2013 Corn and Mexican Agriculture What Went Wrong?

Corn and Mexican Agriculture:
What Went Wrong?

By ANTONIO AVALOS, Ph.D.* and EDUARDO GRAILLET, Ph.D.**
ABSTRACT. The debt crisis of the 1980s caused the development

strategy pursued by the Mexican government to be subject to a
radical adjustment process that triggered deep repercussions for the
agricultural sector and its farmers, particularly in the corn sector. In
combination with the aggressive agricultural policies sustained by the
U.S. government, the new approach meant that Mexican agriculture
operated within an economic environment characterized by signifi-
cant asymmetries and distortions, some internal and some imposed by
major trading partners. This article summarizes and documents the
most salient results of these policy events as well as their implications
for the corn sector, and discusses some of the challenges to repair the
agricultural sector in Mexico.
Introduction
The debt crisis of 1982 marked the beginning of a period characterized

by a dramatic shift in the development model and growth strategies
pursued by the Mexican government. The crisis called into question
the import substitution industrialization model, which would be
replaced by a new model based on structural adjustment policies.
The new “free market” approach included strict fiscal, monetary, and
trade policies that implied a gradual dismantling of price controls and
subsidies, a less interventionist approach in the foreign exchange
market, and a continuing reduction of barriers to international trade.
All these reforms had a significant impact on agriculture, particularly
*Department of Economics, California State University, Fresno, 5245 North Backer
Ave., M/S PB20, Fresno, CA 93740, USA. Phone: + 1 (559) 278-8793. Fax: +1 (559)
278-7234. aavalos@csufresno.edu
**School of Engineering, Agricultural Production Systems, Universidad Veracruzana,
Carretera Federal Acayucan a Catemaco km. 5.5 Acayucan, Veracruz, México. Phone:
+55 (924) 24-791-22. Fax: +55 (924) 24-539-92. egraillet@uv.mx
American Journal of Economics and Sociology, Vol. 72, No. 1 (January, 2013).
© 2013 American Journal of Economics and Sociology, Inc.
146 The American Journal of Economics and Sociology
the corn sector. The idea behind these strategies was seemingly
simple, to move away from costly policies aimed at achieving food
self-sufficiency due to unproductive use of resources, and toward
policies that favored a mix of domestic production of goods for which
Mexico had a relative cost advantage, with greater reliance on inter-
national markets as a supplement.
The liberalization of international trade formally began in 1986
when Mexico joined the General Agreement on Tariffs and Trade
(GATT) and it was later broadened with the signing of the North
American Free Trade Agreement (NAFTA), which came into force
in 1994. Including the agricultural sector in the agreement was an
integral part of the overall new development strategy. Its inclusion
mostly rested on arguments of efficiency and distributive gains. With
respect to corn in particular, Levy and van Wijnbergen (1992), for
example, held that keeping the domestic price of corn above the
world price through an assorted list of protectionist mechanisms was
inefficient. The assertion was that valuable amounts of resources—
land, labor, and capital—would artificially be allocated to corn pro-
duction, distracting them from more efficient and productive uses in
non-traditional labor-intensive export sectors such as fruit and horti-
culture. Also, as de Grammont (2003) argued, an important source of
inefficiency in corn production was the difficulty to implement the
intensive-technological methods originated by the “Green Revolution”
due to natural conditions such as climate, soil, and topography. This
meant that increases in corn production would have to come from
opening new lands to cultivation (extensive growth) rather than from
productivity gains (intensive growth), increasing the pressure on
marginal land. Thus in order to achieve rural development, agriculture
should be transformed. That is, the agricultural sector should reduce
corn production, supplement consumption with imported corn, and
focus on producing those goods where Mexico could better exploit
its comparative agricultural advantages. It is important to note,
however, that, as Hewitt (1978) showed, agricultural modernization
efforts did not focus exclusively on corn, but on a variety of crops.
Besides, as demonstrated by the Plan Puebla, the failed attempt to
achieve increased yields of corn on rain-fed farms through the utili-
zation of improved corn varieties implied a shifted focus on deriving
Corn and Mexican Agriculture 147
recommendations based on the use of fertilizer, timing, and plant

