United States Department of Agriculture Exporting U.S. Red Meat Agricultural Marketing Service and Poultry Products to Transportation and Marketing Mexico in a Free Trade Marketing and Transportation Analysis Environment Agricultural Economic Report 768 January 1999 Calexico Dallas Tijuana Mexicali Rio Grande Fort Worth Ensenada Baja California El Paso Norte Nogales Ciudad UNITED STATES Nogales Juarez SONORA San Antonio Grande io Hermosillo CHIHUAHUA R Eagle Pass Chihuahua Piedras Negras Guaymas Rio Yaqui Baja Mexico California Cuidad Rio Conchos COAHUILA Laredo Obregon Sur Nuevo Laredo State Boundries Gulf of California Moniclova Rivers Ri NUEVO o G rand Mountainous areas LEON e Brownsville SINALOA Matamoros Indicates State Capitals Torreon Monterrey Saltillo National Capital - Mexico D.F, Cuidad de Mex. D.F. Culiacan DURANGO Cities La Paz Durango Principal Ports of Entry ZACATECAS SAN Cuidad Victoria Mazatlan Pacific Ocean LUIS TAMAULIPAS Zacatecas POTOSI Gulf of Mexico Tampico AGS San Luis Potosi Aquascalientes Puerto NAYARIT Cuidad de Valies Progreso Juarez GUANAJUANTO Merida Tepic Guanajuato Tuxpan YUCATAN Leon HIDALGO Guadalajara Queretaro QRO Pachuca TLAX. Campeche JALISCO VERACRUZ QUITANA Tiaxcala Mexico Gulf of Campeche ROO Colima Morelia Plaxcala Jalapa Chetumal MICHOACAN D.F. Veracruz Manzanillo Toluca Puebla Orizaba Cuernavaca CAMPECHE COLIMA PUEBLA TABASCO GUERRERO Villahermosa Coatzacoalcos Lazaro Rio Baisas Belize Cardenas Chilpancingo OAXACA Oaxaca Acapulco Tuxtla Gutierrez Salina Cruz CHIAPAS Gulf of Tehuantepec Guatemala Honduras Tapachula El Salvador United States Department of Agriculture Exporting U.S. Red Meat Agricultural Marketing and Poultry Products to Service Transportation and Marketing Mexico in a Free Trade Marketing and Transportation Environment Analysis AER-768 January 1999 Raymond A. Dietrich, Associate Professor Emeritus, Texas Agricultural Experiment Station, Department of Agricultural Economics, Texas A&M University System, College Station, Texas H. Ronald Smalley, Economist, Marketing and Transportation Analysis The U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs and activities on the basis of race, color, national origin, gender, religion, age, disability, political beliefs, sexual orientation, and marital or family status. (Not all prohibited bases apply to all programs.) Persons with disabilities who require alternative means for communication of program information (Braille, large print, audiotape, etc.) should contact USDA’s TARGET Center at (202) 720-2600 (voice and TDD). To file a complaint of discrimination, write USDA, Director, Office of Civil Rights, Room 326-W, Whitten Building, 14th and Independence Avenue, SW, Washington, DC 20250-9410 or call (202) 720-5964 (voice or TDD). USDA is an equal opportunity provider and employer. i Acknowledgments The authors gratefully acknowledge the cooperation of For further information contact: Mexican meat distributors; hotel, restaurant, and institutional (HRI) purveyors; meat processors; supermarket and discount Marketing and Transportation Analysis chains; and hotel and commercial restaurants in supplying Agricultural Marketing Service data and information for this study; the U.S. border transfer U.S. Department of Agriculture agents and cold-storage facility operators for providing Room 1207, South Building information and data about border transfer procedures and Washington, DC 20250 meat distribution from U.S. ports of exit; and the U.S. Meat Telephone: (202) 690-1303 Export Federation and U.S. Agricultural Trade Office in Facsimile: (202) 690-3616 Mexico City. The views expressed herein are not necessarily those of the The authors also wish to express their appreciation for the Agricultural Marketing Service or the U.S. Department of cooperation of John A. Adams, Jr., first vice president, Agriculture. Union National Bank, Laredo, TX, during the initial phases of this study; Kris B. Schulthies, research associate, Texas A&M University, during the interview phase in Mexico and in translating survey instruments from English to Spanish; Melanie Gillis, research associate, Texas A&M University, in assembling the data from the survey instruments; and Ruth Spear, secretary, Texas A&M University, for typing drafts of the survey instruments and the manuscripts for this report. Contents Summary . 