Iowa State University Capstones, Theses and Retrospective Theses and Dissertations Dissertations

1993 Market power in the henequen industry of Yucatán, Mexico Richard Norman Glendening Iowa State University

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Market power in the henequen industry of Yucatân, Mexico

Glendening, Richard Norman, Ph.D.

Iowa State University, 1993

UMI 300 N. ZeebRd. Ann Arbor, MI 48106

Market power in the henequen industry

of Yucatân, Mexico

by

Richard Norman Glendening

A Dissertation Submitted to the

Graduate Faculty in Partial Fulfillment of the

Requirements for the Degree of

DOCTOR OF PHILOSOPHY

Department: Economics Major: Economics

Signature was redacted for privacy. In Charge of Major Work

Signature was redacted for privacy. or the Hanor Department

Signature was redacted for privacy. For the Graduate College

Iowa State University Ames, Iowa

1993 ii

TABLE OF CONTENTS

CHAPTER 1 INTRODUCTION 1

CHAPTER 2 HISTORY OF THE HENEQUEN ECONOMY OF YUCATAN . . 7 The Physical Geography of Yucatân 7 Yucatân Prior to the Henequen Era 12 Yucatan During the Henequen Era 13 The Modern Era: Land and Institutional Reform ... 21

CHAPTER 3 MONOPSONY IN THE HENEQUEN INDUSTRY, 1880-1930 29 Introduction 29 Supply Elasticities and Market Power 3 0 Supply Elasticities in Agriculture 3 2 Description of Raising and Processing Henequen ... 47 Henequen Supply Function 50 Description of the Data Set 57 Estimation of the Henequen Supply Function 60 Elasticity of Henequen Supply . 65 The Monopsony Power of International Harvester ... 69

CHAPTER 4 OLIGOPSONY IN THE HENEQUEN LABOR MARKET, 1880- 1930 77 Stylized Model of the Labor Market 77 Theory of Rural Households 80 Birthrate Data 84 Estimation of a Birth Rate Function 86 The Statistical Results 9 0 The Conclusions 99

CHAPTER 5 LAND REFORM AND PUBLIC SECTOR MANAGEMENT, 1957 - 1987 100 Introduction 100 Recent Henequen Data 102 Estimation of Supply Elasticities 104

CHAPTER 6 CONCLUSIONS 120 Henequen: A Staple Export Crop 120 International Harvester as a Monopsonist 122 Oligopsony in the Henequen Labor Market 127 Public Sector Management of Henequen 131

BIBLIOGRAPHY 134 iii

APPENDIX A HENEQUEN AND CORN PRICE DATA 143

APPENDIX B BIRTHS AND POPULATION DATA 146 iv

LIST OF TABLES

Table 1: International Harvester's Controlled Share of Yucatecan Henequen Trade to U.S., 1896 - 1914 16

Table 2: ARIMA Procedures on Henequen Prices, 1880 - 1930 55

Table 3: Lag Analysis of Real Henequen Prices on Henequen Production 63

Table 4: Lag Analysis of Nominal Henequen Prices on Henequen Production 64

Table 5: Regression Coefficients for Real Henequen Prices 65

Table 6: Regression Coefficients for Nominal Henequen Prices 66

Table 7: Regression Coefficients for Nominal Henequen Prices 67

Table 8: Regression Coefficients for Nominal Henequen Prices 68

Table 9: Estimated Price Elasticities of Henequen Supply 69

Table 10: Nominal Prices, Real Prices and Production of Wheat in the U.S. from 1880 to 1930 71

Table 11: Philippine Exports of Abaca, 1880 - 1930 ... 72

Table 12: Estimation of Henequen Demand, I 74

Table 13: Estimation of Henequen Demand, II 75

Table 14: ARIMA Procedures on Corn Prices, 1880 - 1930 . 88

Table 15: Regressions of Henequen and Corn Prices on Births in Acanceh and Conkal 91

Table 16: Regressions of Henequen and Corn Prices on Births in Hoctun and Muna 92 V

Table 17: Generalized Least Squares Results - Acanceh . 95

Table 18: Generalized Least Squares Results - Conkal . . 96

Table 19: Generalized Least Squares Results - Hoctun . . 97

Table 20: Generalized Least Squares Results - Muna ... 98

Table 21: Real Henequen Prices, 1957 - 1987 103

Table 22: Land Area in Henequen Production, 1957 - 1987 104

Table 23: Ejido's Percent of Total Land and Output, 1957 - 1974 105

Table 24: Productivity of Henequen Production, 1957 - 1974 107

Table 25: World Production of Hard Fibers, 1979 - 1981 . 110

Table 26: Regression Coefficients for Real Henequen Prices, 1957 - 1987 117 vi

LIST OF FIGURES

Figure 1: Yucatân Peninsula 8 vii

ACKNOWLEDGEMENTS

When one has studied economics for over thirty years, the

intellectual debt owed others is enormous and difficult to

always recognize. This is particularly true of my colleagues

at Central College, where I studied as an undergraduate and

taught for more than twenty five years. Three colleagues, now

retired, merit specific mention: Don Butler introduced me to

economics, challenged me to study at the graduate level,

brought me back to Central to teach, and has supported my work through the years. Jim Graham, as academic dean, had the

vision and provided the resources to stimulate and excite young faculty. Through his efforts Mary and I first visited

Yucatân which led to my teaching in Central's Yucatan program.

Harriet Heusinkveld, as the director of the Yucatân program, taught my family and me to love Yucatan and appreciate our experiences there. Harriet kindled my interest in Yucatecan economic history and the topic of this research.

The Economics Department at Iowa State University has provided an intellectually stimulating environment for rejuvenating my interest in economics and challenging me to complete their graduate program. I have appreciated the quality of the graduate program and their willingness to work viii

with students, even those with significant commitments

elsewhere. Lee Fletcher, as my major professor, encouraged me

through the years. He always responded positively to my

requests for his time and ideas. Lee kept me on the path to

complete this research and the graduate program. I also

appreciate the patience and the support received from the

members of my dissertation committee.

Lastly, I want to acknowledge my family - Mary, Eric,

Mary K, Kara, Erin, and my children's families. My children have used the years of my involvement with Iowa State to enter adulthood and begin professional lives of their own; their maturity and good judgement along with their support have allowed me the time and energy to complete this research project. Simplicity may be the best way of thanking someone to whom you are most indebted: Thank you, Mary. 1

CHAPTER I

INTRODUCTION

Henequen has been called the "Green Gold" of Yucatân.'

The fiber which comes from the long spear-like leaves of this

plant can be dried and then used to produce twine. Henequen

twine is strong, resists rot, and is not susceptible to

insects. The twine can be used for ship riggings and bags.

But as binder or baler twine, henequen became the source of

economic wealth and prosperity for Yucatân in the late

nineteenth and early twentieth centuries.

Three hard fibers can be used to make rope and twine.

Henequen (Agave Fourcroydes) and sisal (Agave Sisalana) are

native Central and South American plants from the same family,

Amaryllidaceae.z The third fiber is abaca or manila hemp

'The term "Yucatân" is commonly used to refer to both the peninsula and the Mexican state. The State of Yucatân is one of three states comprising the Yucatân peninsula. When used by itself in this paper, the term designates the geographical peninsula and not the political state.

zpred Carstensen and Diane Roazen in, "Foreign Markets, Domestic Initiative, and the Emergence of a Monocrop Economy: The Yucatecan Experience, 1925-1903," Hispanic American Historical Review 72, no. 4 (1992); 555, state that sisal is native to Africa but other authorities write that East African 2

(Musa Textiles) which orginated in the Philippines and is a

member of the banana family. Various mixtures of these fibers

are used to make twine, but one preferred mixture, at the turn

of the century in the United States, was composed of twenty

five percent abaca and seventy five percent henequen.

Henequen was viewed as of poorer quality but less expensive

than abaca.3

The expansion of agriculture in the U.S. Midwest and

Great Plains, along with the invention of the McCormick binder

in 1878 and its wide acceptance in the early 1880's,

substantially increased the demand for henequen twine.* The

Yucatecah haciendas exported considerable quantities of

- henequen fiber to the United States in exchange for the

foreign exchange used to finance the development of the

henequen haciendas and to purchase the consumption goods of

the hacendados® and their families. sisal originated from plants sent from Florida in 1893. See Ernest Goulding, Cotton and Other Vegetable Fibres; Their Production and Utilization (London: John Murray, 1919), 167 and 170.

^Thomas Benjamin, "International Harvester and the Henequen Marketing System in Yucatân, 1898-1915: A New Perspective," Inter-American Economic Affairs 31, no. 3 (Winter 1977): 8-9.

^Jeffrey Brannon and Eric N. Baklanoff, Agrarian Reform & Public Enterprise in Mexico: The Political Economy of Yucatân's Heneguen Industry (Tuscaloosa, Ala., The University of Alabama Press, 1987), 34.

^Owners of henequen haciendas. 3

Currently, the henequen economy of Yucatân is in

shambles: synthetic twines have largely displaced natural

twines; combines and the large round balers have reduced the

demcnd for twine; and other countries, such as Brazil,

Mozambique, and Tanzania, have become competitive producers of

natural twine.

The history of the henequen economy has led to three

hypotheses that I intend to examine in this dissertation.

First, in the early twentieth century International Harvester,

through allegedly collusive agreements with Molina y Companla

and Peabody and Company, became the primary U.S. importer of

henequen fiber. The importance of International Harvester in

this market has suggested to several historians that the

corporation was a monopsonist in the henequen market.® The

first hypothesis I want to test is: The conditions among the

henequen suppliers were such that International Harvester

could have exercised monopsony power in the henequen market.

Secondly, in the late nineteenth century, the prosperity

of the henequen economy created a substantial demand for

labor. This increase in labor demand should have increased

®See Gilbert M. Joseph and Allen Wells, "Collaboration and Informal Empire in Yucatân; The Case for Political Economy," Latin American Research Review 18, no. 3 (1983): 204-18, and "Corporate Control of a Monocrop Economy: International Harvester and Yucatân's Henequen Industry during the Porfiriato," Latin American Research Review 17, no. 1 (Spring 1982): 69-99. 4

wage rates to the campesinos^ assuming a less than infinitely

wage elastic supply curve of labor. The standard of living of

the campesinos should have improved with the increased

generation of wealth in the henequen economy. Evidence exists

to contradict this hypothesis: Debt peonage® was present in

Yucatân; captured Yaqui Indians of Sonora, Mexico, were used

essentially as slaves; and bounty hunters and newspaper ads

were used to seek the return of campesinos who fled

haciendas.' The second hypothesis I want to examine is: The

standard of living of the campesinos improved as the henequen

economy developed and became linked with the United States

twine market.

The last controversy is concerned with the influence of

the land reform movement and other institution reform on the

henequen industry. In 1937, President Lazaro Cardenas carried

out a land reform program in the henequen zone that

'Campesino is the term used in Yucatân to designate a worker on a henequen hacienda or a peasant.

^Defined by Katz as, "... resident peons [campesinos] tied to the hacienda by debt." See Friedrich Katz, "Labor Conditions on Haciendas in Pofririan Mexico; Some Trends and Tendencies," Hispanic American Historical Review 54 (February 1974): 2, n. 3.

'Marco Bellingeri, "Projecto de investigacion: La hacienda y la sociedad yucateca en el siglo XIX," Yucatân; Historia v Economia 1 (November-December 1977): 3-13 and Allen Wells, "Violence and Social Control: Yucatân's Henequen Plantations," in Thomas Benjamin and William McNellie, eds., other Mexicos: Essays on Regional Historv (Albuquerque: University of New Mexico Press, 1984), 219-228. 5

transferred 61% of the land in henequen to collective

ejidos.w

Secondly, the financing of henequen ejidos came under the

control of the governmental financing institutions. Banco

Nacional de Crédite Ejidal was created in 1935 to channel

government funds into the rural ejido program." Banrural,

which was formed when the Banco Nacional de Crédite Ejidal was

merged with two other financial organizations in 1974, was

designed to provide credit to agricultural enterprises and to

significantly participate in the management of the henequen

ejidos."

The third major change in the structure of the henequen

industry was the formation in 1961 of Cordemex and its

nationalization in 1964. Cordemex was organized by merging

all the private cordage mills into one collective firm. The

company was granted increasing control over exports of

henequen products so that its position may have approached

that of a monopsonist." The hypothesis that I examine is:

'"The dominant form of the ejido in Yucatân is a collective holding of land with the campesinos holding only usufruct rights (legal right to use but limited rights to transfer to another party) to the land. Jeffrey Brannon and Eric N. Baklanoff, Agrarian Reform & Public Enterprise in Mexico. 51-52.

"Ibid., 10.

'^ibid., 64.

'^Ibid., 72-73, and 94-95. 6

The management of the henequen industry by Mexican public authorities brought about a decrease in the supply elasticities of henequen. 7

CHAPTER II

HISTORY OF THE HENEQUEN ECONOMY OF YUCATAN

The history of the Yucatân peninsula is distinct from

that of central Mexico due to its location, the

characteristics of the land connecting Yucatân to central

Mexico, and the physical attributes of the peninsula itself.

The Physical Geography of Yucatân

The Yucatân peninsula juts to the north and east from the thin land mass connecting North and South America, otherwise known as Central America. The Gulf of Mexico lies to the west and north of Yucatân and the Caribbean Sea to the east. To the southwest, the Usumacinta River effectively separates

Yucatân from the rest of Mexico. The rain forests of the

Peten region of Guatemala isolate Yucatân from the land area to its south.1

Before 1950, the Usumacinta River system and the rain forests were sufficiently difficult to cross that, in a

'Times Books in collaboration with John Bartholomew & Son Limited, The Times Atlas of the World. 7th comprehensive ed., (New York; Times Books, 1985), plate 115. 8

CAMP E C H E BANK Ciyo Artnas

/n£;/i'irs

de Bravo Dxono saAL . ^zidiantun uerto Jui mm Kantunj l Cjnc Tixkokp alotmul Qon4Y»cAno rto Celestun MorWos

( n r/iirvn /s/a d wâfv, VTicul Cozumt NpnkinI puni* ••^rca» 'np.ç.Bo^clRndflRajôn^ Dtluc lerft,72^Llj[chencovl N U C A T S'* I UQ Hop«lehén > !i"7Baiw» tte ta Aïceixiion Soybaplay^l _^X(Edzna / vicwt» Guerr® enp* Puerto ' CO PuntJ Hemn Champoto Knî^Po '' '\% P E N l WS U L nunic «Mohbec Rttfbrma Aoiya* Los UrtKmiw t^jSabano)»® Pixoy|il na*

Kohtt -..J. ik .^calak ; ^ ^ c \ VTi NwCandelaria Tomis 64, ÀBoca Bacalar Chico Ltj ''^iir,^rii'- Calakmul.-. / pAmbtrsnsCêy Monclova an Pedro uA^.W)ulk ancan y îlMùMnten Lagoan 3 [ -f Qiick'tCap

Source; National Geographic Society, Atlas of the World. 6th ed. (Washington, D.C.: National Geographic Society, 1990), plate 35. Figure l: Yucatân Peninsula 9

practical sense, the Yucatân peninsula can be treated as if it

were an island and separate from the rest of Mexico. The

Mayan culture of the pre-conquest era differs from the culture

of central Mexico.% The Spanish conquest of Yucatân was

separate from that of central Mexico/* Following independence

in 1821, the Yucatecans were generally federalists and twice

sought by military action to separate themselves from Mexico/*

As recently as 1915 a Yucatecan army forced the withdrawal of the Mexican army from portions of the peninsula, placing the peninsula in rebellion against the central government.^ It was 1950 and 1961 before a railroad and an all weather highway, respectively, were constructed across the Usumacinta

River system thus linking via a land route Yucatân with central Mexico*.

Politically the peninsula is divided among three

^Henry B. Parkes, A History of Mexico (Boston: Houghton Mifflin Company, 1969), 13-16, 17-18.

^Inga Clendinnen, Ambivalent Conquests; Mava and Spaniard in Yucatân. 1517-1590 (Cambridge; Cambridge University Press, 1987).

^Nelson Reed, The Caste War of Yucatân (Stanford; Stanford University Press, 1964), 27-34.

^Ramon David Chacon, "Yucatân and the Mexican Revolution; The Pre-Constitutional Years, 1910-1918," Ph.D. dissertation, Stanford University, 1983; 195-198.

^Jeffrey Brannon and Eric N. Baklanoff, Agrarian Reform & Public Enterprise in Mexico. 20. 10

countries: Mexico, Belize and Guatemala. The Mexican portion

is now divided into three states: Campeche, founded in 1857^;

Quintana Roo, separated from Yucatân as a territory in 1902

and given statehood in 1974®; and Yucatân.

The principal area of henequen production, often called

the henequen zone, is in the northwest part of the Yucatân

peninsula.9 Geographically, this portion of Yucatân lies

between 20 to 22 degrees north of the equator and 88 to 90

degrees west of the London meridian.'" Effectively, the

henequen zone lies within the current boundaries of the State

of Yucatân and has an approximate radius of 50 to 100 miles centered on the state capital, Mêrida.

This northwestern region of the Yucatân peninsula is a low lying, flat, limestone plain that is bordered on the south by the Puuc hills. The Puuc hills range from near the town of

Peto in south central Yucatân to near the city of Campeche which lies on the west coast of the peninsula."

'Nelson Reed, The Caste War of Yucatân. 242-243.

*The New Encvclopadia Britannica Vol. 9, 15th ed. (Chicago: Encyclopaedia Britannica, Inc., 1985), 862.

'Jeffrey Brannon and Eric N. Baklanoff, Agrarian Reform & Public Enterprise in Mexico. 18-21.

'°Times Books, The Times Atlas of the World, plate 115.

"Lawrence J. Remmers, "Henequen, the Caste War and the Economy of Yucatân, 1846-1883: The Roots of Dependence in a Mexican Region," Ph.D. dissertation. University of California, 11

North of the Puuc hills, the land slopes gradually to the

north towards the Mexican Gulf. The limestone base is porous

so the rain seeps through to the water table below. There are

no rivers in Yucatân. Water is available at the surface in

locations where the limestone has dissolved creating sinkholes

(cenotes).

Water is a problem for agriculture in the heneguen zone.

Rainfall averages only 20 inches per year at Progreso on the

northern coast of Yucatân, but increases as one goes south.

Mérida averages 30 inches of rain. Rains generally occur in

the late summer and fall of the year while the spring is

usually very dry. Additionally, rainfall is erratic from one

year to the next with droughts occurring periodically."

The land surface in this region has little to no soil

with many rock outcroppings." The natural vegetation of the

region is scrub brush.^ The Spanish colonialists raised

cattle with little success. The Maya for centuries have

raised corn and other crops on their small agricultural plots

(milpas). The agricultural technology used is still very

Los Angeles, 1981; 68.

%id., 69.

'^Ibid., 72.

"•ibid., 69-70.

'^Ibid., 72-73. 12

primitive as the terrain of the fields is rocky and rough and

the wages of the campesinos are low. In recent years with

decreasing henequen production, some fields have been planted

with orange trees while other fields remain fallow.

The city of Mérida, which lies near the center of the

henequen zone, was known during the pre-conquest era as the

city of Tiho. The Montejo family, the conquistadors of

Yucatân, in the mid-sixteenth century converted Tiho to the

Spanish political and religious capital of the peninsula.

Today with the Mexican portion of the Yucatân peninsula

divided into three states, Mérida is less important as a

political center than it was during the colonial era. But

Mérida remains the economic and religious center of the

peninsula.

Yucatân Prior to the Henequen Era

Prior to the Caste War (1847-1853), the Yucatecan economy

was diverse and poor. Cattle and corn were raised throughout the peninsula and sugar was raised south and east of the henequen zone where soil and rain are more plentiful. The

Caste War destroyed the capacity to produce sugar, thus creating an available labor force for the production of henequen.