population for the local variety, rather than the utilization of techno-
logically improved corn varieties (Gladwin 1979).1 As a result, corn
productivity steadily increased on rain-fed farms over the past two
decades in spite of the unfavorable policy environment. With regard
to the distributive benefits of opening the agricultural sector, it was
argued that given the imports of cheaper corn from the United States,
consumers would reap the benefits from the lower prices of key staple
corn-based foods like tortillas and other items intensive in corn syrup.
Alain de Janvry and Gordillo de Anda (1995) added that the fear of
labor displacement and falling incomes in the corn sector was exag-
gerated because a majority of corn farmers produced for self-
consumption and not for the market. They also argued that, without
neglecting the potential adverse impact on welfare, the displacement
effect would be concentrated among surplus-producing middle-size
producers, not among the more numerous small-size sectors of sub-
subsistence producers. In any case, displaced workers in the contract-
ing corn sector would join the national labor markets and, eventually,
would be employed in expanding sectors of higher productivity,
either in other agricultural sectors or in the growing urban areas.2
In addition to the wide-ranging trade liberalization efforts, the
change of development paradigm came accompanied by an assorted
list of complementary and more specific reforms within the Mexican
economy, which were geared toward making the agricultural sector
more efficient and more competitive. They included, for example,
changes in the land tenure regime (mainly the reform of Constitutional
Article 27), legislation changes that made the land and labor markets
more flexible, and reformation of the structure and aim of develop-
ment banks and other public agencies. In sum, producers would
benefit due to productivity gains associated with more efficient allo-
cation of resources, while consumers would benefit from the lower
prices of consumption goods.
The new approach, however, implied a series of assumptions that
did not hold true, at the same time that different factors regarding
domestic and international policies were not taken into consideration
(Von Bertrab 2004). As a result, the model adopted since the 1980s has
not produced the desired effects, particularly for the agricultural
sector. One of the most significant failures of the strategy is that, for
the last 40 years, production of corn has been steadily increasing as
well as the amount of land and other resources devoted to it, while
the production of alternative agricultural products, where Mexico was
supposed to have relative advantages, remains relatively low.3 Further,
the new strategy stripped the government of many important tools for
promoting comprehensive rural development. As David, Dirven, and
Vogelgesang (2000) have argued, evidence suggests that the reduction
in the state’s involvement in the rural economy created gaps that could
not be filled by private agents and free markets. For example, they list
the need for the state to provide infrastructure in remote rural areas,
or to assist small and peasant producers to upgrade their skills so they
can more easily move to the expanding and more productive sectors
of the economy. Other researchers have also pointed out that the
deepening of the reforms, since the signing of NAFTA, rather than
fostering rural development, are adding to the challenges that Mexican
farmers face (Chávez 2008). That is, despite the efforts to modernize
the Mexican countryside, a mostly segmented structure of agricultural
production remains. In addition, the performance of the agricultural
sector has been weak and thus the deficit in agricultural trade is
becoming increasingly large.
The new strategy also seemed to have neglected important inter-
national policy factors. Perhaps based on the arguments advanced
in favor of freer trade (King 2001), evidence suggests that Mexican
policymakers severely underestimated the distorting power of the
agricultural policy supported by the U.S. government. The relative
magnitude and structure of the aid U.S. farmers receive from their
government creates a significant disadvantageous trading position for
Mexican farmers. As a result, Mexican farmers are not only exposed
to large price volatility, characteristic of international agricultural
markets, but food security for all Mexicans is also being put at risk.
In addition, opening the agricultural sector to international trade is
creating major socioeconomic changes. For example, the income of
rural families has dropped with the fall of corn price. Also, although
the correlation between corn price and rural poverty has been incon-
sistent over the last couple of decades, rural poverty remains signifi-
cantly higher than in urban areas.4 Subsequently, the challenges for
poor farmers have increased, forcing them to diversify their income

