9n 12,917 17,097 25,456 27,920 27,544 U.S. 2,218 2,598 2,902 4,422 7,710 9,044 6,550 Hides &skins 15,999 18,162 18,724 25,314 36,552 36,880 27,814 U.S. 15,942 18,065 18,598 25,058 36,159 36,691 27,396 Ollseads 4,510 19,597 10,166 3,595 38,848 IrJ9, 400 8,831 U.S. 3.611 17,136 10,130 3,561 34,640 95.719 8,661 Rubber, gums 11,716 9,728 8,836 7,836 18,337 25,811 22,439 U.S. 70 112 34 121 75 608 660 Textl Ie fibers 19,027 14,532 12,237 10,636 12,399 17,458 14,251 U.S. 1,255 1,402 1,636 1,874 2,376 3,749 3,624 Animal & veg. mat. 9,081 10,485 12,404 12,530 18,244 27,359 21,181 U.$. 7,502 8,254 9,714 9,338 14,251 20,446 17,220 Animal fats, vag. oils 9,016 19,573 7,074 5,071 36,306 90,501 40,204 U.S. 7,315 17,056 5,018 2,090 27,296 81,833 36,994 --continued

56 I"} Imports and the U.S share, \969-82--Contlnued Appendix table 4--Mexico's agricultural .. 1982 1978 1979 1980 198\ Cannodities 1976 1977 1,000 dollars 33,411 68,414 49,090 39,996 21,631 29,532 38,134 41,980 Li ve animal s 22,013 29,405 23,462 44,712 U.S. 36,808 19,594 56,638 86,529 53,896 21,531 16,941 26,581 42,377 46,555 Meat &preparations 24,756 38,069 52.167 64,106 U.S. 18,324 16,583 243,860 297,378 113,127 52,213 63,581 72,634 85,870 61,412 Dairv prod. &eggs 21,489 27,681 13,382 90,181 U.S. 16,538 11,621 1,244,614 1,155,151 350,364 106,563 313,401 373,309 495,306 300,516 Cereals &preparations 344,127 492,544 1,207,887 1,038,742 U.S. 96,177 294,016 23,127 50,434 14,867 11,048 10,680 13,432 18,206 12,296 Fruits 9,946 14,573 18,743 42,813 U.S. 9,192 9,174 240,003 360,565 113,565 8,714 8,181 13,819 22,497 111,971 Vegetables 12,515 20,918 237,845 355,286 U.S. 8,416 7,380 185,663 217,260 102,874 2,581 2,285 4,656 6,935 8,479 Sugar &preparations 3,916 6,263 143,585 160,834 U.S. 2,408 2,251 10,068 22,321 II ,505 7,361 6,819 9,011 5,627 2,919 Coffoo, tea, sp i ces, cocoa 1,979 2,714 3,367 5,032 U.S. 2,742 2,712 102,995 76,770 27,590 17,246 69,259 34,673 58,687 23,193 Feedstuffs 32,594 56,445 100,065 73,261 U.S. 9,682 65,212 32,233 41,359 36,962 misc. 23,550 28,061 26,630 31,227 35,379 Fats, shortenings, & 25,783 29,858 28,910 36,773 U.S. 22,922 25,799 73,786 79,956 27,879 28,526 27,662 34,903 46,257 2,678 Beverages &tobacco 12,722 3,993 2,630 3,913 U.S. 8,059 9,337 70,725 87,435 65,027 30.579 37,786 55,746 102,719 64,276 Hides &skins 54,832 102,124 69,860 84,546 U.S. 30,563 37,214 405,852 476,640 356,543 101,810 159,597 302,429 124,947 285,709 Oi 1seeds 268,071 124,761 386,221 325,729 U.S. 70,063 115,820 53,713 54,293 31,138 30,397 29,801 30,387 1,035 945 Rubber, gums 585 1,035 2,339 1,126 U.S. 184 167 25,176 38,802 24,082 12,429 13,753 23,433 23,186 5,063 Texti Ie fibers 8,440 9,009 6,842 5,164 U.S. 1,735 1,883 48,812 62,616 38,711 27,097 26,333 24,596 34,982 32,285 Animal &vag. mat. 19,230 23.378 36,062 48,508 U.S. 22,219 21,185 99,894 53,578 121,099 20,580 35,933 57,815 48,027 114,267 Animal fats, vag. oi Is 47,737 43,500 95,380 49,076 U.S. 14,746 30,700

Source: (66 J.

57 * u.s. GOVERNMENT PRINTING OFFICE: 1986-491 - 953140501 ,~~,~~~~__ -,,~,,"~X1'~"rllt'!!j!il'w;a4lir1 3t 'Wr~

MEXICO Agricultural Production Regions Regions I;;:.\ Dryland Farming (includes corn & beans)

t>Mk'~Irrigated Land W Wheat S Sugarcane C Coffee V Winter Vegetables and Fruits B Beef Cattle

Index to Regions and States Pacific North: Central: Baja California Norte Guanajuato Baja California Sur Queretero (QRO) Sonora Hidalgo Sinaloa Puebla Mexico North: Distrito Federal Chihuahua Tlaxcala (TLAX) Coahuila Morelos (MOR) Nuevo Leon Pacific South: North Central: Guerrero Durango Oaxaca Zacatecas , Chiapas San Luis Potosi AguascaliG;

>•. _'" ~;:::;;;;;;;...~ ...~~'*""...... ;