The henequen industry grew slowly during the early part 13

of the nineteenth century. The major limitation to developing

the henequen industry was the inability to cheaply separate

the waste of the henequen leaf from the henequen fiber. The

rasping machine, or desfibradora, was invented in the late

1850's with the result that the labor cost of processing the

henequen leaf was significantly reduced.'® In 1878, Cyrus

McCormick invented the binder which soon gained widespread

acceptance among farmers in the U.S. midwest.The combined

expansion of agriculture in the U.S. midwest and increased

productivity in processing henequen created the conditions for

a henequen boom in the Yucatecan economy.

Yucatân During the Henequen Era

The high point of the Yucatecan economy occurred from

1880 to 1920. This was the period, first, of substantial growth and, then, leveling off when twine matured as a commodity. During the 1880's and 1890's, the henequen export market involved a number of Yucatecan and American firms including Manuel Dondé, Eusebio Escalante, Molina y Compania, the National Cordage Company, Peabody and Company, Arturo

Pierce, the Plymouth Cordage Company, the Thebaud Brothers and

'^Jeffrey Brannon and Eric N. Baklanoff, Agrarian Reform & Public Enterprise in Mexico. 35-37.

"Ibid., 34. 14

Urcelay Company.'®

Then, in 1902, International Harvester signed an

agreement with Molina y Companla in which International

Harvester allegedly attempted to control the henequen price.

Joseph and Wells write;

[This contract] specified that Molina and Company would use "every effort within their power to depress the price of sisal fiber," and that they would "pay only those prices which from time to time are dictated by the International Harvester Company." More concretely, Harvester agreed to place ten thousand bales of sisal, which they would buy from Molina, "or as much of it as may be needed at the disposal of Molina and Company for sale ... for the express purpose of depressing prices, any loss or gain on such sales being for account of the International Harvester Company." As for the other principals operating in the henequen market, it would be left to Molina to determine how he would induce the exporting firm of Don Eusebio Escalante, his traditional rival, to cooperate with the arrangement. Harvester, for its part, would see to it that the other trading firms of Peabody and Urcelay "shall not pay higher prices for sisal than those given by Molina and Company.

Recently, correspondence has been found indicating that a personal agreement was also reached in 1902 between Cyrus

McCormick, President of International Harvester, and Henry

"Gilbert M. Joseph, Revolution from Without: Yucatân. Mexico, and the United States. 1880-1924 (Cambridge: Cambridge University Press, 1982), 43, 47 and 319, n. 35.

'^Gilbert M. Joseph and Allen Wells, "Corporate Control of a Monocrop Economy: International Harvester and Yucatân's Henequen Industry during the Porfiriato," Latin American Research Review 17, no. 1 (Spring 1982): 80. 15

Peabody, President of Peabody and Company which was another

U.S. importer of henequen, that reaffirmed an earlier contract

in which "McCormick exacted the right to determine the nature

of Peabody's purchases and transactions in the Yucatecan fiber

market."^ Through these agreements with Molina y Companla

and Peabody and Company, Joseph and Wells allege that

International Harvester gained monopsony control of the

henequen market and influenced henequen prices from 1902 until

General Salvador Alvarado entered Yucatân in March, 1915, at

the head of a Constitutionalist army.

Yucatân was not a state in which major battles of the

Mexican Revolution occurred. The primary contribution of the state to the early phase of the Mexican Revolution was that the henequen trade was a substantial source of funding either through direct taxes or forced loans.As the governments changed in Mexico City from Diaz to Madero, to de la Huerta, and finally to Carranza, the Yucatân governors changed to reflect the new circumstances in Mexico City with only a minimum of violence.^

Dissatisfaction among the Yucatecan hacendados against

2°Ibid., 84-85.

^Ramon David Chacon, "Yucatân and the Mexican Revolution," 173-175.

H^bid., 108-187. 16

Table 1: International Harvester's Controlled Share of Yucatecan Henequen Trade to U.S., 1896 - 1914

Year Molina Peabody IH 1896 35.9 27.7 1897 18.8 38.4 1898 16.9 35.4 1899 15.4 36.9 1900 12.9 42.3 1901 23.3 37.7 1902 30.5 39.0 1903 46.4 34.4 80.8 1904 48.7 36.8 85.5 1905 51.9 31.2 83.1 1906 53.2 36.8 90.0 1907 51.6 42.1 93 .7 1908 57.3 36.1 93.4 1909 67.8 28.3 96.1 1910 73.2 26.6 99.8 1911 63.2 24.1 87.3 1912 61.3 24.1 85.4 1913 74.0 20.9 94.9 1914 72.2 20.3 92.5

Note; Joseph and Wells summed the data for Molina and Peabody to obtain the percent of the market controlled by International Harvester (IH).

Sources; U.S. Congress, Senate, Committee on Agriculture and Forestry. Importation of Sisal and Manila Hemp. (Washington, D.C., 1916), Volume 2, p. 963, and Gilbert M. Joseph and Allen Wells, "Corporate Control of a Monocrop Economy; International Harvester and Yucatân's Henequen Industry during the Porfiriato," Latin American Research Review 17,1 (Spring 1982), p. 88. 17

the Carranzista governors developed around several issues:^

(1) The proposed agrarian reform included abolition of debt

peonage. (2) The central government imposed governors on the

State of Yucatân who were not Yucatecans including General

Toribio V. de los Santos, the second Carranzista governor.

(3) Taxes and forced loans were placed on henequen exports to

aid in the financing of the Constitutionalist armies in

central Mexico. On September 11, 1914, Colonel Eleuterio

Avila, the first Carranzista governor, decreed all debts between campesinos and hacendados null and void.^ Later

Avila limited the rights of campesinos to leave haciendas which effectively reversed the decree.^

In February, 1915, Ortiz Argumedo with the support of many hacendados successfully revolted against the de los

Santos governorship.^ While Argumedo attempted to establish his government's allegiance to Carranza and the Constitutional

Revolution, General Salvador Alvarado, as commander of the

Army of the Southeast, gathered an army in Campeche for an

"Ibid., 195.

^^bid., 169.

2^Ibid., 171.

2®Ibid., 197-198. 18

assault on Yucatân.^ The Constitutionalist army defeated the

Yucatân forces in southwestern Yucatân, thus successfully

ending the Argumedo revolt.^"

Among other reforms he began after becoming governor of

the State of Yucatân, General Alvarado strengthened the

Comision Reguladora del Mercado de Heneqûen, a marketing board

that had been established in 1912 by the state government with

the support of many hacendados. Prior to Alvarado*s

governorship, the Comision Reguladora had purchased stockpiles

of henequen attempting to force higher export prices. The

effect on henequen prices was probably minimal, but sales from

the stockpiles were used to support the state and national

governments on occasion. The Comisiôn Reguladora had also

been involved in graft as Ortiz Argumedo stole 5 million pesos

from the Comision Reguladora as he fled from the state

following his military defeat by Alvarado/*

Alvarado established the Comisiôn Reguladora as the sole

agent through which henequen could be exported. On March 26,

^'ibid., 199, and David Arthur Franz, "Bullets and Bolshevists: A History of the Mexican Revolution and Reform in Yucatân, 1910 - 1924, Ph.D. dissertation. The University of New Mexico, 1973, 96.

^®David Arthur Franz, "Bullets and Bolshevists," 97-98.

^Gilbert M. Joseph, Revolution from Without. 137-138. 19

1915, he seized control of the railroads in the state.The

railway system was designed with Mêrida as the hub and a main

line connecting Mêrida to the state's principal port on the

Gulf of Mexico, Progreso. Following the seizure, Alvarado

allowed only the hacendados who signed five year contracts to

sell exclusively to the Comision Reguladora to transport their

henequen via the railroad. Several hacendados with haciendas

near the coast attempted to transport their henequen by

schooner to Progreso but this was stopped by seizing the boats

and the henequen.^'

Henequen exporting firms were also forced out of

operation by the legal and extralegal tactics of Alvarado.

Avelino Montes, the owner of the exporting firm descending

from Molina y Companla, fled Yucatan when Alvarado entered the state. Afterwards the Montes firm became less important as a henequen broker. Peabody and Company withdrew their agent from Yucatan. International Harvester attempted to place a buying agent in Yucatân but were essentially told by Alvarado not to do so. All henequen exports of Yucatân were to be purchased through the Comision Reguladora's agent in New York

^Ramon David Chacon, "Yucatân and the Mexican Revolution," 298.

^Gilbert M. Joseph, Revolution from Without. 139. 20

City

By the end of 1916 the Comisiôn Reguladora had

established monopsony control over henequen purchases from the

hacendados and was the sole exporter of henequen from

Yucatân."

As shown in Appendix A, average henequen prices jumped

from 5.59 cents per pound in 1916 to 13.25 cents in 1917 and

19.25 cents in 1918. Concurrent with the development of the

Comisiôn Reguladora and the sharp increase in henequen prices,

was the ceasing of U.S. imports of competitive fibers from

east Africa, Java, New Zealand, and the Philippines due to

World War

After the armistice was declared in Europe, these sources

of supply were reopened with henequen prices falling to 6.50

cents per pound in 1919. With the falling prices, the

Comisiôn Reguladora became ineffective in its mission and was

bankrupt by the fall of 1919

The henequen economy languished during the 1920s and

1930s with low prices and low output levels. Yucatecan

"ibid., 140-141.

^^Ibid., 140 and Ramon David Chacon, "Yucatan and the Mexican Revolution", 308.

^Ibid., 309.

^Gilbert M. Joseph, Revolution from Without. 167, 172- 175. 21

production of henequen fell relative to world production of

henequen and sisal, a related and competitive product. While

in 1900, Yucatân was the sole supplier, the percentage of

Yucatan production to world production of henequen and sisal

fell from 88% in 1915 to 53% in 1929, 39% in 1933, and to 23%

in 1938

The Modern Era: Land and Institutional Reforms

In August, 1937, President Lâzaro Cârdenas carried out an

extensive land reform movement that reopened the movement to

political control of the henequen industry. By the 1970's, the most important decisions in the henequen industry were made with respect to the political consequences of the decision and largely ignoring the economic consequences."

Nevertheless President Cârdenas did not initiate the drive to politicize the industry; this process had begun in 1912 when the Comision Reguladora was established by the state government of Yucatân.^

^®Ibid., 178-179, where Joseph cites Luis Echeagaray Boblot, Irriaacion. crisis henequenera v condiciones aarlcolas y econômicas de Yucatân. Mexico, 1956, p. 49.

"Jeffery Brannon and Eric N. Baklanoff, "The Political Economy of Agrarian Reform in Yucatân, Mexico," World Development 12, 11/12 (1984): 1131-1132.

^®Ramon David Chacon, "Yucatân and the Mexican Revolution," 134. 22

Land redistribution prior to the Cârdenas presidency

began during Alvarado's term as governor.^ From 1915 to

1933, 390.8 thousand hectares were redistributed with 126

decrees for the benefit of 22,114 persons/" The majority of

the land distributions during this period were made in three

years: 1922, 1923, and 1925.'" In 1922 and 1923 Felipe

Carrillo Puerto, a socialist governor of the State of Yucatân,

sought to provide ejido land to all pueblos in the state.

Some henequen land was redistributed by Carrillo.^" While

Carrillo's efforts ended with his execution in January,

1924,* significant land redistributions continued until 1930,

but most of the remaining land redistributions did not involve

henequen lands.Simpson estimates that approximately 10% of territorial area was placed in ejidos from 1915 to 1933,^" but

^'Gilbert M. Joseph, Revolution from Without. 128.

"•"Eyler N. Simpson, The Eiido; Mexico's Way Out (Chapel Hill: The University of North Carolina Press, 1937), 611.

^Gilbert M. Joseph, Revolution from Without. 239-240, 290.

"^Ibid., 237.

"^Ibid., 237.

"ibid., 263-268.

^^bid., 290.

"•^Eyler N. Simpson, The Eiido. 623. 23

the henequen haciendas remained intact.^

In his pronouncement of August 8, 1937, President

Cârdenas expropriated all privately held land except 150

hectares per owner, the rasping machinery owned by the

hacienda, and the primary residence on the hacienda. Later,

hacienda owners were allowed to retain 3 00 hectares.''® Ejidos

were established with four hectares per ejidatario, the ejido

member possessing usufruct rights to ejido land. The ejidos

were to be managed as a collective with a federal bank created

to provide credit for the ejido operations. The number of

ejidos in the henequen zone increased from 53 to 276.""

The ejidos were established without regard to management

considerations. Ejido lands were spread out geographically and not designed for efficient use of labor. The henequen on the ejido lands was not appropriately varied over the productive stages. If an ejido had a disproportionate amount of henequen in a particular productive stage, the ejido faced major financial difficulties when a sizeable portion of the

"•'Jeffrey Brannon and Eric N. Baklanoff, Agrarian Reform & Public Enterprise in Mexico. 51.

"•'A.J. Graham Knox, "Henequen Haciendas, Maya Peones, and the Mexican Revolution Promises of 1910: Reform and Reaction in Yucatan, 1910-1940," Caribbean Studies 17, 1-2 (April-July 1977): 78.

""Jeffrey Brannon and Eric N. Baklanoff, Agrarian Reform & Public Enterprise in Mexico. 10, and 52-53. 24

its land would become nonproductive during the time when the

land was fallow or newly planted. Lastly, ejidos lacked

rasping machinery which could make efficient processing of the

henequen difficult.^*

Initially the henequen ejidos were to seek funding from

the Banco Nacional de Crédite Ejidal, which had been

established for this purpose in 1935. The ejidatarios were

organized into credit societies which borrowed from the Banco

Ejidal. As the ejido sold its henequen leaves, the hope was

that the loans were to be repaid with the eventual result the

credit societies would become self-financing.^' This was not realized as many ejidos were unprofitable and unable to make the payments on their debt." From August, 1937, to March,

1938, the Banco Ejidal loaned 16 million pesos but was repaid only 9 million pesos." Due to this financial drain, in 1938

Cardenas reassigned the responsibility of the henequen ejidos

^ibid., 53.

^Nathaniel C. Raymond, 'Land Reform and the Structure of Production in Yucatân," Ethnology 7 (October 1968), 464.

"Jeffrey Brannon and Eric N. Baklanoff, Agrarian Reform & Public Enterprise in Mexico. 53-54.

"Moisês Gonzalez Navarro, Raza v Tierra; La guerra de castas V el heneguên (Mexico, DF: El Colegio de Mexico, 1970), 259. 25

to the State of Yucatân.^

The state governor assigned the management

responsibilities of the henequen ejidos to the Henequeneros de

Yucatân, a semi-public agency composed of hacendados and

ejidatarios that controlled the ejidos until 1955. The

Henequeneros de Yucatân administered the ejidos as one large

production operation making the production and marketing

decisions and supervising the work activity on the ejidos. In

response to charges of corruption in 1955, the management

responsibilities were reassigned to a federal credit agency.^

The agencies lending to the ejidos were the Banco

Nacional de Crédite Ejidal and, since 1974, Banrural which was formed by the merger of three major agricultural lending banks. In addition to the lending function, Banrural was significantly involved with the management of the ejido. The work and investment plans of the ejido were presented to

Banrural for their approval and the ejido activities were later audited by the bank. The activities of the ejido had to be approved by Banrural for the ejido to continue receiving credit.^

^^Jeffrey Brannon and Eric N. Baklanoff, Agrarian Reform & Public Enterprise in Mexico. 54.

"ibid., 54-56.

^®Ibid., 64. 26

As was expected with the Banco Ejidal, the Banrural loans

to the ejido were to be self-liquidating in that the sales of

henequen were to repay the debt. In fact, Banrural was forced

to allow the indebtedness of the ejidos to expand over time."

Brannon and Baklanoff conclude that the financial arrangement

between the ejido and Banrural effectively made the

ejidatarios "employees of the federal government."^®

The third change in the henequen industry was the

nationalization of the Yucatecan cordage industry in the early

1960's. During the period of the henequen production boom of

1880 to 1920, henequen fiber was exported to the United States

for processing there. In 1897, in an attempt to begin a

signficant cordage industry in Yucatân, La Industrial, S.A.

was founded with the support of the Yucatecan hacendadoes.

International Harvester and the state government. The

enterprise was unsuccessful and was dissolved in 1907.^

In the 1920's, a successful cordage industry began to

develop in Yucatân.®" One of the developing advantages for the Yucatecan cordage industry was that its labor costs were

lower than the labor costs in the United States. Also the

"Ibid., 77.

^®Ibid., 68.

^'Ibid., 45.

^Ibid., 87-88. 27

United States did not impose any restrictions on cordage

imports/" Economic conditions during World War II and the

immediate postwar period induced a significant expansion of

the cordage industry. The 1950's were a period of

retrogression with falling exports. By 1961, the owners of

the cordage firms were trying to sell the firms to the Mexican

government.

In 1961, the Mexican government created Cordemex with a

loan from the government development bank, Nacional

Financiera, to the owners of the cordage firms. The loan

agreement brought the cordage firms into Cordemex and granted

the government the option to purchase all shares of Cordemex

in three years. In 1964, the government exercised the option

to purchase all the outstanding shares in Cordemex.^

Cordemex was able to behave almost as a monopsonist.

From its inception, it was the major purchaser of henequen in

Yucatân. In 1968, it was given the right to issue export

licenses for henequen fiber and twine. Then in 1973, Cordemex

was granted the additional right to control sales of Yucatecan

®'Eric N. Baklanoff and Jeffrey T. Brannon, "Forward and Backward Linkages in a Plantation Economy; Immigrant Entrepreneurship and Industrial Development in Yucatân, Mexico," Journal of Developing Areas 19 (October 1984): 88.

"Jeffrey Brannon and Eric N. Baklanoff, Agrarian Reform & Public Enterprise in Mexico. 87-94.

"ibid., 94-95. 28

henequen to other domestic buyers, particularly cordage firms

in central Mexico. Later, private producers were allowed to

freely contract the sale of their henequen to Cordemex or

other Mexican cordage firms.^

The Cardenas presidency initiated a period of increasing

political control of the henequen industry. First this occurred with changing the ownership of land, then controlling access to financial markets and lastly controlling the sale of henequen. Interestingly, an industry that contributed to the national treasury during the 1910's had to be heavily subsidized and was a drain on the national treasury by the

1970's and 1980's.

"Ibid., 72-73. 29

CHAPTER III

MONOPSONY IN THE HENEQUEN INDUSTRY, 1880-1930

Introduction

For purposes of modelling the henequen market,

International Harvester will be described as a monopsonist and

the henequen producing haciendas as perfect competitors. The

goal of this chapter is to measure the short run and long run

supply elasticities of henequen so that International

Harvester's ability to exercise its monopsony power, in other

words force down henequen prices, can be examined.

The chapter first states the argument that the price

elasticity of supply is the critical variable in determining

the ability of International Harvester to exercise its

monopsony power. Secondly, the literature outlining the

methodology used to estimate supply elasticities is reviewed.

Then, the cropping of henequen is described so that an

appropriate model of the henequen supply function can be developed. In the sixth section a reduced form of the henequen supply function is formulated and estimated. The statistical results are used to estimate the supply 30

elasticities and to consider the vulnerability of the henequen

industry to monopsony power. Lastly, a demand function is

estimated to see if International Harvester influenced prices.

Supply Elasticities and Market Power

If International Harvester were a perfectly competitive

buyer of henequen and seller of twine, ignoring transportation

and other transaction costs. International Harvester would

seek to maximize:

71 = - p"H - F (1)

where is the U.S. price of twine, P" is the Mexican price of

henequen, T is the quantity of twine produced and sold, H is the quantity of henequen purchased, and F are the other costs of producing twine, which for simplicity are assumed to be fixed.