sources. A common response to the dire situation has been to migrate
to either urban areas, which increased the numbers of urban unem-
ployed, or to the United States, which has produced a rapid femini-
zation of the Mexican countryside as male workers abandon their
families in search of job opportunities.
The main purpose of the article is to summarize the salient facts that
resulted for agriculture from the change in the developing strategy
in Mexico. First, the article reviews the most relevant expected but
unmet outcomes from the opening of the agricultural sector to inter-
national trade. The next section examines the performance of Mexican
agriculture since the early 1980s and follows with a discussion of
agricultural policy in Mexico and the United States. The fourth section
examines the major consequences brought about by the change in
the development model. The last section discusses the challenges
to repair the agricultural sector, looks at some policy options, and
concludes the article.
The Unmet Expectations
Allocation of Resources
The implementation of liberalization policies in agriculture, particu-

larly with the signing of NAFTA, was aimed at creating the economic
incentives among Mexican farmers to channel available resources
to their most productive uses in order to better exploit comparative
advantages. The corn sector, which for a long time had comprised
over 40 percent of the cultivated land as well as large amounts of
other inputs such as labor, was considered highly inefficient since
the allocation of such resources was being conducted under a very
protectionist environment and highly distorted market signals. By
exposing the corn sector to international competition through the
dismantling of the protection mechanisms such as tariffs and subsi-
dies, the allocation of resources in agriculture would be driven by
clear market signals, and should become more efficient. Therefore, it
was expected that the reduction in the domestic price of corn due to
imports from the United States would decrease production, freeing
land, labor, and capital. In turn, these resources would be reallocated

to more productive uses such as fruit and horticulture, which were
non-traditional labor-intensive exporting sectors but where Mexico
enjoyed a comparative advantage with its main trading partner.
As expected, the ratio of domestic to international price of corn—in
U.S. dollars per ton—has been declining (Table 1), which reflects the
effect of opening the corn sector to international competition
launched in the 1980s. The sharp decline in the ratio of domestic to
international price of corn starting in 1994 shows the impact of such
policies. Also as expected, corn imports from the United States
increased from 0.5 million metric tons in 1980 to close to 8.0 million
metric tons in 2009. Most corn imports consist of yellow corn, prima-
rily used for animal feed, while white corn, used to make tortillas,
represents a smaller fraction. Based on these figures, it could be
concluded that the policies worked as planned. Indeed, as added by
Zahniser and Coyle (2004), it was expected that as Mexicans’ income
level raised and they incorporated more meat into their diets, Mexico’s
demand for yellow corn should increase even further. Similarly, as
the Mexican population expanded, the demand for white corn should
also grow.
However, despite the observed behavior of corn prices and imports,
and contrary to the expectation of a more efficient allocation of
resources, corn remains the largest Mexican agricultural product in
terms of both harvested land and output. Corn harvested land is still
over a third of the total harvested land while production shows a
steadily growing trend (Table 1). In fact, almost 1 million hectares
more were devoted to corn in 2009 than in 1980. Understanding the
unexpected result of producing more corn while using more land
despite lower corn prices requires a deeper analysis, however. This
implies an examination of the different types of corn producers in
Mexico as well as of the role that yield increases have played.
In a seminal study by ECLAC (1982) based on the 1970 population
census, a comprehensive classification of agricultural producers was
elaborated.5 The study classified agricultural producers in two broad
categories: 86.6 percent of farmers, defined as those small producers
that mostly produced for self-consumption, utilize family members as
their labor force, and own land of less than 12 hectares; and 13.4
Table 1
Corn Prices, Corn Harvested Land, and Corn Production
Domestic / Corn Harvested Corn
International Land as % of Total Production
Price of Corn Land Harvested (Million HA)
1980 1.74 42.2% 12.37

1981 2.15 36.7% 13.99
1982 1.64 38.9% 10.12
1983 1.55 32.4% 13.19
1984 1.56 41.0% 12.79
1985 1.83 41.8% 14.10
1986 1.75 38.1% 11.91
1987 2.40 38.0% 11.61
1988 1.54 38.0% 10.59
1989 1.71 38.9% 10.95
1990 1.98 40.8% 14.64
1991 2.18 40.6% 14.25
1992 2.36 41.8% 16.93
1993 2.42 42.6% 18.13
1994 1.80 43.4% 18.24
1995 1.38 42.8% 18.35
1996 1.15 40.3% 18.03
1997 1.35 39.8% 17.66
1998 1.33 39.3% 18.45
1999 1.34 37.5% 17.71
2000 1.32 38.1% 17.56
2001 1.30 39.0% 20.13
2002 1.29 36.8% 19.30
2003 1.29 37.4% 20.70
2004 1.22 38.1% 21.69
2005 1.21 35.7% 19.34
2006 1.19 36.5% 21.89
2007 1.18 36.6% 23.51
2008 1.15 35.8% 24.41
Source: “Estadísticas Históricas de México 2009,” Instituto Nacional de Estadística,
Geografía e Informática (INEGI), and Historical Exchange Rate Series, Banco de México
(BANXICO).
percent of agricultural entrepreneurs and transitional producers,