1 Introduction . 5 NAFTA Impact on U.S. Export Opportunities . 5 Peso Devaluation and Temporary Trade Impact . 7 Study Setting . 8 Mexican Market Demand for Red Meat and Poultry Products . 11 Demographics and Market Segmentation . 11 Tariff and Currency Constraints . 14 Importers’ Preferences, Market Infrastructure, and Handling Methods . 15 Existing Domestic and Foreign Competition . 17 Potential Mexican Clients . 18 Mexican Customs Clearance and Port-of-Entry Procedures . 21 Certification and Documentation Requirements . 21 Border Port-of-Entry Procedural Requirements . 22 Duties To Be Phased Out Under NAFTA by 2004 . 22 Customs Clearance and Other Costs . 22 International Freight Forwarding . 23 U.S.-Mexico Red Meat and Poultry Trade Patterns . 25 U.S. Red Meat and Poultry Products Exported to Mexico, 1994 . 25 Kind of U.S. Red Meat and Poultry Products Imported by Mexico, 1994 . 26 Type of U.S. Red Meat and Poultry Products Imported by Mexico, 1994 . 30 Form of U.S. Red Meat and Poultry Products Imported by Mexico, 1994 . 33 Sources of U.S. Red Meat and Poultry Products Imported by Mexico, 1994 . 42 Mexican Distribution Channels . 47 Initial Destination of U.S. Red Meat and Poultry Exported to Mexico, 1994 . 47 Geographic Area of Sales . 57 Market Outlets . 64 Transportation Modes and Services . 71 Overland Shipments . 71 Maritime Shipments . 76 Air Shipments . 77 Storage, Handling, Packaging, and Merchandising . 79 State of Mexican Plant Infrastructure . 79 Refrigeration and Storage Facilities . 80 Physical Product-Handling Systems . 80 Packaging and Container Systems . 81 Buyer Merchandising-Assessment Views . 82 Mexican Markets With Sales Growth Potential . 87 Historical Perspective of Mexican Demand for U.S. Red Meat and Poultry Exports . 87 Factors Favoring Future Expansion in Mexican Demand for U.S. Exports . 90 Future Opportunities—Mexican Markets With Maximum Sales Potential for U.S. Exports . 91 Impact of Improved Transportation and Distribution Delivery Alternatives . 93 Global Impacts and U.S. Goals . 95 Appendix Tables . 97 Contents iii Summary The outlook for U.S. agriculture is being enhanced dramati- industry technology as well as existing handling and market- cally through recent multilateral and regional trade agree- ing methods; (4) existing levels of domestic and other for- ments. One of these completed agreements directly affects eign market competition and competitiveness of their prod- U.S. exporting opportunities in a free trade environment with ucts; and (5) potential client and trade contacts within Mexico. With the implementation of the North American Mexico. Free Trade Agreement (NAFTA) on January 1, 1994, Mexican red meat and poultry import trading patterns, as Once the negative repercussions of the 1994 devaluation of well as marketing and distribution methods, are undergoing the peso and Mexico’s ensuing recession have ended, the substantial change. Many of the changes in the Mexican outlook for a return to expanded export sales of U.S. red meat industry are characterized by an introduction of new meat and poultry products to Mexico should be enhanced technologies, improvements in management techniques and significantly. marketing practices, and modernization of the industry’s infrastructure, especially at the retail level, as foreign corpo- Port-of-Entry Procedures rations continue to form joint-partnership ventures with Mexican corporations. These changes suggest that if all U.S. Opportunities to capitalize on the NAFTA accord require a meat-packing and poultry-processing firms are to realize the detailed knowledge of Mexican customs-clearance require- full benefits of liberalized trade and increased export oppor- ments and port-of-entry procedures..