Henequen is an input into the production of twine so:

T = f{H) (2) with the usual assumptions of fH>0 and fHH<0* The first order condition of the maximization function is:

71^ = ~ P" = 0 (3) which says that International Harvester will continue purchasing henequen until the marginal revenue product of the 31

last unit purchased equals the henequen price.'

If International Harvester were a monopsonist in the

henequen market, then the Mexican price of henequen becomes a

positive function of the quantity of henequen purchased:

P" = P"(H) (4)

where Ph">0.^ The maximization function for International

Harvester becomes:

7t = P'^T - P"{H)H - F (5)

The first order condition for profit maximization is:

TZ„ = - p" - = 0 (<)

where dP"/dH is the derivative of the henequen price with

respect to the quantity of henequen purchased. Manipulating

this equation to account for the price elasticity of supply of

henequen gives:

'Hal R. Varian, Microeconomic Analysis. Second edition (New York: W.W. Norton & Company, 1984), 79-82.

^This analysis ignores the problem of dynamic consistency for the monopsonist. The hacendado starts harvesting henequen seven years after the henequen was planted. The monopsonistic purchaser of henequen should set the price to minimize the current cost of buying henequen but at a sufficient level to promote planting for future production. See, as an example of the literature on dynamic consistency, Larry S. Karp, "Consistent Tariffs with Dynamic Supply Respnse," Journal of International Economics 23, no. 3/4 (November 1987): 369-376. 32

P% = i'^l + -|J (7)

with e is the price elasticity of supply. The monopsonist

buys henequen until its marginal revenue product equals the

marginal expenditure on henequen. To the extent that e«», the

marginal expenditure on henequen is greater than the price for

that quantity. In that case, the monopsonist can control the

input price through its control of the quantity of the input

that it purchases.

The ability of the monopsonist to control input prices is

a function of the supply elasticity of the input. If

International Harvester faced an infinitely elastic supply

function, then International Harvester as a monopsonist would

be as unable to control the price of henequen as a firm buying henequen competitively.

Supply Elasticities in Agriculture

Estimating supply elasticities became interesting when economists questioned the response of agricultural entrepreneurs to price changes. Agricultural output was often thought to be nonresponsive to price changes as the entrepreneurs were hypothesized to minimize risk when selecting production strategies, to highly value leisure time, 33

and to have achievable fixed income goals.^ If the supply of

agricultural output is totally price inelastic, then output is

independent of agricultural pricing policies.

The standard approach to estimating price elasticities of

agricultural commodities began with Marc Nerlove's "Estimates

of Supply of Selected Agricultural Commodities".^ The Nerlove

model for annual crops consisted of three equations;

A, - = YUt" - /Ic-i) <8>

Pt® - = P (Pt-i - -Pt^)

At = 3(5 + a^Pt + agZ; + Ug (10) with At as the actual cultivated acreage at time t, Aj** the desired cultivated acreage, P,® the expected price, the actual price, Z^ other exogenous variables affecting supply conditions, and y and jS as the adjustment and expectation coefficients.3 Nerlove's essential contribution to estimating supply elasticities was to introduce price expectations into

^Marian E. Bond, "Agricultural Responses to Prices in Sub- Saharan African Countries," IMF Staff Papers 30 (December 1983): 705.

^Marc Nerlove, "Estimates of Supply of Selected Agricultural Commodities," Journal of Farm Economics 38 (1956): 496-509.

^Marc Nerlove, "The Dynamics of Supply; Retrospect and Prospect," American Journal of Agricultural Economics 61, no. 5 (December 1979) ; 875. 34

the model.® Nerlove wrote,

Surely farmers must base their decisions on some reasonable assessment of the supply and demand conditions for the commodities they produce. Farmers react, not to last year's price, but rather to the price they expect, and this expected price depends only to a limited extent on what last year's price was.?

In the first sentence of the quote, Nerlove anticipated Muth's

notion of rational expectations.' But as he continued to

write, Nerlove focused on past prices as the basis for

expected future prices which had been used in previous

research.' Later in the same article Nerlove wrote,

Each past price represents only a very short-run market phenomenon, an equilibrium of those forces present in the market at that time. It is for precisely this reason that fanners may not react only to last year's price. ... I assume that the influence of more recent prices should be greater than the influence of less recent prices. What could be simpler than to represent expected price as a weighted moving average of past prices in which the weights decline as one goes back in time?^°

As suggested by the quote, Nerlove used the adaptive

®Marc Nerlove, "Estimates of Supply of Selected Agricultural Commodities," Journal of Farm Economics 38 (1956): 498.

•'ibid., 498.

*John F. Muth, "Rational Expectations and the Theory of Price Movements," Econometrica 29 (July 1961): 315-335.

'Marc Nerlove, "Estimates of the Elasticities of Supply of Selected Agricultural Commodities," Journal of Farm Economics 38 (May 1956): 496-497 for a review of previous studies of supply elasticities of agricultural products.

'"Ibid., 499. 35

expectations model which earlier had been developed by Phillip

Cagan." A wide variety of studies surveyed by Askari and

Cummings and Bond used the Nerlove model to estimate supply

elasticities of agricultural commodities.

Three modifications of the original Nerlove model are

used in this research. First, capital theory is employed to

account for the significant lags occurring between planting

and harvesting decisions arising with perennials. The first

users of the Nerlove model were estimating supply

relationships of annual crops where the distinction between

planting and harvesting is relatively unimportant. The second

modification is to replace the adaptive expectations model

with the rational expectations model. The last modification

is to describe the decisions entrepreneurs make in an explicit profit function. The profit function is optimized with respect to the decision variables to determine the profit maximizing decisions.

"Phillip Cagan, "The Monetary Dynamics of Hyper­ inflations," Ph.D. dissertation. University of Chicago, 1954.

^Hossein Askari and John Thomas Cummings, "Estimating Agricultural Supply Response with the Nerlove Model: A Survey," International Economic Review 18, no. 2 (June 1977): 257-292, and Marian E. Bond, "Agricultural Responses to Prices in Sub-Saharan African Countries." 36

Wickens and Greenfield'^ introduced a vintage production

function that included planting as an exogenous variable in a

study of coffee production:"

9c = ^2 (H) 1^0

where qP is potential coffee production, <9; is the productivity

of the coffee tree in the i*th year of their life, and I,.; is

the number of coffee trees planted i years ago. The coffee

producing firm has expected discounted net revenue V:^

y = Ê (12) c-o

with r as the discount rate, p' the expected price of coffee,

s,® the expected cost of harvesting coffee, F, the fixed costs, and f(IJ the nonlinear costs of planting in year t. The firm maximizes its expected discounted net revenue constrained by the production function. The Lagrangian is:'®

"M.R. Wickens and J.N. Greenfield, "The Econometrics of Agricultural Supply: An Application to the World Coffee Market," Review of Economics and Statistics 55 (November 1973): 433-440.

'"Ibid., 434.

'^Ibid. , 435.

'®Ibid. , 435. 37

00 £2 = g {(1+r) (TJ ] + ô t-o 1=07 =n (13)

with q and I as the decision variables. By differentiating

the Lagrangian with respect to q, I, and X, planting of coffee

continues until its marginal cost equals its marginal expected

gain:"

(14) o-'-c i-0

With f(It) a quadratic function of I,, then the annual planting

of coffee is a function of the marginal expected gain of

planting:

(15)

Assuming that the planting of coffee trees occurred with a constant density defined as the number of trees per hectare, the change in coffee acreage then is a function of the marginal expected gain of planting and of the uprooting of the trees:

I'ibid., 435. 38

= d„ + IISI

where U, is the annual clearing of aged coffee trees.'®

To estimate the above equation, Wickens and Greenfield

had to simplify the estimated equation as they lacked data on

harvesting costs and the acreage that was uprooted. They

estimated the above equation with lagged acreage and current

coffee prices as independent variables and used the maximum

likelihood procedure to avoid first order autocorrelation

problems. As a result of their statistical results, they

stated that

= «0 + + «zPt (17)

with p, as current price of coffee, was a good approximation of

the investment function.''

A short term supply function was developed by stating

that deviations away from potential supply (pf) could be

explained by recent prices. Wickens and Greenfield also

wanted to recognize a biennial cycle in coffee production so they included past production as an independent variable:

'®Ibid., 435.

"ibid., 435-436. 39

m = Yo + Yi

Equations (11), (17), and (18) are solved to find the reduced

form of the supply equation:

n = Z PiPt-i + (Y2+«l)?t-l - Y2«l?6-2 + ^ (19) r^o

with k as the constant.^

To estimate equation (19), Wickens and Greenfield took

first differences of the equation and used an Almon polynomial

distributed lag. Using Brazilian coffee production data, they found /3 coefficients positive for the current year price, negative for prices of years t-1 through t-3, positive for prices of years t-4 through t-7, and negative for the price of t-8. While the jSs were not individually statistically significant, the sum of the /3s was statistically significant and the pattern of the signs agreed with economic theory/"

Hartley, Nerlove and Peters found that the Wickens and

Greenfield approach did not work well when used with data on rubber prices and production in Sri Lanka. They also had access to data for additional variables. These included newly planted and replanted areas, subsidies, wages, the age

20lbid., 437.

2'lbid., 438-439. 40

distribution of the tree stocks, and an age-yield profile of

rubber trees.^

Three equations representing the replanting decision, the

new planting decision, and the production decision were

estimated. The replanting decision was derived from

information regarding the age structure of the rubber trees:

= cTo + â;At[i-Ft(a;)] + Û; (20)

with a,* is the age at which trees become eligible for replanting. F (a,*) is the proportion of trees that are too young to be replanted. The age at which trees should be replanted is a function of current and expected rubber prices, wage rates, subsidies, plus an error term (x,)

aZ = Pt/ Sf ^t) (21)

Using adaptive expectations as in equation (9) to explain p®, equation (21) is substituted into equation (20), and linearized, to obtain:

^Michael J. Hartley, Marc Nerlove, and R. Kyle Peters, Jr., The Supplv Response for Rubber in Sri Lanka; A Preliminarv Analvsis. Kcrld Bank Staff Working Papers No. 657 (Washington, D.C.: The World Bank, 1984); idem, "An Analysis of Rubber Supply in Sri Lanka," American Journal of Agricultural Economics 69 (November 1987): 757.

"Ibid., 758. 41

(22 ) i2j. = «0 + GiCPc-p*] + a^Pt + «3*^6 + K4SC + «sAGEt + Uc

with the AGE, variable measuring the acreage planted into trees

of various age groupings/^

The equation estimating new plantings was similarly

reasoned but did not contain the current rubber price:

= Yo + YiOZ + YzPt + ^c + eg (23)

with Qt* measuring the effect of potential production on

planting new trees. The production equation was;

2c = Po + PiOZ + PzPt + PaPt + Pd^c + Pst + (24)

with the variable t used to measure improved productivity over time. Q,' is determined by the acreage of rubber trees, the age structure of the rubber trees, and the age-yield profile of the trees."

The replanting equation performed the best: The short run price elasticity was negative as expected but statistically insignificant and small. The long run elasticity equalled 1.74 and was highly significant. The subsidy variable was also positive and statistically significant but the wage variable was insignificant. The equation for new plantings performed poorly with expected

^Ibid., 758-759.

2^Ibid., 759. 42

prices having the wrong sign, although it was statistically

insignificant. In the production equation, the current price

was positive as expected but was statistically

insignificant." Hartley, Nerlove and Peters believe that

separating the investment decision of Wickens and Greenfield

into a replanting decision and a new planting decision

provided the better explanation of a mature perennial crop.^"

Zvi Eckstein^ replaced the adaptive expectations

equation with the rational expectations hypothesis in

Nerlove*s supply model. Eckstein used a dynamic linear model

described by Hansen and Sargent." His modifications of the

Nerlove model lead to a more complete specification of the

supply model, but it is observationally equivalent to

Nerlove's.

The rational expectations hypothesis originated with John

Muth's 1961 article in Econometrica.The hypothesis was

"ibid., 760.

"Ibid., 761.

^®Zvi Eckstein, "The Dynamics of Agriculture Supply: A Reconsideration," American Journal of Agricultural Economics 67 (May 1985): 204.

"Lars P. Hansen and Thomas J. Sargent, "Formulating and Estimating Dynamic Linear Rational Expectations Models," in R.E. Lucas and T.J. Sargent, eds., Rational Expectations and Econometric Practice. 91-125.

'°John F. Muth, "Rational Expectations and the Theory of Price Movements," Econometrica 29 (July 1961); 315-335. 43

first integrated into the macroeconomics literature through

the research of Lucas,Sargent,^ and Sargent and Wallace^"

in the early 1970's.^ In 1976, Lucas showed that changes in

policies should alter the behavioral responses of rational

actors and transform the structure of the economy. Long run

estimation of economic behavior that does not recognize the

structural economic changes should contain significant

estimation errors." Hansen and Sargent say of Lucas's

research:

The implication of Lucas's observation is that instead of estimating the parameters of decision rules, what should be estimated are the parameters of agents objective functions and of the random processes that they faced

^Robert E. Lucas, Jr.., "Expectations and the Neutrality of Money," Journal of Economic Theory 4 (1972): 103-124; and idem, "Some International Evidence on Output - Inflation Tradeoffs," American Economic Review 68 (1973): 326-334.

"Thomas J. Sargent, "Rational Expectations, the Real Rate of Interest, and the Natural Rate of Unemployment," Brookings Papers on Economic Activity 2 (1973): 429-472.

"Thomas J. Sargent and Neil Wallace, "The Stability of Models of Money and Growth with Perfect Foresight," Econometrica 41 (1973): 1043-1048; and idem, "Rational Expectations and the Dynamics of Hyperinflation," International Economic Review 14 (1973): 328-350.

^David K.H. Begg, The Rational Expectations Revolution in Macroeconomics: Theories and Evidence (Baltimore: The Johns Hopkins University Press, 1982), 206.

"Robert J. Lucas, Jr., "Econometric Policy Evaluation: A Critique," in Karl Brunner and Allan H. Meltzer, eds.. The Phillips Curve and Labor Markets Carnegie-Rochester Conferences on Public Policy 1 (Amsterdam: North-Holland, 1976): 19-46. 44

historically. Disentangling the parameters governering the stochastic processes that agents face from the parameters of their objective function would enable the econometrician to predict how agent's decision rules would change across alterations in their stochastic environment.^

Eckstein constructed a model with a stochastic linear

production function and a quadratic total cost function. The

cost function accounts for decreasing returns to scale as

related to land area and an additional term that makes total

cost a function of the interaction between this year's and

last year's acreages (da,an). The term d is positive when the

interaction of the acreages for the two years reduces

productivity, for example when previous land use decreases the

nutrients in the soil. The term is negative when the interaction increases productivity. For example, land previously tilled may not be as susceptible to weeds in the second year. Market price is a linear function of the quantity demanded and income, which is a second-order autoregressive process. The farmer maximizes discounted expected profits subject to the production function. The maximization function is differentiated with respect to land

^^Lars P. Hansen and Thomas J. Sargent, "Formulating and Estimating Dynamic Linear Rational Expectations Models," in Robert E. Lucas and Thomas J. Sargent, Rational Expectations and Econometric Practice (Minneapolis: The University of Minnesota Press, 1981): 91-92. 45

acres, resulting in a second order linear equation."

Market equilibrium is established when total demand

equals total supply. The equilibrium condition is solved to

find that current acreage is a function of past acreage,

current and past incomes, current total costs, plus an error

term. Future prices are a function of current and past

prices; future, current and past income; and future and

current error terms.

Eckstein used the model to show that cobweb cycles can

come about in a market with rational actors.Furthermore,

he showed that the model is observationally equivalent to the

Nerlove model so that both models used the same estimated

variables/"" and he demonstrated a method for estimating

supply elasticities/"

In the only study of henequen and sisal reported by

Askari and Cummings^ and by Bond,^ G.D. Gwyer studied the

"ibid., 205-206.

^'Ibid., 207-208.

^'Ibid., 208-209.

""Ibid., 209-211.

"'Ibid., 211-213.

^Hossein Askari and John Thomas Cummings, "Estimating Agricultural Supply Response with the Nerlove Model: A Survey." 46

supply elasticities of sisal in Tanzania from the years 1945

to 1967.^ As stated in the introduction, sisal is

biologically related to henequen and originated in Yucatân.

In 1836, an American consul in Yucatân, Henry Perrine, took

some young henequen plants to Florida to determine if they

would grow there. These plants plus others illegally exported

from Yucatân provided the basis for henequen and sisal

production in German East Africa in 1893, and later in the

Bahamas, Cuba, and El Salvador.^

Gwyer examined separately the planting and harvesting

decisions. He hypothesized that annual planting (N,) was a

function of expected prices (p,®), time which was used as a

proxy for increasing costs, and the age composition of the

sisal plants (A/M),.,. He included a dummy variable to account

for Tanzania's independence in 1961 (ID61).^

^Marian E. Bond, "Agricultural Responses to Prices in Sub-Saharan African Countries."

^G.D. Gwyer, "Long- and Short-Run Elasticities of Sisal Supply," Eastern Africa Economic Review 3 (December 1971): 19-30. My interest in this study results from examining the essentially the same agricultural plant.

^tawrence J. Remmers, "Henequen, the Caste War and the Economy of Yucatân, 1946-1883," 812. Remmers states that sisal production began in German East Africa in 1912. Ernest Goulding, Cotton and Other Vegetable Fibres. 167 and 170, provides the earlier date.

'*^G.D. Gwyer, "Long- and Short-Run Elasticities of Sisal Supply," 21. 47

N^ = f{p^, t, ID61, (A/Af)t-i) (25)

Three expectations assumptions were used. First,

expected prices were assumed equal to current year prices.

This was referred to as a naive specification. Secondly,

Gwyer used what may be called a sum-of-the-digits specification and which he called the "Fisher lag scheme".

The weights applied to prices were developed analogous to a sum-of-the-digits capital depreciation schedule. Thirdly, the adaptive expectations model was used, which is a nonrestrictive form of the sum-of-the-digits/"

Gwyer found short run planting elasticities of about .25 and long run elasticities of about .48. The difference in elasticity coefficients between the different elasticity assumptions were numerically small His estimates of the harvesting price elasticities were even less."*'

Description of Raising and Processing Henequen

A henequen plant goes through five distinct stages:

Fomento is the first year or two of the plant. Small shoots of the henequen plant are placed in the ground of a nursery to

•''ibid., 21-22.

''^Ibid., 23.

•"Ibid., 25. 48

begin the growth of a new plant. The nurseries are watered

and weeded daily and well fertilized. For the next five

years, henequen is in cultivo. At the beginning of this

stage, the henequen is transplanted into large fields.

Weeding has to occur twice a year and there is no harvesting

of leaves. From the seventh to the twelfth year, henequen is

in mateo. During this phase, weeding continues regularly and

selective harvesting begins. Often the supervisor carefully

marks the leaves for cutting. Inappropriate harvesting would reduce the plant's productivity in later years. For the next eight years, henequen is in the explotacion stage. The mature plant yields twenty or so leaves each year with weeding occurring once a year. The final phase is called decadencia. during which the plant becomes nonproductive. Weeding is stopped during this phase. Fields in this phase can often be identified by containing plants with a tall center stock.

Following this phase, the field would be left fallow for about seven years before replanting.^

During the productive stages, workers use machetes to cut the leaves off each plant. The leaves are long with sharp points at the end so care must be taken by the worker when harvesting the leaves. Leaves at the bottom of the plant are

^Jeffery Brannon and Eric N. Baklanoff, Agrarian Reform & Public Enterprise in Mexico. 60, and discussion with Sr. Fernando Zapata of Merida, Yucatân, on April 25, 1990. 49

harvested first, with the workers working up the plant as more

leaves are cut. Workers generally place the harvested leaves

in bundles at the end of the rows of the henequen plants.