defined as those larger producers that produced for the market, utilize
paid labor force and own larger extensions of land.6 Although this
classification suggests a dualistic agricultural structure, the ECLAC
study emphasizes that there is a substantial sector of middle-size
producers (around 26.2 percent) in between the large commercial
producers and the subsistence and sub-subsistence producers that
must be taken into account. In a more current study (SIAP-SAGARPA
2007) that specifically focuses on corn producers, a similar taxonomy
is offered. The study identified around 2 million corn producers in
2007, 85 percent of those own less than five hectares and are classified
as small farmers, while 15 percent own land of more than five
hectares. The study also identifies a sizeable sector of middle-size
producers (of around 10 percent of the total). Recognizing the large
and growing—at least in absolute terms—number of small farmers is
essential to explain the steadily growing trend in corn production.
Most of these small farmers do not have available crop options to
switch to since they typically lack access to credit, technology, and
infrastructure, or simply because they own land of poor quality. Also,
switching from production for the domestic market to production for
exports can be risky, particularly because achieving the competitive-
ness levels required for world markets can be prohibitively expensive
(Von Bertrab 2004). Thus, considering the large and growing number
of small farmers that produce for self-consumption and not for the
market is critical to understand that, despite the fall in corn prices,
production has actually progressively increased. Another critical factor
to explain the steadily growing trend in corn production is related
to increased yields. Not every region in Mexico has benefited from
productivity improvements, but there are a few states that have
experienced a significant yield increase, particularly the state of
Sinaloa. This state alone, mostly characterized by irrigated land,
accounts for more than 20 percent of the national production and
reports yields close to 10 metric tons per hectare, which are compa-
rable to the yields in the United States. In fact, although not all top five
state corn producers (Chiapas, Jalisco, Mexico, Sinaloa, and Veracruz)
have experienced such productivity improvements, they account
for 60 percent of the national production. These facts suggest that
Figure 1
Land Use in Non-Traditional Crops
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
80
82
84
86
88
90
92
94
96
98
00
02
04
06
08
19
19
19
19
19
19
19
19
19
19
20
20
20
20
20
Non-Traditional Crops / Total Fruits & Horticulture / Total Non-Traditional Crops
Source: “Agricultural Statistics and Indicators,” Estadísticas de América Latina y El

Caribe (CEPALSTAT), Economic Commission for Latin America and the Caribbean
(ECLAC).
increases in corn production come from a combination of extensive

growth (more land in most states) and intensive growth (yield
enhancements in a few states).
With regard to alternative crops, land use data indicate that
although the amount of land devoted to fruits and horticulture has
indeed increased in relation to the total harvested land used for
non-traditional crops (it almost doubled over the last 30 years), the
land used for these non-traditional crops has actually declined
in relation to the total cultivated land in the country (Figure 1).
In fact, Mexican farmers still use three times as much land for
corn production than for all non-traditional crops combined. Further,
the land devoted to fruits and horticulture is typically irrigated
high-quality land and concentrated in a few, usually rich, farmers
with access to technology, credit, and domestic and international
markets.
Also, as explained by Alain de Janvry (1997), several agricultural
items in which Mexico has comparative advantages were traded
within a free trade regime even before NAFTA was implemented.

Examples of these are fruits and horticultural products, which means
that NAFTA provided few new tariff advantages for these sectors.
Compounding these inconsistencies between policy expectations
and empirical evidence, the farmers’ labor response to agricultural
liberalization constituted another unexpected outcome regarding the
allocation of resources. As Acevedo and Espenshade (1992) argue,
with the liberalization of agriculture and greater access to the large
U.S. market, it was expected that Mexico, a country abundant in labor,
would specialize in the production and exports of labor-intensive
goods, decreasing the pressure to migrate, particularly to the United
States. However, as discussed later, the number of farmers migrating
to the United States has significantly increased over the last three
decades. Indeed, Taylor, Yunez-Naude, and Dyer (1999) showed that
even when taking into account the high degree of diversification in
small Mexican farms to cope with liberalization policies, migration is
a logical response.7
In summary, the evidence supports the notion that most farmers,
instead of switching crops in order to more efficiently use land as
planned by policymakers, kept producing corn. Evidence (see below)
also shows that some farm labor, rather than shifting to the expanding
sectors of the economy, migrated to either urban areas or to the
United States. Thus, the evidence does not support the assumption
of an efficient resource allocation mechanism that responds to
market signals. Further, the behavior of Mexican farmers suggests that,
although the resource allocation process mechanically takes place
through markets, the decision-making process that farmers follow
involves more than simply responding to the price of corn. In other
words, farmers engage in a social provisioning process that takes
place outside of markets and that incorporates historical and cultural
elements that bear little relationship with the functioning of markets
(Dugger 1996). For example, since corn plays such an important role
within the Mexican culture and tradition, and it is a staple food in the
Mexican diet, small farmers continue to grow it for family consump-
tion regardless of price. In fact, farmers are reluctant to give up corn,
which was domesticated in Mexico some 5,000 years ago (Salvador
1997) as it also represents food security.
Distributive Gains
Since corn is the main input to make tortillas, it was expected that
imports of cheaper corn from the United States would translate into
lower tortilla prices. This would in turn benefit millions of consumers
of this staple food in the Mexican diet, mostly low-income families.
Under NAFTA, the agreement replaced a tariff and import permit
system for corn into a tariff quota system that was supposed to be
phased out during a 15-year transition period. However, as explained
by Nadal (2000), this period was actually compressed into only 30
months, forcing Mexican corn producers to struggle with the rapidly
changing market conditions. The Mexican government argued that
the tariff was not enforced in order to secure cheap corn and to make
sure that tortilla prices would not increase. Contrary to expectations
though, despite the declining price of corn, the price of tortillas has
been steadily increasing since 1994, rising faster than the price of all
food items combined, with obvious negative consequences to millions
of Mexicans who intensively consume this product on a daily basis
(Figure 2).
To understand this incongruous outcome, it is worth noting that the
processing of tortillas is fragmented among thousands of producers
throughout the country, which encourages competition and low
prices. Production of corn flour, however, is very concentrated, which
facilitates oligopolistic behavior and provides better opportunities to
influence government policy decisions. Moreover, within the package
of policies associated with the new development strategy, the priva-
tization of public enterprises was fundamental. It was for this reason
that the Mexican government transferred the state monopoly CONAS-
UPO (National Company of Popular Subsistence)—which until its
full liquidation in 1999 played a fundamental role in regulating the
national market, and stockpiling, importing, and distributing grain—to
the Grupo Minsa, a private company. As reported by Zahniser and
Coyle (2004), the two largest Mexican corn flour mills, Gruma and
Grupo Minsa, control more than 90 percent of domestic corn flour
production. This means that the benefits of cheap corn are mostly
captured by the corn flour mills, as they buy low-price corn but sell
high-price corn flour to tortilla makers. Indeed, according to publicly
Figure 2
Price Indices of Tortilla and Food (2000 = 100)
200
180
160
140
120
100
80
60
40
20
0
80
82
84
86
88
90
92
94
96
98
00
02
04
06
08
10
19
19
19
19
19
19
19
19
19
19
20
20
20
20
20
20
Food Tortilla
Source: “Indices de Precios al Consumidor y UDIS,” Banco de México (BANXICO).
available financial statements of Gruma, for example, its profit margin

has spread from 2.3 percent in 1999 to 7.5 percent in 2009, which
suggests a privileged market position. Further, in addition to the
oligopoly power exercised by major corn flour mills, in 1999 the
Mexican government ended 25 years of tortilla subsidies and price
controls, which fueled the price increases. Certainly, the rural poor,
who generally do not buy factory-made but prepare and eat hand-
made tortillas, were not as severely affected by the subsidy elimination
as urban consumers were. But these facts, tortilla prices increase as
corn price decreases, evidently suggest that the expected distributive
gains in the form of low tortilla prices benefiting millions of Mexican
low-income consumers have not taken place.
Overall Performance of the Agricultural Sector
In contrast to the expectations set forward by policymakers when