Most haciendas and ejidos have small portable steel rails,

called Decauville railroads, which are tracks for donkey or

horse drawn steel wheeled carts. The bundled henequen leaves

are placed on these carts and taken to the hacienda or the

ejido village for processing.^'

Some haciendas still have the rasping machinery or

desfibradoras" used to obtain the fiber from the leaves. In

recent years, Cordemex has built several small plants with

rasping machinery and located them throughout the henequen

zone. The rasping machine, which is now driven by a diesel

engine, crushes the green portion of the henequen leaf and retains the fiber. The fiber is dried out for several days and then baled. The baled henequen can then be sold."

Haciendas have several advantages for carrying out the rasping operation. The henequen leaves have to be processed within twenty four hours of cutting or the fiber loses its strength. Most of the labor used in the rasping operation were unskilled and lived either on the hacienda or in nearby

^'Ibid., 58.

"Gilbert M. Joseph, Revolution from Without. 24.

"Ibid., 58. 50

villages. For these particular tasks, rural labor could

probably be hired more cheaply than urban labor. Lastly, the

rasping operation eliminated about 90% of the weight of the

henequen plant which should significantly reduce the costs of

transporting the henequen to its markets.*

Henequen Supply Function

The supply function of henequen is based on a dynamic

equilibrium model with hacendados making rational decisions

with respect to raising henequen. The dynamic feature of the

model results from planting and harvesting activities

occurring at significantly different times. The model assumes

fixed proportions between land and the other production

factors.

The hacendado has to choose in each time period how much

land to plant in henequen (I,) . No accounting is made of land taken out of production, so I, should be interpreted as net hectares planted in year t. Land in henequen production is that quantity previously planted so:

<26) where A, is land planted in henequen at the beginning of the

*Ibid., 60. 51

time period t. The term n is the number of years occurring

between replanting a henequen field. As discussed in the

previous section, an approximate value of n is 32. A henequen

plant can be in the field for up to twenty five years and the

field is likely to remain fallow another seven years before

replanting. Therefore land in henequen production is defined

to include land currently producing henequen and land

previously used in henequen production but allowed to lie

fallow until replanting.

Current year henequen production is assumed to be a

linear function of plantings seven to n years in the past:

n (27) where a:|>0 and measures the productivity of land in producing henequen.

The hacienda incurs cultivating and harvesting production costs (C) which are nondecreasing, concave and continuous functions of land in production, including the land lying dormant. Planting costs (C) are nondecreasing, concave and continuous functions of the land area planted in a particular year. The total cost function for henequen is;^^

"Hal R. Varian, Microeconomic Analvsis. 44. 52

Q = C°{A^) +Cf(TJ (28)

The profit of the hacienda in any time period is simply the

difference between total revenue and total costs:

7t, = - C, (29)

The hacendado chooses I, in order to maximize expected

future profits discounted to their present value subject to

the vintage production function constraint;

n n (30) e-£ P' t=0 U=7 /J where E is the expectations operator and j8 is the discount factor with the limits; 0

n n (31) = eY, P' t=0

£ is maximized by differentiating the function with respect to I,, and \ yielding;

Sfj = £ = 0 (32) SA..,

n • E = 0 (33) t=7

The information set (n,) of the hacendados when seeking to maximize £ contains past values of plantings, hectares in 53

henequen, henequen prices, cultivating and harvesting costs,

planting costs, future and past production levels, and other

relevant variables;

Ci /. — jTg-i / Tg-g / • • • / P^r •f'c-l ' •^t-2' • • • ' •'^C ' • • • '

r C't-11 C't-s f • • • / Cb / Ct-1 / C't-2 / • • < / ' •^t+5 ' •^t+4 ' • ' • '

' ^t-1' ^t-2' ' • • } (34)

with Wt.i representing the values of other relevant variables.

When deciding upon I,, the hacendados are assumed to have

expectations on Pj+i, Pt+2' * • *' ^t+i / ^1+2 / • • • » ^t+2''' •

. and W,+j, W(+2, • • • such that their expectations are

exogenous to the values of these variables actually occurring

in the future.

Expectations of henequen prices in equation (32) can be

modelled using several different approaches. One approach

would be to model the world twine market. In practical terms,

this approach would be expensive due to the data requirements.

Objections to this approach are also based on information

availability assumptions of this model. Yucatecan hacendadoes

would have to access information on Philippine abaca supplies, the United States demand for twine and the U.S. production function of twine. Given the geographical isolation of

Philippines and United States from Yucatan, and the rather 54

primitive communications systems in existence at the beginning

of the twenthieth century, the actual information available to

the Yucatecan hacendado was probably rather limited.

An alternative approach is to assume that the Yucatecan

hacendado based expectations on the preceived time series

structure of henequen prices. A priori, there is no

information regarding what is the structure of henequen

prices. The approach is to use ARIMA procedures to determine

the structural model that best explains the time path of the

henequen prices. The rational hacendado would have learned

what structure would have "best" explained henequen prices and

used that structure to forecast future henequen prices.

Table 2 shows the results of estimating the structure of the henequen price data from 188 0 to 193 0. I decided to use a first order autoregressive equation to explain the behavior of henequen prices over the time interval studied. Expectations of future henequen prices are formed by:

= *0 + Oifc (35)

(36) and

(37) 55

Table 2: ARIMA Procedures on Henequen Prices, 18 80 - 193 0

SSE AR(1) P, = 3.762 + .725P,.i 1036.73 (5.83) (7.34)

AR(2) P, = 3.988 + .761P,.i - .05IP,.; 1034.30 (6.13) (5.28) (0.36)

MA(1) P, = 14.006 - .619a,., 1267.33 (12.19) (5.49)

MA(2) P, = 13.940 - .869a,.i - .380a,.2 1083.18 (9.33) (6.49) (2.82)

IMA(1,1) vP, = .229a,., 1180.20 (1.64)

IMA(1,2) VP, = .179a,., + .272a,.2 1098.25 (1.28) (1.94)

ARI(1,1) VP, = -.lOOvP,.! 1196.92 (0.70)

ARI(2,1) VP, = -.129vP,., - .304VP,.2 1087.45 (0.93) (2.20)

ARIMA(1,1,1) VP, = .716vP,., + .972a,., 1047.07 (6.16) (15.99)

ARIMA(2,1,1) VP, = -.OlOvP,., - .294vP ,.2 + .131a,., (0.02) (1.93) (0.28) 1084.30

ARIMA(1,1,2) VP, = .613 VP,., + .774a,.i + .190a^ (3.89) (4.12) (1.10) 1059.67

ARIMA(2,1,2) vP, = .093VP,., - .564vP,.2 + .237a,., (0.23) (1.67) (0.52) 1069.26 —. 31 la,.2 (0.74)

Note: Absolute t-statistics are shown in parenthesis. 56

with n, representing the information available to decision

makers at time t and 0i constained by O<0i

Equation (36) can be appropriately substituted for the

expected price of henequen in equation (32):

dCP _ n (38) ax. • E M (:=1 sr.

Equation (38) suggests that I, is determined by the

expected future revenue derived from the planted henequen and

the expected future costs to be incurred because of the

planting. Expected henequen prices are determined by a

weighted average of the current henequen price and some normal henequen price (0o) which is unknown. According to equation

(38), I, is determined by the interaction of the current henequen price and the marginal costs associated with planting henequen.

For simplicity, set:

= p/n Q2 dC° ^^s+2 nn ("59)

SO that Z, is a function of future cultivating and harvesting costs as they respond to current year plantings. Then;

J, = 1^1 (40) 3 ,

This equation can be substituted into equation (27) to obtain: 57

Igj (41)

Data on costs and production acreages for the 1880 to

1930 period is unavailable so these are assumed as part of the

random error term which has the standard characteristics of

E(e)=0 and var(e)=a. Henequen production then is a function

of current and past henequen and prices:

~ •^•^C-7' • ' • ' (42)

or, in linear form,

Xf. = a + PyPj-y + . . . + P/J-Pf/J ®t (43)

Description of the Data Set

The henequen price data from 1880 to 193 0 was taken from

Aznar's article in the Enciclopedia Yucatânense.^^ The

article does not describe the source of the data or the manner

in which it was collected. The prices are described in the

article as the nominal price per pound of henequen exports

^"Enrique Aznar Mendoza, "Historia de la industria henequenera desde 1919 hasta nuestros dias," Enciclopedia Yucatanense. Tomo 3 (Mexico: Edicion oficial del Gobierno de Yucatan, 1947), 778-780. 58

expressed in U.S. cents. The data is used by Brannon" and

Joseph^® in their research and is generally accepted by other

scholars."

The statistical research is undertaken using both nominal

and real henequen prices. The real prices were calculated by

deflating henequen prices with the U.S. producer price index.

The decision to deflate henequen prices with a U.S. price

index is somewhat arbitrary. If the hacendados primarily used

the receipts of henequen sales to purchase U.S. goods or if

purchasing power parity holds, then this is the appropriate

deflating technique. If purchasing power parity does not

explain the dollar peso exchange rate and receipts from

henequen sales are used to hire Yucatecan campesinos or buy

Yucatecan goods, then this approach may be no better than

using henequen prices expressed in nominal U.S. cents.

The producer price index was derived by converting the wholesale price index for the years 1880 to 1889 given in

"Jeffrey Brannon and Eric N. Baklanoff, Agrarian Reform & Public Enterprise in Mexico. 142.

^Gilbert M. Joseph, Revolution from Without. 142.

"Fred. V. Carstensen and Diane Roazen-Parrillo, "International Harvester, Molina y Compania, and the Henequen Market; A Comment," Latin American Research Review. 18, 3 (1983), 198, cite henequen price data for 1887 to 1912 from Siegried Askinazy, El Problema Aararia de Yucatan (Mexico, 1936), 100-101. This data has the same values as does Aznar's. 59

Warren and Pearson's Gold and Prices to a 1967 base.®" The

price index for the remaining years was taken from the

Historical Statistics of the United States/"

Henequen exports are used as a proxy for henequen

production with data again given by Aznar.^ For most years,

henequen fiber was exported with the manufacturing of twine

occurring in the United States. Since the domestic use of

henequen was small relative to production, the quantity

exported was a good proxy for production.

In the 1920's and 1930's the manufacturing of twine began to become profitable in Yucatân so that differences between exports and production eventually became significant.®^

Brannon and Baklanoff's data on henequen production, which is given only for intermittent years, has the same numeric value as given by Aznar on henequen exports for the years 1901 to

1930. Brannon and Baklanoff's data on henequen production for

^George F. Warren and Frank A. Pearson, Gold and Prices (John Wiley and Sons, 1935), 14.

®'U.S. Bureau of the Census, Historical Statistics of the United States; Colonial Times to 1970 (Washington, D.C., 1975).

^Enrique Aznar Mendoza, "Historia de la industria henequenera desde 1919 hasta nuestros dias," 778-780.

"Eric N. Baklanoff and Jeffery T. Brannon, "Forward and Backward Linkages; Immigrant Entrepreneurship and Industrial Development in Yucatân, Mexico," Journal of Developing Areas 19 (October 1984); 88. 60

the years 1937 and 1938 are 93,821 and 73,236 metric tons

whereas Aznar's data on henequen exports for the same years

are 77,111 and 57,918 metric tons.^

Estimation of the Henequen Supply Function

To estimate equation (43), the length of the lag

structure was established using a likelihood ratio statistic

(Xj) The task in determining the length of the lag

structure is to efficiently use the data set by minimizing the

number of lagged variables®^ but also develop unbiased

estimates of the regression coefficients by including all

significant lagged variables.^

The maximum length of the lag (M) should be no greater

than 32 with the true length of the lag (N) shorter. Henequen

fields can be replanted in 32 years but N may be substantially

less than 32 because (1) the productivity of the henequen

^Jeffrey Brannon and Eric N. Baklanoff, Agrarian Reform & Public Enterprise in Mexico. 62, and Enrique Aznar Mendoza, "Historia de la industria henequenera desde 1919 hasta nuestros dias," Enciclopedia Yucatanense. Tomo 3 (Mexico: Edicion Oficial del Gobierno de Yucatân, 1947): 780.

^George G. Judge, R. Carter Hill, William E. Griffiths, Helmut Lutkepohl, Tsoung-Chao Lee, Introduction to the Theory and Practice of Econometrics Second Edition (New York: John Wiley & Sons, 1988), 722-734.

«®Ibid., 722.

"Ibid., 72 6. 61

plant eventually decreases with age and (2) there is a period

in which the henequen fields are allowed to lie fallow. Prices

concurring with the planting of the older henequen plants

should then have minimal effect on current output suggesting

that N may be substantially below 32.

The null hypothesis is that:

N = M-i (44) or

= 0 (45) for i = 0, 1, 2, ... j, ... M. The null hypothesis is tested sequentially, beginning with i=0, until it is rejected. For the j'th lag term in which the null hypothesis is rejected, then:^

= M-i (46) and

" 0 (47) for i>j.

The likelihood ratio statistic is found by:

®®Ibid., 723. 62

, _ SSE^.,-SSE^.,,^ (48) ' "w-i+iÂ2

where

2 _ SSE^ (49) " T-N-2

and SSEf, is the sum of the squared errors. The likelihood

ratio statistic has an F-distribution with 1 and T-M+i-3

degrees of freedom.®'

The combination of the limited data set with 51 price and quantity observations with the long lag structure associated with the henequen plant posed problems for establishing the length of the lag structure. The data set used to estimate the likelihood ratio statistic contained henequen output from

1903 to 193 0. The real henequen price data was lagged for up to 23 years so that all of the price data, 1880 to 1930, was used. A series of linear multiple regressions were run beginning with all the price variables included and then deleting the longest lagged price variable. The estimates of the likelihood ratio statistic using real henequen prices are shown in Table 3.

The estimated X's are statistically insignificant at the

5% and 1% level until the fourteenth lagged price variable is

®'lbid. , 724. 63

Table 3: Lag Analysis of Real Henequen Prices on Henequen Production

R2 Lag (adj) SSE SD Lamda DF 23 61.3% 3362720512 336272051 10 22 63 .8 3458312704 314392064 0.28 11 21 64.4 3718918400 309909867 0.83 12 20 66.1 3829661696 294589361 0.36 13 19 67.8 3921226240 280087589 0.31 14 18 65.7 4472193536 298146236 1.97 15 17 63.2 5116155904 319759744 2.16 16 16 65.4 5118756352 301103315 0.01 17 15 65.1 5459283456 303293525 1.13 18 14 66.7 5507255296 289855542 0.16 19 13 48.1 9025679360 451283968 12.14" 20 12 30.5 12699987968 604761332 8.14" 21 11 17.0 15878956032 721770729 5.26* 22 10 6.5 18707296256 813360707 3.92 23 9 0.0 21889519616 912063317 3.91 24

'significant at the 5% level of significance. "significant at the 1% level of significance.

deleted. For the thirteenth lagged price variable, X = 12.14

with 2 0 degrees of freedom which is statistically significant

at the 1% level. With these results, I decided to establish

the model with real henequen prices lagged from 7 to 14 years.

Table 4 shows the results when nominal henequen prices

are used. The Xs associated with the thirteenth and twenty

third lagged variables are significant at the 5% level of

significance. The X for the twelth lagged variable is significant at the 1% level of significance.

The statistical results of the regression using real 64

Table 4: Lag Analysis of Nominal Henequen Prices on Henequen Production

RZ Lag (adj) SSE SD Lamda DF 23 66. 3% 2930849536 293084954 10 22 49.2 4863237632 442112512 6.59' 11 21 50.0 5216155136 434679595 0.80 12 20 53.9 5216386560 401260505 0.00 13 19 50.7 5996694528 428335323 1.94 14 18 48.1 6769597440 451306496 1.80 15 17 51.3 6769614336 423100896 0.00 16 16 46.0 7985640448 469743556 2.87 17 15 48.9 7993360384 444075577 0.02 18 14 42.6 9486472192 499288010 3.36 19 13 24.1 13193041920 659652096 7.42' 20 12 0.0 20454682624 974032506 11.01" 21

'significant at the 5% level of significance, "significant at the 1% level of significance.

henequen prices are shown in Table 5. The regression

coefficients are positive except for the price lagged eight

years variable. The regression coefficients for P,.? and Pn4

are statistically significant at the 1% level.

The regression coefficients when using nominal henequen

prices as the independent variables are shown in Table 6,

Table 7 and Table 8. The difference among the tables is the

number of lagged prices used as independent variables. There

is consistency among these regressions in the price lagged

seven years is positive and statistically significant at least

at a 5% level. In the two regressions containing P,.;^, the variable is positive and statistically significant at the 1% 65

Table 5: Regression Coefficients for Real Henequen Prices

Regression Variable Coefficients T-Ratio

Constant 16530 1.75' Pt-7 1256.2 2.43" P..8 -555.0 -0.88 P..9 407.9 0.63 Pt-10 44.2 0.07 P..n 413.8 0.66 Pt-12 822.9 1.19 Pt-13 594.9 0.73 Pt-14 3012.9 4.70" r2 (adj.) = .795 D.W. — 2.02 D.F. = 28

'significant at the 5% level of significance, "significant at the 1% level of significance.

1% level. These results are similar to the regression using real prices as independent variables.

Elasticity of Henequen Supply

Point price supply elasticities were estimated by multipling the ratio of the mean henequen price to the mean henequen quantity times the respective regression coefficients. The cumulative or long run price elasticity was found by summing the concurrent and previous price 66

Table 6: Regression Coefficients for Nominal Henequen Prices

Regression Variable Coefficients T-Ratio

Constant 18908 1.98' P.-7 1554 2.82" Pt.8 1016 0. 62 P..9 1833 0.68 Pt-lO -1275 -0.58 Pt.ll 3998 1.75 Pt-I2 -4065 -1.26 Pl-13 7582 1.54 Pt-14 12398 3.15" Pt-15 -7935 -1.88' Pl-lS 6764 1.73 Pt-17 -4943 -1.12 Pt-18 2592 0.65 P.-I9 1349 0.32 Pt-20 -5761 -1.48 Pt-21 2570 0.59 P|-22 1787 0.43 P..23 -9145 -2.57" r2 (adj.) = .663 D.W. = 2.20 D.F. = 10

'significant at 5% level of significance, "significant at 1% level of significance.

elasticities. The estimated price elasticities are shown in

Table 9. The price elasticities estimated with nominal prices had the same lag structure, seven to fourteen years, as that used with the real prices.

The long run price elasticity is estimated to be .837, using real prices, or .743 using nominal prices when prices 67

Table 7; Regression Coefficients for Nominal Henequen Prices

Regression Variable Coefficients T-Ratio

Constant 29540 2.82" Pt.7 3055 2.33" P..8 -274 -0.17 P,.9 618 0.36 Pt-lO -902 -0.51 P.-Il 1571 0.86 Pt-i2 -1996 -0.83 Pl-13 3599 1.03 Pt.l4 10607 3.96" r2 (adj.) = .643 D.W. = 1.17 D.F. = 28

'significant at 5% level of significance, "significant at 1% level of significance.

are lagged seven to fourteen years. When nominal prices are lagged seven to thirteen years the estimated long run price elasticity is .630 and .741 when nominal prices are lagged seven to twenty three years. The results shown in Table 9 suggests that a 10% price increase should be associated with about an 8% total supply increase 14 years later. The assumption of the methodology is that regression coefficients for lagged prices of more than 14 years are estimated to equal zero, so the price elasticity should not change with any increase in the lagged terms in the regression equation.

The .80 estimate of price elasticity is greater than that 68

Table 8; Regression Coefficients for Nominal Henequen Prices

Regression Variable Coefficients T-Ratio

Constant 41059 3.58" P.-7 2723 1.72' Pt.8 -181 -0.09 P..9 -174 -0.08 P|-IO -139 -0.07 Pt-u 3965 1.88' P,.12 -5864 -2.19" Pm3 12973 4.10" R^ (adj.) = .490 D.W. = 1.77 D.F. = 30

'significant at 5% level of significance, "significant at 1% level of significance.

estimated by Gwyer for East African sisal. His estimate of

long run price elasticity was approximately .48.^° East

African sisal becomes productive sooner and has a shorter productive life than Yucatecan henequen.^ These characteristics should lead one to expect East African sisal to have a higher price elasticity than Yucatecan henequen. I do not have an explanation for this discrepancy.

'"g.D. Gwyer, "Long- and Short-Run Elasticity of Sisal Supply," p. 23.

''Ernest Goulding, Cotton and Other Vegetable Fibres. 69

Table 9; Estimated Price Elasticities of Henequen Supply

Price Price Elasticities Variable Point Cumulative

Real prices:

P,.7 .175 .175 P,.8 -.077 .098 P,.9 .057 .155 P,.,o .006 .161 P,.ii .058 .219 Pl.,2 .115 .333 P,.,3 .083 .416 Pn4 .420 .837

Nominal prices;

P,.7 .139 .139 P,.8 -.013 .127 P,.9 .028 .155 P,.io -.041 .114 P,.,j .072 .186 P,.,2 -.091 .095 P,.i3 .164 .259 Pt.i4 .484 .743

The Monopsony Power of International Harvester

These results suggest that, if International Harvester

were a monopsonist and permanently decreased henequen prices,

henequen production would decrease by approximately 80% of the

price decrease over a fourteen year time period. The model is constructed using the assumption that in the short run, the first six years, there is no supply response to a price change. Except for the regression lagging nominal prices 70

twenty three years, the supply response is assumed by the

model to be completed at the end of fourteen years.

Since the long run supply curve of henequen appears to be

price inelastic, apparently the Yucatecan hacendados were

vulnerable to the monopsonistic power of International

Harvester. If International Harvester lowered henequen

prices, the company would have been able to extract a portion

of the Yucatecan producer surplus for its own purposes.

Did International Harvester act as a monopsonist when it

was the predominate purchaser of henequen? An answer to this

question is attempted based on the assumption of a perfectly

inelastic short run supply curve. The market price for henequen should then be determined by the demand for henequen.

The real henequen price should then be a negative function of current henequen production plus a series of other variables that attempt to explain demand. The additional variables used as demand shifters are: The quantity of wheat raised and the real price of wheat since henequen twine was used in the harvesting of wheat. The quantity of abaca exported from Philippines was included since it can be used as a substitute for henequen in the production of twine. Data for the wheat and abaca variables are shown in Table 10 and

Table 11. Lastly, a dummy variable for International

Harvester was constructed. The variable had a value of 1 for 71

Table 10: Nominal Prices, Real Prices and Production of Wheat in the U.S. from 1880 to 1930

Wheat Prices Wheat Wheat Prices Wheat Year Nominal Real Output Year Nominal Real Output 1880 .95 2. 69 502 1906 .75 2 .42 706 1881 1.20 3.30 406 1907 .87 2.59 629 1882 .89 2.33 552 1908 ' .97 2.99 643 1883 .91 2.55 439 1909 .99 2.84 684 1884 .65 1.98 571 1910 .91 2. 50 625 1885 .77 2.57 400 1911 .87 2.60 618 1886 .69 2.38 514 1912 .81 2.28 730 1887 .68 2.27 491 1913 .79 2.17 751 1888 .93 3. 06 424 1914 .98 2.78 897 1889 .70 2.45 504 1915 .96 2.68 1009 1890 .84 2.91 449 1916 1.43 3.24 635 1891 .83 2.88 678 1917 2.05 3. 37 620 1892 .62 2.30 612 1918 2.05 3. 03 904 1893 .53 1.93 506 1919 2.16 3. 03 952 1894 .49 1.98 542 1920 1.83 2.30 843 1895 .51 2.02 542 1921 1.03 2.05 819 1896 .72 3. 01 523 1922 .97 1.94 847 1897 .81 3.38 606 1923 .93 1.79 759 1898 .58 2. 32 768 1924 1.25 2.48 842 1899 .59 2. 19 655 1925 1.44 2.70 669 1900 .62 2.15 599 1926 1.22 2.36 832 1901 .63 2.21 763 1927 1.19 2.41 875 1902 .63 2.07 687 1928 1.00 2. 00 914 1903 .69 2.25 663 1929 1.04 2.12 824 1904 ,93 3. 02 556 1930 .67 1.50 887 1905 .75 2.42 706

Nominal wheat prices are deflated by the Wholesale Price Index (1967 = 100) to estimate real wheat prices. See the text for the source of the Wholesale Price Index data.

Wheat output in millions of bushels.

Source for wheat data; U.S. Department of Commerce. Bureau of the Census. Historical Statistics of the United States; Colonial Times to 1970. Bicentennial Edition. Washington, D.C., 1987. 72

Table 11: Philippine Exports of Abaca, 1880 - 1930

Year Exports Year Exports 1880 800.9 1906 1645 1881 868.9 1907 1854 1882 707.3 1908 2077 1883 746.8 1909 2655 1884 815.6 1910 2580 1885 834.2 1911 2343 1886 743.2 1912 2769 1887 1029.9 1913 1894 1888 1322.8 1914 1840 1889 1137.1 1915 2245 1890 1012.3 1916 2171 1891 1271.1 1917 2678 1892 1581.0 1918 2676 1893 1282.5 1919 1917 1894 1591.9 1920 2237 1895 1664.6 1921 1587 1896 1531.8 1922 2720 1897 1804.7 1923 3011 1898 429 1924 2803 1899 1109 1925 2387 1900 1436 1926 2435 1901 1996 1927 2353 1902 1791 1928 2764 1903 2213 1929 2995 1904 1954 1930 2677 1905 2062

Export Volume (000 piculs)

Source: Norman G. Owen, Prosperity without Progress; Manila Hemp and Material Life in the Colonial Philippines (Berkeley: University of California Press, 1984) ; 258- 263. 73

the 1902 to 1914 period, as these are the years International

Harvester allegedly acted as a monopsonist, and a value of 0

for the other years.

Henequen production is measured by both the actual data

and predicted valued based on the regression equation shown in

Table 5 and have an expected negative regression coefficient.

The regression coefficients for U.S. wheat production and real

price of wheat should be positive. The regression coefficient

should be negative for Philippine abaca exports. Lastly, the

dummy variable for International Harvester is expected to have

a negative regression coefficient.

The regression coefficients, as shown in Table 12 and

Table 13, for the actual henequen production and the predicted

henequen production either have very low t-ratios when

negative or may be statistically significant at the 5% level

of significance when positive. The regression coefficients do not support the notion of a negatively sloped demand curve for

Yucatecan henequen; rather these results suggest that real henequen prices are independent of henequen production. This is consistent with the hypothesis that henequen is sold in a highly competitive world market for twine inputs.

The regression coefficients for the International

Harvester dummy variable is particularly damaging to the hypothesis that International Harvester behaved as a 74

Table 12: Estimation of Henequen Demand, I

Const. H HA W Prw Abaca R: DF 16.11 -.0030 0.0% 35 (3.93) (-.08)

13.00 -.0087 1.516 0.0 34 (1.96) (-.23) (.60)

21.54 .0372 -.0045* 6.5 34 (4.61) (.93) (-2.12)

14.95 -.0023 -.0027 1.252 0.0 33 (1.45) (-.05) (-.25) (.45)

22.41 .0403 -.0018 -.0045* 3.7 33 (3.39) (.92) (-.19) (-2.04)

19.93 .0336 .724 -.0022 3.9 33 (2.76) (.79) (.30) (-2.01)

10.30 .0430 5.6 49 (4.88) (1.99)

8.58 .0322 .0040 4.1 48 (2.04) (1.02) (.47)

10.06 .0429 .099 3.6 48 (1.85) (1.96) (.05)

10.68 .0490 -.0005 3.8 48 (4.20) (1.58) (-.27)

8.74 .0391 .0050 -.0008 2.4 47 (2.05) (1.09) (.57) (-.42)

10.68 .0490 -.000 -.0005 1.7 47 (1.79) (1.53) (-.00) (-.26)

* Significant at the 5% level of significance H: Predicted levels of henequen production Actual levels of henequen production W: U.S. wheat production Paw: Real price of wheat in the U.S. Abaca: Philippine exports of abaca 75

Table 13: Estimation of Henequen Demand, II

Regressions; (1) (2) Coef. T-ratio Coef. T-ratio Constant 19.452 2.81 17.614 2.64 H .022 .54 .013 .30 W .006 .61 Prw .530 .23 IH 4.309 2.01 4.863* 2.11 1 o Ax -.004 -1.96 -.004 to

R: .120 .129 DF 32 32

Regressions. (3) (4) Constant 11.482 2.05 3.494 .44 Ha .037 1.23 .007 .18 W .013 1.42 Prw -.182 -.09 1.003 .47 IH 5.601" 2.74 6.362" 3.04 A* -.001 -.51 -.002 -.87

R: .137 .155 DF 46 45

Significant at the 5% level of significance Significant at the 1% level of significance H: Predicted levels of henequen production Actual levels of henequen production W: U.S. wheat production Pgyy: Real price of wheat in the U.S. IH: Dummy variable for International Harvester A^: Phillipine exports of abaca 76

monopsonist during the 1902 to 1914. As a monopsonist

International Harvester should have been able to effectively

lower henequen prices. The highly significant regression

coefficients as shown in Table 13 for the International

Harvester dummy variable contradict this hypothesis.

A second reason for doubting that International Harvester

may have acted as a monopsonist is that the company's price

decisions were more complex than conventionally described. If

International Harvester was interested in maintaining a long

term supply of henequen for its midwestern twine customers, then it would have had to pay a price that is sufficiently high to induce continued planting .of henequen. This motivation could have prevented International Harvester from fully exploiting a perfectly elastic short run supply curve.

Lastly, anecdotal evidence is not supportive of this hypothesis. The wealth that was created in Yucatân during the

1880 to 1920 period suggests that the hacendados earned a substantial producer surplus during that time. 77

CHAPTER IV

OLIGOPSONY IN THE HENEQUEN LABOR MARKET, 1880-1930

Stylized Model of the Labor Market

The domestic henequen economy has been described with a

Marxian class model in which the hacendado class owns the

henequen haciendas with labor provided by the campesino class.

The number of haciendas producing henequen in 1916 has been

estimated at 1100.' Many families owned several haciendas so

the number of families owning haciendas may have been 300 to

400.2 An even smaller number of 20 to 30 families owned the

haciendas that produced 80% to 90% of the henequen produced in

Yucatân. This group of hacendados was given the name "casta divina" or "divine caste" by General Salvador Alvarado.^

'Entrique Aznar Mendoza, "Historia de la industria henequenera desde 1919 hasta nuestros dias," Enciclopedia Yucatanese. Vol. Ill, 777.

^Roland E.P. Chardon, Geographic Aspects of Plantation Agriculture in Yucatân. Publication 876, (Washington, D.C.: National Academy of Sciences—National Research Council, 1961); 35.

^Gilbert M. Joseph, Revolution from Without; Yucatân. Mexico, and the United States. 1880-1924. 37. 78

Joseph, Wells and other students of Yucatecan history

argue that the prosperity of the henequen industry reduced the

welfare of the campesinos/ The campesinos did live, by our

standards, in terrible conditions. Many were subject to debt

peonage. The haciendas were able to use the state to enforce

the contractual arrangements with the police and other

authorities actively involved in the search for and

apprehension of campesinos who fled haciendas with unpaid

debts. Additionally, Yaqui Indians were forcibly placed on

Yucatecan haciendas and essentially worked as slaves.

Gilbert Joseph writes of the campesinos:

Judging conditions on Porfirian estates in terms of such diverse criteria as diet, availability of medical care and educational instruction, workload, real wages, access to cash advances and corn plots, physical coercion, and mobility, yucatecologos have found that treatment of workers was generally bad and tended to get worse as market demand intensified throughout the period. In short, as the local economy became more engaged by, and ultimately subordinated to, the demands of international capitalism, labor conditions become "involuted" with the traditional system of peonage transformed by degrees into a neo-slave regime. In the process, Yucatân's campesinos suffered "a profound regression in terms of the quality of their lives."*

^Ibid., 71-75; Allen Wells, "Yucatân: Violence and Social Control on Henequen Plantations," 213-241; Friedrich Katz, "Labor Conditions on Haciendas in Porfirian Mexico: Some Trends and Tendencies," 17-19; and A.J. Graham Knox, "Henequen Haciendas, Maya Peones, and the Mexican Revolution Promises of 1910: Reform and Reaction in Yucatan, 1910-1940," 64-66.

^Gilbert M. Joseph, Rediscovering the Past at Mexico's Periphery: Essavs on the History of Modern Yucatan (Tuscaloosa, University of Alabama Press, 1986), 60, with 79

Alternatively, the campesinos did have the option to

escape into the jungle or move to other communities in

Yucatân. The eastern and southern portions of the Yucatecan

peninsula were not fully controlled by the Mexican central

government until well into the twentieth century. Following

the Caste Wars, many of the surviving Mayan military leaders

went into the jungle.® Historically, the campesinos also

moved to different haciendas and villages when they believed

the burdens of their present communities were becoming

oppressive.'

The henequen economy substantially increased the demand for labor. Workers were needed to care for the plants, harvest the leaves, and process the leaves into fiber. In a partial equilibrium model, if the price elasticity of labor supply is less than infinite, the increased demand for labor should have been translated into increased wages to the campesinos. If the labor supply were perfectly price elastic, the expected outcome of increasing labor demand is the continuation of real wage rates.

Joseph quoting: Jose Luis Sierra Villarreal, "Hacia una economia politica de la hacienda henequenera," Yucatan; Historia y Economia 4 (July-August 1980): 16-17.

^Nelson Reed, The Caste War of Yucatan. 250-256.

'Nancy M. Farriss. "Nucleation versus Dispersal: The Dynamics of Population Movement in Colonial Yucatân," Hispanic American Historical Review 58, no. 2 (1978): 203-204. 80

In a general equilibrium model, falling real wages with

rising labor demand can occur with increasing monopsonistic or

oligopsonistic power on the part of the haciendas, or

increasing population and labor force at growth rates greater

than the growth rate of labor demand.

Theory of Rural Households

One approach to examining these conflicting hypotheses

can be made using a microeconomic model of the rural

households making decisions about consumption levels for

themselves and their children, leisure time, the number of

children to have, and the endowment to be given to their

children.*

The stylized description of the rural household is as

follows: The campesinos earn their incomes by working on the henequen haciendas and are paid daily wages (w). Since wages are earned producing henequen, they are a positive function of henequen prices:

= w{Pt) (50) with Wp>0.

*This model is an adaptation of that developed by Gary Becker and his colleagues. Gary S. Becker, "Family Economics and Macro Behavior," American Economic Review 78, no. 1 (March 1988): 1-13, and Gary S. Becker and Robert J. Barro, "A Reformulation of the Economic Theory of Fertility," QuarterIv Journal of Economics CIII, no. 1 (February 1988): 1-25. 81

Campesino income is spent on purchases of corn (C) for

themselves (CJ , and for their children (0%)

c, = (51)

and for savings (S). Campesinos choose the amount of their

work time (x), and by implication the amount of leisure time (1) ,

= + (52)

the amount of corn consumed and its distribution between themselves and their children (q,q,,qk), the amount of savings, and the number of children they have (n,). The campesino's budget constraint is:

©(.(l+r) + = Pti

= e^d+r) + (54)

Debts were not passed on to children', so there is a lower boundary to ej e,>0.

The life of a campesino has two periods. The first period is as a child when parents provide the consumption

'Lawrence J. Remmers, "Henequen, the Caste War and the Economy of Yucatân: 1846-1883: The Roots of Dependence in a Mexican Region," 474-475. 82

good, corn. In the second period, the campesino works,

providing for himself and his children. At the beginning of

the second period, the campesino makes the decision regarding

the number of children he wants to have based upon prices of

henequen and corn.

The utility of an campesino is determined by his own

consumption of corn as an adult (q.J and as a child ,

leisure time (1,), and the ,utility of his children , where

t indicates different time periods;

(55)

The utility and g functions are assumed to be concave,

continuous, and nondecreasing in their arguments. The child's utility is a function of the child's consumption, his endowment, and future wage rate.

(56)

The Lagrangian function is:

SE = Vjkc)) + A(eo(l+r) (57) + w[P^]x^ - - acGc+i)

The first order conditions of the Lagrangian are;

(58)

(59) 83

letting

ag aq,; (

= C^J - XwPt = 0 (6;

+ = 0 (6:

where

- ^-3§l

= 0 (64 with

rr = ac/ dg dU^t ,gc dg 6%c ae^.i and

= e.d+r) + w%c- p'^iq^ + n^q^^) - = 0 (66

Then X can be solved for and, given the assumptions of the model, should be positive: 84

U ^ = £2 ^ Un (67) ft n^{p'^) ^ f"%c + ec+i

The cainpesinos then choose optimum values of q.^*, qj^/, 1,*,

n,*, and e,+,* so that U is maximized subject to the budget

constraint. The point of this theory is that n, is rationally

determined within a complex decision-making framework that

also determines outcomes for other meaningful variables.

Birthrate Data

The data on the number of births was taken from microfilm

copies of the birth registries of four Yucatecan

municipalities. The number of births for a given year shown

on the registry was adjusted for multiple births, deaths occurring at birth, and births occurring in years other than the year in which it was recorded.

The four municipalities are Acanceh, Conkal, Hoctum, and

Muna. Acanceh is located southeast of Mêrida, Conkal to the northeast, Hoctum to the east, and Muna to the south. Each of these towns is located within the henequen zone with Muna close to its southern edge. South of Muna lie the Puuc Hills which is not suitable for raising henequen. While all people living in the towns were not directly involved in the henequen industry, the towns served primarily as commercial centers for the surrounding haciendas with their prosperity dependent on 85

the henequen economy. Also people living on haciendas

registered births in the municipalities.

These municipalities were chosen to be included in the

study because I have been in the towns, they are in the

henequen zone, and microfilm copies of their birth registries

could be obtained for most of the years under consideration.

Other towns could have been included in the study given these

criteria. Their exclusion is arbitrary.

The Mexican censuses of 1900, 1910, 1921, and 1930 had

population estimates of each of the towns. These four data

points were regressed with respect to time using linear and

log-linear functions. The regressions were used to develop

linear and log-linear estimates of the yearly populations from

1880 to 1930. The birthrate is the number of births per 1000

of people for each year.

The town populations show substantial variance over the

4 0 years. Some disruption occurred during the Mexican

Revolution of 1910 but fighting erupted only in 1915 with the

overthrow of Governor de los Santos and the re-establishment of the Constitutional government by General Salvador Alvarado.

This suggests that the population variations were caused by other factors. Because the population variations are large, the number of births is also used as an independent variable. 86

Estimation of a Birth Rate Function

The family when deciding upon having another child can be

thought to compare its expected future discounted income (IJ

including the intrinsic utility associated with having the

child with the expected future discounted marginal costs (Cj)

related to the child. The probability of a birth in a family

is then a function of these variables plus a whole range of

other factors which are assumed to be randomly distributed:

/ m \ P^iBixth) = T (68) 12^0

The primary income source of the campesinos is the wages paid

by the haciendas. These wages are hypothesized to be a

positive function of current henequen prices.

li = liP") (69)

Corn is assumed to be the major consumption expenditure with

consumption expenditures also a positive function of corn

prices so:

Cj = c(pf) (70)

With these substitutions, equation (68) becomes:

P^iBixth) = Et.F T (71) U=o or 87

E,[JiP^)] -gJC(P^)] Pt.(Bizth) = F (72) (1+r)

\ / -C[Ec(Pf)] PABirth) = f (73) (1+r) U?o / In the previous chapter, it was shown that henequen

prices followed a first order autoregressive process. The

structure of corn prices was also examined as shown in

Table 14. Based on those tests, I decided to assume that corn prices also followed a first order autoregressive process.