launching the new development strategy, Mexican agriculture has
performed poorly over the last three decades. Since 1980, the agri-
cultural sector increased by an annual average of 1.6 percent, which
is barely above the population annual growth rate (1.5 percent) but
below the average Gross Domestic Product (GDP) annual growth rate
(2.5 percent), measured in constant 2000 U.S. dollars. The total
harvested land increased by nearly 4 million hectares, but most of this
expansion was rain-fed land. In fact, irrigated land increased by less
than a million hectares over the 30-year period (Table 2). Although the
“Green Revolution” produced yield increases worldwide, the impact
of technology in agriculture had a more favorable effect in the United
States than in Mexico. In 2008, for example, the average corn yield in
the United States reached 9.46 metric tons per hectare, while the
same indicator for Mexico—where the corn sector still includes a large
number of small-scale producers employing backward technologies—
was only 3.22.
Despite the disappointing performance of the overall agricultural
sector and as an expected outcome of the liberalization, however, the
fruit and horticulture sub-sectors have experienced substantial growth.
Although the land devoted to these crops modestly increased from 0.8
million hectares in 1980 to 1.3 million in 2009, the productivity gains
were significant, particularly since NAFTA came into effect. In fact,
exports of fruit and horticulture products more than tripled, repre-
senting now more than 75 percent of the total agricultural exports
(Figure 3). The gains in productivity, however, were mainly the result
of applying more efficient technology by large commercial farmers,
and not so much by small farmers switching from corn to fruit and
horticulture production (de Grammont 2003).
In addition, two important facts should be pointed out. First, the
relatively small increase in cultivated land for fruit and horticulture
products (0.5 million hectares in 30 years) combined with a significant
yield increase due to technological improvements, suggest that
employment opportunities in this expanding sector are likely to be
modest. This implies that the incentive to switch from corn to these
non-traditional products is likely to be minimal. It also means that the
benefits obtained from producing and exporting these products is
likely to be concentrated in a relatively small number of large farmers.
Second, fruit and horticulture sub-sectors only represent around 3
Table 2
Total Harvested Land and Corn Yields
Harvested Land (HA) Corn Yields (MT/HA)
Total Rain Fed Irrigated Mexico USA
1980 16,039,480 13,238,896 4,585,347 1.21 6.87

1981 20,904,977 14,489,444 5,019,827 1.28 5.71
1982 14,476,946 11,392,960 5,052,519 1.53 6.84
1983 22,890,838 11,194,497 5,353,070 1.17 7.11
1984 16,805,618 10,271,529 5,586,656 1.43 5.09
1985 18,172,521 13,878,441 5,285,073 1.57 6.70
1986 16,979,685 12,000,000 5,200,000 1.69 7.41
1987 17,912,359 11,486,520 5,570,154 1.67 7.49
1988 17,094,539 11,270,087 5,674,032 1.65 7.52
1989 16,617,245 11,384,531 5,232,714 1.68 5.31
1990 17,974,637 13,031,194 4,943,443 1.68 7.30
1991 17,106,488 11,975,674 5,130,814 2.14 7.44
1992 17,278,429 12,269,392 5,009,037 2.10 6.82
1993 17,423,326 12,393,870 5,029,456 2.47 8.25
1994 18,866,622 13,453,297 5,413,325 2.49 6.32
1995 18,753,551 13,772,682 4,960,275 2.12 8.70
1996 19,981,003 15,012,207 4,968,796 2.29 7.12
1997 18,586,339 13,439,914 5,146,425 2.30 7.98
1998 20,050,318 15,176,620 4,873,699 2.41 7.95
1999 19,097,575 14,354,829 4,742,746 2.26 8.44
2000 18,734,050 14,054,330 4,679,720 2.66 8.40
2001 20,032,833 15,284,775 4,748,058 2.51 8.59
2002 19,318,966 14,475,881 4,843,082 2.62 8.67
2003 20,118,776 15,307,527 4,811,338 2.74 8.12
2004 20,191,532 15,337,193 4,854,338 2.83 8.92
2005 18,528,491 13,328,375 5,200,116 2.87 10.06
2006 19,978,367 14,750,043 5,217,414 2.94 9.29
2007 20,054,634 14,746,233 5,308,401 3.03 9.36
2008 20,502,834 15,089,777 5,413,057 3.22 9.46
Source: “Estadísticas Históricas de México 2009,” Instituto Nacional de Estadística,
Geografía e Informática (INEGI), Production, Supply and Distribution Online, Economic
Research Service, United States Department of Agriculture (USDA).
Figure 3
Exports of Fruit and Horticultural Products
90.0% 7.0%
80.0% 6.0%
70.0%
5.0%
60.0%
50.0% 4.0%
40.0% 3.0%
30.0%
2.0%
20.0%
10.0% 1.0%
0.0% 0.0%
19 3
19 4
95
19 6
19 7
19 8
99
20 0
20 1
20 2
20 3
20 4
20 5
06
20 7
20 8
09
9
9
9
9
9
0
0
0
0
0
0
0
0
19
19
20
20
Fruit & Horticultural Exports/Total Agricultural Exports