That information asserts:

(74)

(75) and

*0 (76) for henequen and corn prices. Substituting appropriately equations (74), (75), and (76) into equation (73) and expanding it, equation (73) becomes: 88

Table 14: ARIMA Procedures on Corn Prices, 1880 - 1930

SSE AR(1) P, ; = .775 + .48IP,., 6.619 (15.05) (3.84)

AR(2) P, := .697 + .43IP,.; + .102P,.2 6.564 (13.46) (2.99) (0.71)

MA(1) P, := 1.497 - .420a,., 6.994 (19.94) (3.24)

MA(2) P, = = 1.496 - .399a,., - .195a,.2 6.820 (17.79) (2.82) (1.38)

IMA(1,1) VP, — « 698a,., 7.127 (6.80)

IMA(1,2) VP, = . 554a,., + .260a,.2 6.712 (3.96) (1.85)

ARI(1,1) VP, = -.338vP,., 7.911 (2.50)

ART (2,1) VP, = -.412vP,.i - .245vP,.2 7.469 (2.93) (1.74)

ARIMA(1,1,1) vP, = . 3 62vP,., + . 907a,., 6.648 (2.22) (12.85)

ARIMA(2,1,1) vP, = . 419vP,., + .076vP,.2 + .968a,., (2.77) (0.51) (16.18) 6.582

ARIMA(1,1,2) VP, = .499VP,., + 1.061a,., - .123a,.2 (2.27) (4.53) (0.56) 6.630

ARIMA(2,1,2) vP, = -.587vP,.i + .199vP,.2 .274 a,., (2.96) (1.15) (1.99) 5.812 .817a ,.2 (7.31)

NOTE; Absolute t-statistics are shown in parenthesis. 89

Ijp^) -C{p^y ^ r((|)o+4)iPf) -cQo+Gif^) P I.(Birth) = F 1 (1+r)

+

+ (77)

+ (1+r)

with 0 used to denote the expectations functions of henequen

prices and B to denote the expectations functions of corn

prices. Equation (77) suggests that the current year birth

rate is a positive function of current year henequen prices

and a negative function of current corn prices. Simplifying

equation (77) leads to;

Pt.(Bixth) = G(pf) +H{P^) (78)

GpH ) 0 (79)

HpM < 0 (80) where the partial derivative of G with respect to henequen prices is positive and the partial derivative of H with respect to corn prices is negative. 90

The Statistical Results

Table 15 and Table 16 show the results of econometric

testing of equation (78). Six regressions were run for each

of the four communities. The population of each community is

estimated according to three different assumptions as

explained in the section describing the birthrate data. For

each assumption, a linear and a log-linear regression were

run.

The regression coefficients for henequen prices are consistently positive. The regression coefficients for Hoctun and Muna are statistically significant at the 1% level. For

Conkal, the two regressions using the number of births data have regression coefficients statistically significant at the

1% level. The regression coefficients for henequen prices in the other four regressions are statistically significant at the 10% level. The results for the henequen price variable are more erratic for Acanceh. The regression coefficients are statistically more significant in the linear regressions as compared to the log-linear regressions. The regression coefficients for the regressions using the number of births as the dependent variable have greater statistical significance than the regressions using birth rate data as the dependent variable.

The results for the corn price variable are weaker than 91

Table 15; Regressions of Henequen and Corn Prices on Births in Acanceh and Conkal

Acanceh R^(adj.) D.W. B' = 199 + 1.30P" - 11.45PM .126 1.71 (16.64) (2.81) (1.57) = 5.12 + .082p" - .099pW .088 1.62 (59.48) (2.35) (1.69) BR* = 57.0 + .294P" - 5.35P" .108 1.33 (15.02) (2.00) (2.31) br = 3.85 + .067pH - .163pM .080 1.24 (36.86) (1.58) (2.29) BR"' = 56.9 + .299P" - 5.34pM .109 1.33 (14.99) (2.03) (2.30) br' = 3.85 + .068pH - .163pM .081 1.24 (36.80) (1.61) (2.29) Conkal B = 148 + 1.81P" - 12.8pM .120 0.75 (9.09) (2.88) (1.29) b = 4.60 + .184p" - .ISlpM .111 0.79 (28.44) (2.81) (1.38) BR = 71.4 + .629P" - 10.4pW .084 0.60 (8.56) (1.94) (2.04) br = 3.84 + .155p" - .263p" .063 0.58 (18.54) (1.85) (1.87) BR" = 70.9 + .650P" - 10.2P" .087 0.60 (8.52) (2.01) (2.01) br® = 3.83 + .159p" - .260pM .066 0.58 (18.53) (1.91) (1.86)

Note: Absolute t-statistics are shown in parenthesis.

*B: Number of births of each year. ^Variables designated with uncapitalized letters indicate the data is in logarithmic form. *BR: Birth rate with population estimated from census populations in numeric form. ®BR': Birth rate with population estimated from census populations in logarithmic form. 92

Table 16: Regressions of Henequen and Corn Prices on Births in Hoctun and Muna

Hoctun R^( ad j. ) D. W. B* = 110 + 1.59P" - .977PW .265 1.53 (11.23) (4.21) (0.16) bf = 4.42 + .178p" - .OlSpM .270 1.55 (41.99) (4.20) (0.25) BR* = 48.0 + .657P" - 1.26P" .250 1.55 (11.58) (4.11) (0.50) br = 3.58 + .172p" - .040pM .252 1.58 (34.25) (4.09) (0.56) BR"' = 49.3 + .664P" - 1.54P" .245 1.55 (11.66) (4.07) (0.60) br' = 3.60 + .171p" - .047pM .246 1.58 (34.46) (4.05) (0.65) Muna B = 194 + 2.37P" - 18.7P" .187 1.33 (11.18) (3.52) (1.76) b = 4.86 + .189p" - .155pM .210 1.41 (39.68) (3.83) (1.86) BR = 37.3 + .479P" - 2.99pM .193 1.37 (11.07) (3.67) (1.45) br = 3.21 + .195p" - .127pM .227 1.49 (27.01) (4.06) (1.57) BR® = 36.7 + .490P" - 2.47P" .197 1.39 (10.88) (3.75) (1.20) br" = 3.20 + .200p" - .106pM .239 1.54 (27.19) (4.20) (1.33)

Note: Absolute t-statistics are shown in parenthesis.

*B: Number of births of each year. •"Variables designated with uncapitalized letters indicate the data is in logarithmic form. *BR: Birth rate with population estimated from census populations in numeric form. 'BR®: Birth rate with population estimated from census populations in logarithmic form. 93

those of henequen prices. The regression coefficients are

consistently negative but the statistical significance is low.

The regression coefficients in the regressions using the birth

rates in Acanceh are statistically significant at a 5% level,

and in Conkal, at a 10% level. For Muna, the regression

coefficients in the regressions using the number of births as

the dependent variable are statistically significant at a 10%

level. All other regression coefficients are statistically

insignificant at the 10% level with the regression

coefficients using the Hoctun data having very low Student-t

values.

The Durbin-Watson test does indicate a high degree of

autocorrelation in the regressions. For fourteen of the

twenty four regressions, the d statistic is below the lower

boundary at the 5% level of significance. The d statistic is

in the indeterminant range for nine regressions. For only one

regression, the null hypothesis that there is no

autocorrelation can be accepted. The Durbin-Watson tests

suggest that the levels of significance are biased upwards.

The generalized least squares procedure was used on the

equations that contained the number of births as the dependent

variable. First order autocorrelation was assumed to be

present in the estimated residuals, therefore the residuals of the least squares estimations were regressed against their 94

values lagged one period. Defining p as the regression

coefficient derived from the least squares estimation of the

residuals, a transformed data set was estimated using for the

first observation:

Vxk = (81)

with y as the values of the transformed data set, x the values

of the original data set, and k as the number of variables in

the data sets. For the remaining observations in the data

sets, then:

Vtk = ^tk - (82)

An iterative process was carried out three or four times or

until p became numerically quite close to zero.'°

The results of the generalized least squares procedure are shown in Table 17, Table 18, Table 19, and Table 2 0 for the respective cities. For the city of Acanceh, the Durbin-

Watson tests reject the hypothesis regarding the presence of autocorrelation. Also the t-statistic for p is insignificant at the 10% level of significance. Arbitrarily I decided to run the generalized least squares procedure on this data. The regression coefficients retain their expected values, positive

'°George G. Judge, R. Carter Hill, William E. Griffiths, Helumt Lutkepohl and Tsoung-Chao Lee, Introduction to the Theory and Practice of Econometrics. Second Edition, 389-391. 95

Table 17: Generalized Least Squares Results - Acanceh

Regression Coefficients by Iteration:

Constant Hprice Mprice R^(adj. ) D.W. P 0. 199.1198 1.2976 -11.4469 .1261 1.7123 .1247 (16.638) (2.807) (-1.567) (.841)

1. 172.3516 1.0973 -7.8021 .0612 1.8644 .0290 (14.907) (2.161) (-1.005) (.199)

2. 166.7248 1.0549 -6.8526 .0486 1.8970 .0060 (14.478) (2.028) (-.868) (.041)

3. 165.5953 1.0464 -6.6534 .0461 1.9036 .0012 (14.389) (2.001) (-.840) (.008)

4. 165.3713 1.0448 -6.6135 .0456 1.9050 .0002 (14.371) (1.996) (-.835) (.002)

Note: T-statistics are shown in parenthesis.

for henequen prices and negative for corn prices. The t-

statistics for the regression coefficient for henequen prices

decrease. In the original equation this regression

coefficient is statistically significant at 1%, but in the

fourth iteration it is significant at only a 10% level of

significance. The adjusted coefficient of determination also

decreases from .126 in the original estimation to .046 in the

fourth iteration.

For the city of Conkal, the Durbin-Watson definitely indicates the presence of autocorrelation. The t-statistic 96

Table 18: Generalized Least Squares Results - Conkal

Regression Coefficients by Iteration:

Constant Hprice Mprice R^(adj. ) D.W. P 0. 147.5958 1.8138 -12.8167 .1201 .7480 .6256 (9.094) (2.883) (-1.291) (5.516)

1. 43.6100 1.4628 12.2360 .0888 1.9480 .0107 (6.507) (2.222) (1.508) (-.077)

2. 44.2400 1.4557 12.0121 .0876 1.9232 .0024 (6.559) (2.216) (1.479) (.017)

3. 44.0983 1.4573 12.0622 .0878 1.9287 .0005 (6.548) (2.217) (1.486) (-.004)

Note: T-statistics are shown in parenthesis.

for p is also statistically significant at the 1% level of significance which also supports the hypothesis on the presence of autocorrelation. The results of the generalized least square estimation show that the t-statistics for henequen prices decrease from a 1% level of significance to a

5% level. The disturbing change is that the regression coefficients for corn prices become positive although they are insignificant at the 10% level of significance.

The statistical results for the city of Hoctun are indeterminant regarding the autocorrelation hypothesis. The

Durbin-Watson test is inconclusive and the t-statistic for p 97

Table 19: Generalized Least Squares Results - Hoctun

Regression Coefficients by Iteration:

Constant Hprice Mprice R^(adj. ) D.W. P 0. 110.1429 1.5941 -.9773 .2651 1. 5306 .2079 (11.230) (4.210) (-.163) (1.413)

1. 88.4023 1.4615 -.4216 .1867 2. 0664 -.5008 (10.232) (3.492) (-.068) (-.328)

2. 84.0952 1.4330 -.1930 .1683 2. 1843 -.1095 (9.917) (3.318) (-.030) (-.720)

3. 92.8708 1.4955 -.5774 .2079 1.9234 .0216 (10.548) (3.688) (-.094) (.132)

4. 91.0892 1.4841 -.5162 .2006 1.9730 -.0041 (10.440) (3.621) (-.084) (-.027)

Note: T-statistics are shown in parenthesis.

is insignificant at the 10% level of significance. The regression coefficients for henequen prices strongly support the hypothesis expecting a positive regression coefficient.

This t-statistic is consistently significant at the 1% level of significance. The regression coefficient for corn prices is also negative as expected but the coefficient is insignificant at the 10% level of significance.

The hypothesis of autocorrelation for Muna is supported both by the Durbin-Watson statistic and the t-statistic for p which is significant at the 5% level. The regression 98

Table 20: Generalized Least Squares Results - Muna

Regression Coefficients by Iteration:

Constant Hprice Mprice R^(adj. ) D.W. P 194.0525 2.3708 -18.6557 .1875 1. 3252 .3372 (11.179) (3.523) (-1.756) (2.507)

135.1882 1.2302 -13.3966 .0305 2. 0496 -.5301 (9.838) (1.541) (-1.193) (-.381)

141.5196 1.3804 -14.1658 .0472 1.9391 .0096 (10.133) (1.789) (-1.283) (.068)

140.3161 1.3529 -14.0241 .0440 1.9592 -.0017 (10.082) (1.743) (-1.266) (-.012)

140.5305 1.3578 -14.0495 .0446 1.9556 .0003 (10.091) (1.751) (-1.269) (.002)

Note: T-statistics are shown in parenthesis.

coefficients for both henequen and corn prices retain their respective positive and negative values when the generalized least squares procedures are used. The t-statistics decrease in value but the regression coefficients for henequen prices are significant at the 5% level of significance whereas the coefficients for corn prices are insignificant at the 10% level. The adjusted coefficient of determination also decreases from .1875 to .0446. 99

The Conclusions

The reason for undertaking this study was to examine the

hypothesis that the internationalization of the henequen

industry tended to reduce the standard of living of the

campesinos. The problem in addressing this issue is finding a

measurable proxy for the campesinos' standard of living. This

research was unsuccessful in that search.

Essentially a positive relationship between birth rates

and income and a negative relationship between birth rates and

consumption costs were asserted. Income was determined by

henequen prices and consumption costs by corn prices. Birth

rate data was obtained from municipal records of four

Yucatecan communities in the henequen zone.

The statistical results supported the assertions; Birth rates tended to rise with henequen prices and fall with corn prices. The results were stronger for the henequen prices than for the corn prices. These results may be interesting but the lack of a theoretical structure does reduce the usefulness of these results for analyzing hypotheses. 100

CHAPTER V

LAND REFORM AND PUBLIC SECTOR MANAGEMENT, 1957 - 1987

Introduction

Following the land reform of 1937, the management of the

ejido lands came under state control. From 1938 to 1955 the

Henequeneros de Yucatân managed the production and marketing

activities for the ejidos. Then, from 1955 until about 1990,

financial institutions organized by the Mexican central

government assumed those responsibilities. The first federal

institution was the Banco Nacional de Crêdito Ejidal which was

followed by Banrural in 1974.

The institutions responsible for processing and marketing

henequen and henequen products also changed. During the

1920's cordage plants in the United States shut down as cordage manufacturing shifted closer to the input source. In

Yucatân, the early cordage industry, which developed during the 1920's, was relatively competitive with a number of firms producing twine. Then, in 1961 and 1964, the Yucatecan cordage industry was nationalized with the formation of 101

Cordemex.' From the perspective of the ejido, decisions

regarding henequen production, financing and marketing were to

be negotiated with two Mexican government agencies or firms:

Banrural and Cordemex.

Some of the land retained by the haciendas at the time of

the land reform continued in henequen production. The former

hacendados were permited to retain 3 00 hectares of henequen

land along with the hacienda buildings and the rasping

machinery. These owners of henequen land have become known as

pequenos propietarios.^

Another group of henequen producers are called parcelarios. The distinguishing feature of this group is that area in henequen production is small. Brannon suggests the term is used for people working plots of less than six hectares.3 The land may be held by an ejido or privately owned.

This chapter examines the question of how the change in the institutional structure affected the supply elasticities of henequen. The expectation is that supply elasticities of

'For a more complete discussion of these institutions and their arrangements, see the section in Chapter 2 entitled "The Modern Era: Land and Institutional Reforms."

^Jeffrey Brannon and Eric N. Baklanoff, Agrarian Reform & Public Enterprise in Mexico. 68-70.

^Ibid., 70-71 including footnote 16. 102

henequen decreased in response to the institutional changes

that occurred in the henequen industry.

Recent Henequen Data

Henequen prices for the 1957 to 1987 period were derived

from the Mexican peso value of henequen production divided by

henequen production measured in metric tons. The real price

was found by deflating the nominal price by the Mexican

producer price index. The land area in total henequen

production is measured in hectares.

The data was collected at the statistical office of the

Secretaria de Agricultura y Hidraulicos in Mérida, Yucatân.

The data for 1957 to 1976 was printed in the Secretariats publication, Yucatân en Cifras. 20 Anos de Estadisticas

Aaropecuarias (Mérida, 1978). The data for the remaining years was written in the margins of the statistical office's copy of the publication as this office collected the data over the years. The data is also available in an annual statistical yearbook published by the governor's office of the

State of Yucatân. The data used in the study is shown in

Table 21 and Table 22. 103

Table 21: Real Henequen Prices, 1957 - 1987

Value of Henequen Producer Real Price Production Production Price Index Henequen Year Pesos (mil.) (metric tons) (1985=100) (1985=100) 1957 190.05 105,586.0 1.38 130435 1958 233.33 131,372.9 1.44 118056 1959 229.90 131,872.9 1.45 120232 1960 247.77 137,648.0 1.53 117647 1961 251.37 139,649.7 1.54 116883 1962 247.18 135,815.6 1.57 115924 1963 271.88 117,696.9 1.57 147134 1964 313.73 131,267.4 1.64 145732 1965 185.84 128,166.1 1.67 86826 1966 159.42 122,628.0 1.69 76923 1967 152.90 117,614.3 1.74 74713 1968 143.26 110,197.4 1.78 73034 1969 144.51 111,159.8 1.82 71429 1970 153.38 117,750.5 1.93 67489 1971 147.54 113,493.7 2.00 65000 1972 193.54 113,848.9 2.06 82524 1973 237.92 109,188.8 2.38 91555 1974 517.36 111,983.5 2.92 158219 1975 618.67 101,420.6 3 .22 189441 1976 591.18 98,529.8 3 .94 152284 1977 514.18 85,697.5 5.57 107720 1978 520.05 80,007.1 6.44 100932 1979 587.49 70,442.3 7.62 109448 1980 1083.08 72,205.3 9.49 158061 1981 1363.89 75,771.8 11.81 152413 1982 1349.09 61,045.3 18.43 119913 1983 1507.99 63,824.5 38.2 61851 1984 1720.91 56,510.0 65.1 46779 1985 3300.00 50,000.0 100.0 66000 1986 13160.00 65,800.0 188.4 106157 1987 26384.30 67,479.0 443.9 88083

Sources: International Monetary Fund, International Financial Statistics. XXXIX (1986), ; , International Financial Statistics. XLII (1989), and Secretaria de Agricultura y Recursos Hidraulicos, Representacion en Yucatân, Yucatan en Cifras. 2 0 Anos de Estadisticas Aaropecuarias. Merida (1978) including notes in text. 104

Table 22: Land Area in Henequen Production, 1957 - 1987

Hectares in Hectares in Year Production Year Production 1957 141237 1973 174785 1958 155087 1974 168928 1959 157087 1975 160000 1960 165472 1976 157000 1961 167212 1977 159556 1962 165443 1978 150375 1963 186521 1979 135000 1964 190187 1980 135000 1965 182991 1981 135740 1966 177566 1982 121553 1967 170934 1983 116666 1968 160936 1984 109000 1969 155816 1985 96525 1970 150460 1986 117355 1971 154591 1987 114572 1972 173786

Source: Secretaria de Agricultura y Recursos Hidraulicos, Representacion en Yucatan, Yucatân en Cifras. 20 Anos de Estadisticas Aaroxaecuarias. Mérida (1978) including notes in text.

Estimation of Supply Elasticities

The model used in Chapter 3 is inappropriate for use with the 1957 to 1987 data to the extent that the motivation of the decision makers of the latter period differed from the motivation of the hacendados of the 1880 to 193 0 period. The pequenos propietarios can be assumed to be profit maximizers but Banrural's objective function used in managing the henequen ejidos may include an employment or other constraints and may exclude a profit maximizing function. 105

Table 23; Ejido's Percent of Total Land and Output, 1957 - 1974

Year Land Output 1957 73.2% 65.1% 1958 69.5 52.5 1959 71.1 61.7 1960 66.6 55.6 1961 62.1 51.3 1962 69.5 51.4 1963 63.5 54.2 1964 61.3 50.6 1965 64.6 53.1 1966 67.3 55.4 1967 70.2 55.5 1968 84.9 58.1 1969 87.8 60.4 1970 94.2 61.9 1971 92.2 64.8 1972 79.1 64.2 1973 76.7 62.9 1974 76.5 57.9

Average 73.9% 57.6%

Sources: Jeffrey Brannon and Eric N. Baklanoff, Agrarian Reform & Public Enterprise in Mexico (Tuscaloosa, AL: The University of Alabama Press, 1987), 75 and Secretaria de Agricultura y Recursos Hidraulicos, Representacion en Yucatân, Yucatân en Gifras. 2 0 Anos de Estadisticas Aaropecuarias. Merida (1978) including notes in the text.

Anecdotal evidence that the objective function used in managing the ejido lands may differ from that associated with the pequenos propietarios is shown in Table 23 and Table 24.

The evidence in Table 23 suggests that the percentage of total henequen lands controlled by the ejidos was greater than the 106

percentage of total henequen output produced by the ejidos.

One may infer from this statistic that either the ejidos were

less well managed or faced different cost constraints than did

the privately owned henequen land.

The production and land area data can also be used to

directly estimate the productivities of the ejidos and the

privately owned land as shown in Table 24. The privately

produced henequen is computed by subtracting the ejido

production from total henequen production. Similarly the

privately owned henequen land is found by subtracting ejido

henequen land from total land in henequen production. This

method of computing productivities probably results in greater

error in the estimates of privately produced henequen which

diminishes the value of this data.

The pequenos propietarios do appear to be more productive

in terms of land usage. The average productivity, as measured

by metric tons per hectare, is 1.524 for the pequenos

propietarios and .575 for the ejidos.

The model for the pequenos propietarios is a the same as that used in Chapter 3. The pequenos propietario plant henequen until the expected future marginal revenue equals the expected future marginal costs of planting an additional hectare to henequen. An acreage constraint is not imposed.

This methodology recognizes that as pequenos propietarios 107

Table 24: Productivity of Henequen Production, 1957 - 1974

Year Ejido Land Private Land 1957 .665 .973 1958 .640 1.319 1959 .728 1.115 1960 .694 1.106 1961 .691 1.071 1962 .607 1.307 1963 .539 .791 1964 .570 .881 1965 .575 .929 1966 .569 .941 1967 .544 1.028 1968 .469 1.902 1969 .491 2.321 1970 .515 5.106 1971 .515 3. 329 1972 .532 1.123 1973 .512 .995 1974 .501 1.190

Average .575 1.524

Measure of Productivity: Metric tons per hectare

Sources: Jeffrey Brannon and Eric N. Baklanoff, Agrarian Reform & Public Enterprise in Mexico (Tuscaloosa, AL: The University of Alabama Press, 1987), 75, and Secretaria de Agricultura Y Recursos Hidraulicos, Representacion en Yucatân, Yucatân en Cifras. 20 Anos de Estadisticas Acfropecuarias. Merida (1978) including notes in the text. 108

expand their production into areas of lower productivity, the

expected future marginal revenue of the additional hectare

should decrease to the point that additional planting does not

occur.

As in Chapter 3, henequen production is assumed to be a

linear function of plantings in previous years:

(83)

with Q!i>0 measuring the productivity of land planted in the

i'th year prior to t'th harvesting year, and the net

hectares planted in henequen during the i'th year and prior to

the t'th harvesting year. Land area in henequen production is

the sum of hectares planted over the previous n years:

= E (84) 2=1

The cost of cultivating and harvesting henequen is a

nondecreasing, concave, and continuous function of acreage in

henequen production;

Cg = CHAf.) (85)

which is expressed in currency units. The standard

assumptions regarding cost functions are made with respect to planting costs: They are a nondecreasing, concave and continuous function of hectares planted in the year in which 109

the costs are incurred.

Cf = C^(J,) (86)

The profit function of the pequeno propietario is:

71, = PpYc - ClA,) - CP(I^) (87)

with P, as the henequen price. The pequeno propietario decides

to plant henequen in order to maximize the expected future

profits from the production activity as shown by the

Lagrangian function:

n n (88) ç£ = p' P^,-C°{A,) -CP{I,) +X, t=0 U=7 /J where E is the expectations operator and /3' is the discount

factor such that 0

The pequenos propietarios have available information on

previous hectares planted, henequen prices, hectares in

henequen production, production costs, anticipated future and

current henequen production, and other relevant variables;

^ t ~ '^t-2 I ••• ' ' •^t-1' •^t-2 I •^t' '^t-2 / " • '' ( 89 )

C't ' ^t-1' ^t-Z I ••• > ^t*6 ' •^t+5' ' • • • ' ^t-1 ' ' • } with W representing the other relevant variables.

The planting decision is determined by differentiating £ with respect to I, and setting the differential equal to zero: 110

Table 25: World Production of Hard Fibers, 1979 - 1981

Henequen Yucatân 72.8 Mexico (inc. Yucatân) 85.7

World 92.2

Sisal Angola 8.4 Brazil 197.3 Haiti 12.3 Kenya 38.6 Madagascar 15.9 Mozambique 11.7 Tanzania 79.8

World 393.8

Abaca Ecuador 10.1 Phillipines 74.7

World 86.3

Measurement: Thousands of metric tons, averaged annually for 1979 to 1981.

Sources: Commodity Year Book 1982 (New York: Commodity Research Bureau, Inc., 1982), 165. The Yucatân data was derived from Table XI. Ill

n ac dcp ^ Q (90) t=l az, az.

subject to the production function

n = E = 0 (91) s=7

The assumption is made that Yucatecan pequenos

propietarios treat current and future henequen prices as

independent of their own production. As shown in Table 23,

pequenos propietarios market approximately 40% of Yucatân's

henequen output. Yucatan's henequen production was a substantial percentage of the world's production of henequen, but for the 1979 to 1981 period it was a relatively small percentage of the world's production of hard fibers.

Expectations of future henequen prices are assumed to be rationally formed by examining the history of henequen prices.

Since the number of observations of the price variable are limited, I choose to assume that the historical structure of the price variable did not change from the 1880-1930 period to the 1957-1987 period. Therefore the results of Chapter 3 regarding expected future henequen prices are used in this study. Expectations of future henequen prices are then assumed to equal: 112

= o + 4)ifc (92)

with 0<<^i

(93)

Equation (93) can be substituted into equation (90) to

eliminate the expectations operator and derive:

n dCP (94) ft - = 0 ' T, P' t=i ' SA.., dl. az.

This equation states that I, is a function of current year

henequen prices, planting costs, and future costs determined

by the number of hectares planted into henequen.

Again for simplicity set:

^ dC^ ^-^s+i n2 dC^ ^•^3*2 n n ac= (95) 2, = F\ P ' P ) . .. , p 3*n with Zj is a function of future cultivating and harvesting costs as they respond to I,. Equation (94) can be solved in terms of I,. Then:

ac*! (96) ~ A -Pfl/ aic

Since current output is a function of previous plantings, the output of the pequenos propietarios (X^p) can be explained by substituting equation (96) into equation (83): 113

n Xf = g a,J,., 1^1 (97) 2=0 \

Lacking data on cultivating and planting costs, they are

assumed to be part of a random error term which has the

standard characteristics of E(e)=0 and var(e)=a. The henequen

production of the pequenos propietarios is a function of

previous henequen prices:

Xl'' = fc-8 Pt-n> (98)

or

Xf = a + p,P,.7+P8P,.8 + . . . + (99)

Ejido output as argued earlier may be controlled by a

political process that directly involves the leadership of the

ejido and the federal government financial institution,

Banrural. In a larger context, the decision making process

may be impacted by the desire of the PRI party to retain the

electoral support of the ejidatarios. Banrural lent

substantial sums to the ejidos which eventually the ejidos

were unable to repay. Effectively, the lending mechanism

turned into a de facto subsidization of the henequen producing

ejido.4

Banrural participation in the management of the ejidos

^Jeffrey Brannon and Eric N. Baklanoff, Agrarian Reform & Public Enterprise in Mexico. 76-77. 114

may restrain the supply elasticities to the extent that

Banrural loans are not considered as explanatory variables.

As Banrural loans tend to offset henequen price movements,

then henequen production should appear nonresponsive to its

price.

The effect of Banrural loans, to the extent that they

turn out to be subsidies to the ejidos, on the supply

elasticities may also work through the expectations of

ejidatarios regarding future returns to raising henequen. The

expected future return to raising henequen should be a

function of both the expected future price and the expected

future output subsidy.

A second avenue by which the institutional changes

occurring since 1937 could impact on the supply elasticities

of henequen is with the institution of the ejido itself. As stated earlier the ejidatario has only usufruct rights to the use of land. An ejidatario may transfer the usufruct rights to the land to his children but may not sell those rights to another party. Additionally, if the ejidatario decides to quit working the land, the former ejidatario loses all usufruct rights to the land. The ejidatario faces a wealth loss if he should decide to leave the ejido and seek work 115

elsewhere.^ The anticipated wealth loss occurring with

migration from the ejido may act to reduce the price

elasticity of factor supplies to the ejidos. Therefore, ejido

production of henequen may not be responsive to changes in

henequen prices.

The structure of the decision-making regarding henequen

production on the ejidos then is very similar to that

structure that prevails with the pequenos propietarios.

Therefore, as the output of the pequenos propietarios is a function of current and previous henequen prices, ejido output should also be function of current and previous prices.

Xt^ = & + Yvft-7 + Ygft-8 + ... + c;, + (100)

The difference between equation (99) and equation (100) is the expectation that /?; > 7;. While the henequen prices paid to the pequenos propietarios may differ from the effective henequen prices paid to the ejidos, these prices should be sufficiently close that the difference in scale of the independent variables should have only a negligible effect on the dimensions of the regression coefficients, and therefore, on the value of the supply elasticities.

The data used to examine the hypothesis is derived from

^P. Lamartine Yates, Mexico's Agricultural Dilemma (Tucson, Arizona: The University of Arizona Press, 1981), 148. 116

the entire henequen industry without respect to the various

sectors in the industry. Defining

XTot ^ ^pp + (101)

and rj as the percent of henequen output produced by the ejido

sector, then equations (99) and (100) can be combined into:

Xl"" = r]ô + (l-n)a + (TIY7 + (l-T)) p,) Pt.7 + (TIY8+(1-n) Pa) ^t-8 + . . . + (nYn+ (l-n)P;,)fc-;, + Gc (102) To estimate equation (102), thirty one observations were

available from 1957 to 1987 which limited my ability to test

for the length of the lag structure. A seven to fourteen year

lag was assumed to exist as this was length of the lag found

for the 1880 to 1930 period when using real henequen prices.

Two regressions were run. The first contained all the

independent variables; the second regression used real

henequen prices lagged fourteen years as only independent

variables. The regression coefficients for these estimations

of equation (102) are shown in Table 26.

With only eight degrees of freedom, none of the

regression coefficients in the regression containing all the

lagged variables are statistically significant at the 5% level

of significance. In the second regression when the real henequen price lagged fourteen years is the only independent variable, the regression coefficient is statistically 117

Table 26: Regression Coefficients for Real Henequen Prices, 1957 - 1987

Regression Regression Variable Coefficient T-Ratio Coefficient T-Ratio Constant 18995 0.33 23448 1.71 P..7 -.0983 -0.39 Pl.8 . 1672 0.48 P..9 -.0774 -0.20 Pf-lO . 0670 0.17 P..U -.0761 -0.19 P..12 . 1683 0.43 P..I3 -.0240 —0 .06 Pt-14 .5513 1.77 .5869 4.45*

R^ (adj. ) .230 .540 F 1.60 19.76*

D.F. 8 15

'significant at a 1% level of significance.

significant at the 1% level of significance. The F statistic for the first equation is insignificant at the 5% level of significance but, for the second equation, is significant at the 1% level.

The estimated supply elasticities are .842 when all eight lagged real prices are used as independent variables. If only the real henequen price lagged fourteen years is used the estimated supply elasticity is .728. These estimates of supply elasticities are surprisingly close to those of estimated for the 1880 to 1930 period. 118

A Chow test was run using data from the 1880 to 1930

period with the data from the 1957 to 1987 period. The

purpose of the test was to examine if the data from the two

periods came from the same population.

To carry out the test, the henequen price data from 1957

to 1987, which is expressed in Mexican pesos, had to be

converted to U.S. dollar prices and then deflated with the

U.S. Wholesale Price Index. The converted price data is not

representative of the relevant prices perceived by the

Yucatecan henequen producers which diminishes the value of the

data.

The F-statistic for the Chow test equalled 5.48. Given

nine constraints imposed on the regression and n-k-1 = 45, the

F-statistic is significant at the 1% level of significance.

This statistical finding denies the null hypothesis that the

two data sets came from the same population. Apparently

institutional changes in the henequen industry had an impact

on the supply curve of henequen; the supply of henequen is

determined by more than the biology of the plant.

There was no attempt to directly account for the interferences of the Mexican government in the henequen market that occurred with the land reform movement, the establishment of Banrural to finance and manage the ejidos, and the formation of Cordemex as a possible monopsonistic purchaser of 119

henequen. The ejidos which provide only usufruct rights to the ejido land and the Banrural loans which can be interpreted as effective subsidies to the ejidatarios should reduce the responsiveness of the henequen supply to its own price. While the evidence is weak, the evidence does not support that thesis. These results suggest that the supply elasticity of henequen for 1957 to 1987 was about .80, as it was for the

1880 to 1930 period. 120

CHAPTER VI

CONCLUSIONS

Henequen: A Staple Export Crop

Henequen has gone through a 150 year cycle as a staple

export crop of Yucatân, Mexico.' Henequen and sisal, native

to the Yucatân peninsula, was used by the Mayans to make bags,

hammocks, and rope. The Spanish borrowed the Mayan ideas on

the use of henequen following their entry into the peninsula

during the 1540's.

The development of henequen as a significant export

commodity began during the 1870's and 1880's with the

expansion of American midwestern agriculture and the

widespread acceptance of the McCormick binder. In Yucatan,

the growth of the henequen exports created substantial wealth.

Mérida became one of the wealthiest cities in Mexico and saw

the development of wide boulevards, large spacious homes, and

trade in consumer goods with Europe and the United States.

This wealth probably peaked during the Mexican Revolution when

'Melville H. Watkins, "A Staple Theory of Economic Growth," The Canadian Journal of Economics and Political Science 29, 2(May 1963), 141-158. 121

the various contenders for power in the central government saw

Yucatân as a source for financial resources.

The decline of the henequen industry began as other

countries became exporters of henequen and sisal. Following

World War II, synthetic twines began to displace natural

twines. Lastly, the introduction of the large baler further

reduced the demand for twine. During the decline, the central

government transformed the industry by implementing a land

reform program, placing the management and financing of the

henequen industry under the control of a government bank, and nationalizing the marketing and manufacturing processes.

Recently, the central government turned the responsibility for the henequen industry over to the state government. Ejidos have significantly reduced their production of henequen either using the land for orange groves or letting the land lie fallow. The ejidos may become privately owned. A new government agency is looking for ways to improve the productivity of raising henequen and other agricultural commodities. Cordemex is to be sold and become a private corporation.

This research examined three issues that are part of the history of the henequen industry. From the 1870's to the

1920's henequen was exported raw to the United States where it was manufactured into twine. The topics of the price 122

elasticity of henequen supply and the relationship of the

campesinos's standard of living to the prosperity of the

henequen industry are from this period. The third topic is a

comparison of the henequen supply elasticity of the land

reform era with the price elasticity during the 1880 to 193 0

period.

International Harvester as a Monopsonist

The issue that captures the excitement of people concerns

the activity of International Harvester in the henequen

market; Did International Harvester act as a monopsonist and force downward henequen prices from 1902 to 1911?

International Harvester wrote contracts with at least two henequen brokers in Mérida, Yucatân, with the alleged intention of trying to control henequen prices.% Henequen prices, measured in real terms, fell from 32.370 per pound in

1902 to 11.070 in 1911.3 This is the "smoking gun".

Accepting the above statements as proving that

International Harvester acted as a monopsonist is subject to the logical fallacy of post hoc, propter hoc. Secondly,

Benjamin suggests that other events may well have caused

^Gilbert M. Joseph and Allen Wells, "Corporate Control of a Monocrop Economy," 80, 84-85.

^See data in Appendix A. 123

henequen prices to decline. A major reason is that during the

Spanish-American War the United States did not import abaca

from the Philippines. While abaca adds certain qualities to

twine, it is easy to produce twine totally from henequen. The

decreased supply of abaca during the war increased the demand

for henequen causing high henequen prices. Following the

Spanish-American War, the re-entry of abaca supplies the U.S.

market should have caused henequen prices to fall. While this

explanation cannot totally account for the price decline from

1902 to 1911, it is a partial explanation/*

This research sought to examine the issue from another perspective: Assume International Harvester had the ability to force henequen prices downward. Would the henequen industry be harmed by this price decline? The critical variable is the price elasticity of supply. If the supply elasticity of henequen is infinite, then any attempt by

International Harvester to reduce prices would just force resources into other occupations without any reduction in factor income. The less price elastic supply is, the greater would be the income loss to resources in the henequen industry due to the price decline.

A Nerlove type model was developed in which the

''Thomas Benjamin, "International Harvester and the Henequen Marketing System in Yucatân, 1898-1915." 124

entrepreneur of the hacienda made a planting decision. The

entrepreneur sought to maximize discounted expected future

income subject to a vintage production function. The

entrepreneur had to rationally develop expectations of future

prices. It was found that henequen prices had a first order

autoregressive structure which became the basis for the

expected future prices. A Lagrangian function was solved

which set the determinants of the planting function. Since

output is limited by previous plantings, it was shown that henequen production was a lagged function of henequen prices.

The henequen quantities were variously listed as henequen production and henequen exports. Given that only minor amounts were set aside for domestic usage and ignoring changes in inventories, henequen production from 1880 to 1930 period essentially equaled henequen exports. Henequen prices were expressed in both constant and nominal U.S. dollars.

To maximize the number of observations in the statistical analysis, the likelihood ratio statistic was used to determine the appropriate lag function. Eliminating any lagged variable not contributing to the explanation of the dependent variable is desirable, but eliminating a lagged variable that is statistically related to the dependent variable causes the regression coefficients to be biased. The results of the test led to the conclusion that the price variable should be lagged 125

fourteen years. Regressions were run with real prices lagged

seven to fourteen years or nominal prices lagged seven to a

maximum of twenty three years.

The statistical results were that henequen production

responded positively to henequen price increases with a lag of

seven to fourteen years. The estimated supply elasticity

coefficient, whether using real henequen prices or nominal

henequen prices, was approximately .80. A 10% increase in

prices would tend to cause about an 8% increase in production

in about fourteen years. While the supply curve is inelastic,

supply is responsive to changes in price.

If signing the contracts to control prices is the

"smoking gun", the question I essentially asked is, "If the gun were fired, would the person hit by the bullet be harmed?"

The answer is, "Yes!" But, "Was the gun fired?"

I attempted an answer to this question, although not with the same care as taken to answer the first question. If the supply of henequen is perfectly inelastic in the short run, then the current henequen price should be determined by current henequen demand. Combinations of five variables were used to estimate demand: Either actual henequen production or expected henequen production based upon the henequen supply model, the real price and U.S. output of wheat, Philippine exports of abaca, and a dummy variable which is given a value 126

of 1 during the years in which International Harvester

allegedly exercised its monopsony power.

Wheat is included in the regression since henequen twine

was used when harvesting wheat. Abaca is a substitute input

into twine so increased Philippine exports should depress

henequen prices. If International Harvester exercised

monopsony power then the dummy variable should have a negative

regression coefficient.

The statistical results were that the regression

coefficients for henequen production were statistically

insignificant at the 5% level of signficance when negative,

but were also positive in some regressions. Henequen prices

were probably independent of current henequen production. The

regression coefficients for Philippine abaca exports tended to

be negative which supported the notion of substitutability

between henequen and abaca. The regression coefficients for the International Harvester dummy variable were consistently positive and highly significant in some instances. This result directly contradicts the International Harverster monopsony hypothesis.

"Was the gun fired?" Probably not! Two other reasons for believing this can be stated. First, International

Harvester's pricing decisions were more complex than just setting the current price to obtain current henequen 127

production that would be sufficient so enough twine could be

produced for U.S. Midwestern farmers. The current price had

to be at a level that hacendados would be willing to plant new

henequen and commit to continuing to produce henequen in the

future. Since a hacendado had to wait seven years before a

henequen plant would become productive, the hacendado had to

be willing to take risks and incur substantial costs when

making the decision to plant more henequen. To the extent

that International Harvester was interested in a long term

henequen market, the company would not gain by attempting to

exploit a short run supply curve.

Secondly, if a cursory examination of the life style of

the hacendados during the first two decades of this century is

made, the evidence is that these people had a high standard of

living; there is no evidence of impoverishment of the

hacendados.

Oligopsony in the Henequen Labor Market

Social scientists often questioned if the campesinos

benefitted from the development of henequen as an export commodity. Joseph and others believe very strongly that the standard of living of the campesinos fell as the export 128

markets for henequen developed.^

The rationale for that position is that the hacendados,

acting as a social class, were oligopsonists in the labor

markets for campesinos. Prior to the development of the

henequen export markets, the hacendados had no interest in the

campesinos as there was no highly profitable activity for them

on the haciendas. After henequen prices began to increase

because of the growing export market, the hacendados wanted

more land and labor to increase production of this

increasingly valuable product. The hacendados achieved this

expanded control of land and labor by exercising their

oligopsonistic power to deprive the campesinos of their

collectively held land and freely traded labor.

The campesinos went from a time when their standard of

living was largely determined by their own productivity

working on milpas to when they were forced to work on haciendas. Campesinos became indebted to the hacendado. Debt peonage became commonplace with either the state government or hired individuals used to search for campesinos who had fled a hacienda prior to the repayment of their debts.

The neoclassical counter argument is that, ceteris paribus, rising henequen prices increases the value of the

^See Gilbert M. Joseph, Rediscovering the Past at Mexico's Periphery. 59-81, for a review of this literature. 129

campesinos as workers on haciendas. The hacendados would

mutually compete for labor and, thus, bid upward wage rates

paid the campesinos. Campesinos should see their standard of

living improve as henequen exports increased. Wages falling

concurrent with rising henequen prices can occur in this model

if labor supply is rising more rapidly than labor demand or if

the hacendados are becoming increasingly oligopsonistic.

Since most neoclassical explanations ignore changing factor

market structures as an explanatory tool, the expectation is that campesinos would experience an improving standard of living as henequen price rose.

A Becker-Barro model was developed with multi-generations maximizing utility subject to a wealth constraint. The model showed that, with an individual's utility a function of his children's utility among other variables, the number of children of a family is expected to be rationally determined in conjunction with a number of other decisions to be made by the family.

The assertion was made that birth rates are an interesting variable to explain with family income and family expenses as independent variables. Family income was a positive function of henequen prices; family expenses were a positive function of corn prices. Birth rates, then, should be a positive function of henequen prices and a negative 130

function of corn prices.

Data on the number of births from 1880 to about 1930 was

collected from four communities located in the henequen zone.

During some of this time period, Yucatân imported corn from

the United States, so U.S. corn prices were used as one of the

independent variables with henequen prices as the other.

Both linear least squares and generalized least squares

statistical models were used to estimate the regression

coefficients. Linear least squares estimates were made with

the number of births, birth rates based on linear estimates of

population, and birth rates based on log-linear estimates of

population as the dependent variables. Linear and log-linear

estimations were made. The number of births was used as the

dependent variable with the generalized least squares

regression model.

The statistical results are supportive of the hypothesis that birth rates increased with increases in henequen prices.

All regression coefficients for the henequen price variable were positive. For the results with the generalized least squares statistical model, two of four regression coefficients were significant at the 5% level of significance, and a third at 10%.

The results for corn prices are more tenuous: Three of the four regression coefficients for corn had the expected 131

negative values. But the regression coefficients were

statistically insignificant at the 10% level of significance.

While I would have like to have linked the number of

births to some notion of the campesinos' standard of living,

as this would have allowed Joseph's hypothesis to be tested,

the economic theory used in the model does not establish the

sign of the derivative of the utility function with respect to

the number of children. Also the theory does not establish that the number of children will necessarily increase with

increased income or decreased consumption costs. This research remains incomplete because I would like to examine

Joseph's hypothesis that the internationalization of the henequen market tended to lower the campesinos' standard of living.

Public Sector Management of Henequen

The research in the last chapter attempts to compare the supply elasticity of henequen for the post-land reform era with the supply elasticity of the earlier era. The hypothesis is that the institutional changes in the late 1930's to the early I960's would have increased the incentives for campesinos to continue producing henequen as prices fell as compared to an earlier period. The supply elasticity of henequen is expected to be lower during the post-land reform 132

era. Campesinos lost their rights to use land if they would

leave the ejido for a sufficiently long period. Banrural made

loans to ejidos to pay workers. When the ejidos were unable

to repay, many loans had to be canceled. Cordemex incurred

significant losses. The popular belief is that Cordemex kept

Yucatân henequen prices below those in the world market in the

attempt to become profitable.

The data for testing this hypothesis is unsatisfactory.

Price and quantity data could only be obtained for thirty one years, 1957 to 1987. Due to this limitation, ideas regarding the formation of price expectations and the number of lagged price variables to include in the regression were taken from the research on the 1880 to 193 0 period. The quantity data included both the ejido and private sectors.

A model of henequen production explained by real henequen prices lagged seven to fourteen years and expressed in Mexican pesos was developed. One regression was run using henequen prices lagged fourteen years as the only independent variable.

The results were that the regression with prices lagged seven to fourteen years had low t-ratios and a low F-statistic. The regression coefficient of prices lagged fourteen years, when it was used as the sole independent variable, was statistically significant at a 1% level of significance.

Estimates of the supply elasticity for this period were 133

also close to .80, which is similar to the supply elasticity

estimates from the 1880 to 1930 period. This result was

unexpected. A Chow test was run to see if the two data sets

were derived from the same population. This hypothesis was

rejected.

The long run supply curve of henequen appears to have

shifted between 1930 to 1957. There is historical and

institutional evidence to expect this outcome but the analysis

does not explain how a particular institutional change shifted

the supply curve.

Problems with this research include: A model of the

ejido economy should be developed separately from that of the

private producers. Price and subsidy should both be treated as independent variables. The data set should be expanded to include the years 1937 to 1957. 134

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APPENDIX A

HENEQUEN AND CORN PRICE DATA

enequen Prices Henequen Corn Prices Producer Nominal Real Production Nominal Real Price «/lb. 67=100 metric tons $/bu. 67=100 Index

2.22 6.28 18 179 .39 1.10 35.3 2.45 6.73 24 912 .63 1.73 36.4 1882 2.58 6.76 24 244 .48 1.26 38 .2 1883 2.46 6.89 32 652 .42 1.18 35.7 1884 1.87 5.69 42 043 .35 1.06 32.9 1885 1.76 5.86 43 064 .32 1.07 30.0 1886 2.28 7.87 39 089 .36 1.24 29.0 1887 3.68 12.25 36 283 .43 1.43 30.0 1888 4.29 14.12 35 119 .33 1.09 30.4 1889 5.72 19.98 45 079 .28 .98 28.6

1890 2.63 9.10 45 079 .50 1.73 28. 9 1891 2.80 9.72 52 065 .40 1.39 28.8 1892 3.25 12.08 58 585 .39 1.45 26.9 1893 3.30 12.00 58 098 .36 1.31 27.5 1894 2.52 10.20 61 606 .45 1.82 24.7 1895 2.25 8.93 61 607 .25 .99 25.2 1896 2.51 10.50 65 763 .21 .88 23.9 1897 2.64 11.00 70 545 .26 1.08 24.0 1898 6.23 24.92 68 834 .29 1.16 25.0 1899 6.16 22.90 73 191 .30 1.12 26.9

1900 6.33 21.90 81 093 .35 1.21 28.9 1901 6.21 21.79 83 191 .60 2.11 28.5 1902 9.84 32.37 83 993 .40 1.32 30.4 1903 8.12 26.45 93 059 .42 1. 37 30.7 1904 7.47 24.25 67 206 .44 1.43 30.8 1905 6.96 22.45 96 534 .41 1.32 31.0 1906 6.35 19.84 97 198 .39 1.22 32.0 1907 5.60 16.67 100 774 .51 1.52 33.6 1908 4.33 13.36 108 795 .65 2.01 32.4 1909 4.79 13.72 95 758 .62 1.78 34.9 144

Henequen Prices Henequen Corn Prices Producer Nominal Real Production Nominal Real Price 0/lb. 57=100 metric tons $/bu. 67=100 Index

4.25 11.68 94 789 .52 1.43 36.4 3.71 11.07 116 547 .68 2.03 33.5 4.73 13.29 139 902 .55 1.54 35.6 1913 6.35 17.64 145 280 .70 1.94 36.0 1914 7.34 20.85 169 286 .71 2.02 35.2 1915 5.89 16.45 162 744 .68 1.90 35.8 1916 5.59 12.68 201 990 1.14 2.59 44.1 1917 13.25 21.76 127 092 1.46 2.40 60.9 1918 19.25 28.48 140 001 1.52 2.25 67.6 1919 6.50 9.10 113 870 1.51 2.11 71.4

1920 4.50 5.65 160 759 .64 .80 79.6 1921 4.25 8.45 106 794 .52 1.03 50.3 1922 3.75 7.52 78 809 .73 1.46 49.9 1923 4.25 8.19 102 925 .81 1.56 51.9 1924 6.00 11.88 109 275 1.06 2.10 50.5 1925 6.66 12.50 128 142 .70 1.31 53.3 1926 6.37 12.34 101 157 .74 1.43 51.6 1927 7.00 14.20 116 392 .85 1.72 49.3 1928 6.00 12.00 119 094 .84 1.68 50.0 1929 7.25 14.77 110 056 .80 1.63 49.1

1930 5.50 - 12.33 102 899 .60 1.35 44.6 1931 3.00 7.98 74 620 .32 .85 37.6 1932 1.90 5.65 91 054 .32 .95 33.6 1933 3.06 9.00 97 465 .52 1.53 34.0 1934 3.18 8.24 86 440 .82 2.12 38.6 1935 2.32 5.61 88 845 .82 1.99 41.3 1936 3.23 7.74 102 726 1.04 2.49 41.7 1937 5.07 11.39 77 111 .52 1.17 44.5 1938 3.31 8.16 57 918 .49 1.21 40.5 1939 2.73 6.86 76 420 .57 1.43 39.8

1940 3.55 8.76 52 474 .62 1.53 40.5 1941 3.53 7.82 92 493 .75 1.66 45.1 1942 6.50 12.76 81 400 .92 1.81 50.9 1943 8.98 16.85 116 993 1.12 2.10 53.3 1944 8.99 16.77 115 413 1.03 1.92 53.6 1945 1.23 2.25 54.6 1946 1.53 2.46 62.3 1947 2.16 2.82 76.5 1948 1.28 1.55 82.8 1949 1.24 1.58 78.7 145

Henequen Prices Henequen Corn Prices Producer Nominal Real Production Nominal Real Price */lb. 67=100 metric tons $/bu. 67=100 Index

1950 90,128 1.52 1.86 81.8 1951 1.66 1.82 91.1 1952 1.52 1.72 88.6 1953 1.48 1.69 87.4 1954 1.43 1.63 87.6 1955 74,651 1.35 1.54 87.8 1956 98,062 1.29 1.42 90.7 1957 6.53 7.00 105,586 1.11 1.19 93.3 1958 6.17 6.52 131,374 1.12 1.18 94.6 1959 6.33 6.67 131,873 1.05 1.11 94.8

1960 6.53 6.88 137,648 1.00 1.05 94.9 1961 6.53 6.91 139,650 1.10 1.16 94.5 1962 6.60 6.97 135,816 1.12 1.18 94.8 1963 8.38 8.87 117,697 1.11 1.17 94.5 1964 8.67 9.16 131,267 1.17 1.24 94.7 1965 5.26 5.45 128,166 1.16 1.20 96.6 1966 4.72 4.73 122,628 1.24 1.24 99.5 1967 4.72 4.72 117,614 1.03 1.03 100.0 1968 4.72 4.60 110,197 1.08 1.05 102.5 1969 4.72 4.43 111,160 1.16 1.09 106.5

1970 4.73 4.28 117,751 1.33 1.20 110.4 1971 4.72 4.14 113,494 1.08 .95 114.0 1972 6. 17 5.18 113,849 1.57 1.32 119.1 1973 7.91 5.87 109,189 2.55 1.89 134.7 1974 16.76 10.47 111,984 3.02 1.89 160.1 1975 22.14 12.66 101,421 2.54 1.45 174.9 1976 17.67 9.66 98,530 2.15 1.17 183.0 1977 12.04 6. 20 85,697 2.02 1.04 194.2 1978 12.93 6.18 80,007 2.25 1.08 209.3 1979 16.59 7. 04 70,442 2.48 1.05 235.6

1980 29.58 11.01 72,205 3.12 1.16 268.8 1981 33.33 11.36 75,772 2.47 .84 293.4 1982 17.77 5.94 61,045 2.55 .85 299.3 1983 8.92 2.94 63,825 3.21 1.06 303.1 1984 8.23 2.65 56,510 2.63 .85 310.3 1985 11.65 3.77 50,000 2.23 .72 308.7 1986 14.83 4.94 65,800 1.50 .50 299.9 1987 12.87 4.18 67,479 1.94 .63 307.7 1988 2.60 .81 320.0 1989 14.74 46,591 146

APPENDIX B

BIRTHS AND POPULATION DATA

Census Data

Year Acanceh Conkal Hoctun Muna 1900 3601 2241 2645 4711 1910 4080 2694 1862 4946 1921 3936 2505 2669 6276 1930 4056 2759 2455 3946

Births and Population Estimates by Year Acanceh Conkal Population Population Year Births Linear Log-Linear Births Linear Log-Lim 1880 200 3496 3504 127 2082 2105 1881 198 3508 3514 161 2095 2116 1882 208 3520 3526 176 2109 2127 1883 200 3532 3537 144 2122 2139 1884 187 3544 3548 170 2135 2150 1885 202 3556 3559 140 2148 2162 1886 197 3568 3570 156 2162 2174 1887 193 3580 3582 149 2175 2185 1888 179 3592 3593 158 2188 2197 1889 189 3604 3604 167 2201 2209 1890 201 3616 3616 155 2215 2221 1891 207 3628 3627 158 2228 2233 1892 237 3640 3639 195 2241 2245 1893 225 3652 3650 182 2255 2257 1894 212 3664 3662 150 2268 2269 1895 215 3676 3673 179 2281 2281 1896 192 3688 3685 164 2294 2293 1897 240 3700 3696 188 2308 2306 1898 202 3712 3708 196 2321 2318 1899 245 3724 3720 185 2334 2331 1900 213 3736 3732 171 2347 2343 1901 248 3748 3743 189 2361 2356 1902 223 3760 3755 177 2374 2369 147

Acanceh Conkal Population Population Births Linear Log-Linear Births Linear Log-Linear 1903 204 3772 3767 176 2387 2381 1904 236 3784 3779 176 2401 2394 1905 224 3796 3791 175 2414 2407 1906 223 3808 3803 175 2427 2420 1907 212 3820 3815 174 2440 2433 1908 184 3832 3827 202 2454 2446 1909 175 3844 3839 185 2467 2459 1910 191 3856 3851 182 2480 2472 1911 225 3868 3863 206 2494 2486 1912 147 3880 3876 166 2507 2499 1913 195 3892 3888 152 2520 2513 1914 187 3904 3900 130 2533 2526 1915 175 3916 3912 125 2546 2540 1916 180 3928 3925 120 2560 2553 1917 214 3940 3937 133 2573 2567 1918 215 3952 3950 173 2586 2581 1919 175 3964 3962 126 2600 2595 1920 188 3976 3975 190 2613 2609 1921 212 3988 3987 112 2626 2623 1922 192 4000 4000 119 2640 2637 1923 176 4012 4012 82 2653 2651 1924 185 4024 4025 128 2666 2665 1925 163 4036 4038 90 2679 2680 1926 186 4048 4051 124 2693 2694 1927 171 4060 4063 131 2706 2709 1928 164 4072 4076 97 2719 2723 1929 126 2732 2738 1930 119 2746 2753

Hoctun Muna Population Population Year Births Linear Log-Linear Births Linear Log-Linear 1880 98 2304 2247 185 5212 5307 1881 125 2307 2250 177 5205 5294 1882 109 2310 2254 169 5198 5282 1883 115 2313 2257 181 5191 5269 1884 105 2316 2261 192 5184 5257 1885 96 2319 2264 138 5177 5244 1886 121 2321 2268 175 5170 5232 1887 91 2324 2271 161 5164 5219 1888 111 2327 2274 186 5157 5207 1889 116 2330 2278 172 5150 5194 1890 125 2333 2282 226 5143 5182 1891 136 2336 2285 207 5136 5169 148

Hoctun Muna Population Population Births Linear Log-Linear Births Linear Log-Linear 1892 149 2338 2289 259 5129 5157 1893 150 2341 2293 234 5122 5145 1894 142 2344 2296 196 5115 5132 1895 178 2347 2300 245 5108 5120 1896 121 2350 2303 204 5102 5108 1897 136 2353 2307 256 5095 5096 1898 157 2355 2310 210 5088 5084 1899 178 2358 2314 259 5081 5071 1900 128 2361 2318 225 5074 5059 1901 144 2364 2321 230 5067 5047 1902 163 2367 2325 233 5060 5035 1903 145 2369 2328 223 5053 5023 1904 145 2372 2332 242 5046 5011 1905 139 2375 2336 226 5040 4999 1906 157 2378 2339 254 5032 4987 1907 135 2381 2343 262 5026 4975 1908 144 2384 2347 204 5019 4964 1909 124 2386 2350 174 5012 4952 1910 130 2389 2354 226 5005 4940 1911 132 2392 2358 232 4998 4928 1912 110 2395 2361 215 4991 4916 1913 155 2398 2365 217 4984 4905 1914 128 2401 2369 218 4978 4893 1915 125 2403 2372 196 4971 4881 1916 134 2406 2376 180 4964 4870 1917 138 2409 2380 163 4957 4858 1918 153 2412 2383 194 4950 4846 1919 103 2415 2387 14 6 4943 4835 1920 119 2418 2391 189 4936 4823 1921 136 2420 2395 144 4929 4812 1922 133 2423 2398 178 4922 4800 1923 133 2426 2402 154 4916 4789 1924 120 2429 2406 143 4909 4777 1925 109 2432 2410 155 4902 4766 1926 175 4895 4755 1927 172 4888 4743 1928 201 4881 4732 1929 167 4874 4721 1930 203 4867 4709