Total Agricultural Exports/Total Exports
Source: “Balance of Payments Accounts,” Banco de México (BANXICO).
percent of total exports. This means that despite the significant pro-
duction and export increases in these sub-sectors, they are overshad-
owed by the trading performance of the overall agricultural sector.
Besides, the agricultural trade balance began to consistently show
a deficit since the 1980s (Figure 4). With the exception of the peso
devaluations of 1985 and 1994, during which due to a temporary but
large depreciation the trade balance showed a short-lasting surplus,
the balance shows a clear negative trend.
Summing up, labor opportunities in the expanding sectors are
minimal due to small increases in land utilization and increases in
productivity. The benefits produced in the expanding sectors are
concentrated in few large commercial farmers, not distributed among
the large number of small peasant farmers. The size of the expanding
sectors and its exports are small relative to the size of imports. Thus,
evidence shows that the expected transformation of the agricultural
sector to achieve rural development has not materialized.
Figure 4
Agricultural Trade Balance (Million US$)
2,000
1,000
-1,000
-2,000
-3,000
-4,000
61
64
67
70
73
76
79
82
85
88
91
94
97
00
03
06
09
19
19
19
19
19
19
19
19
19
19
19
19
19
20
20
20
20
(ECLAC).
Agricultural Policy and Other Factors
Arguably, at least during the last three decades, the Mexican govern-
ment has considered small land properties as inefficient and overall
agriculture as a declining sector with low yields. In terms of political
influence, the large numbers of small farmers are at significant dis-
advantage not only with the urban industrial sectors, but also with the
rural rich landholders. Consequently, policies are typically centralized
ignoring the needs of the rural population, predominantly among the
poor (Fox and Haight 2010). Indeed, as the agricultural sector became
increasingly exposed to trade liberalization, a combination of failed
domestic policies and persistently damaging foreign policies (mainly
from the United States) implied that the goals of opening the sector to
international competition would be much harder to attain. More-
over, the rules of the World Trade Organization (WTO) imply that the
ability of governments to influence international prices is no longer
based on tariffs and other traditional protection mechanisms, but on
the strength of their national budgets in order to provide support to
agricultural producers. Given the significantly large government

payments to the agricultural sector in the United States—particularly
corn—it seems evident that the Mexican rural sector is at considerable
disadvantage given Mexico’s weaker national budget (Oxfam 2003).
This compounds the technological, credit, and scale advantages
of U.S. farmers over Mexican farmers. Thus, far from competitive
market-price-driven conditions, Mexican agriculture operates within
an economic environment characterized by significant asymmetries
and distortions, some internal and some imposed by major trading
partners.
Agricultural Policy in Mexico
During the 1980s, the implementation of policies of austerity and

restructuring of government agricultural extension services, marketing
agencies, and the rural credit system made the challenges to develop
the agricultural sector even more difficult to overcome. The new set of
policies eliminated old agencies and programs, and created new ones.
Policy changes virtually touched every angle of agriculture (Table 3).8
Guaranteed prices held above world-market levels were abandoned.
Subsidies on fertilizer, crop insurance, irrigation water rates, and
loans were either completely eliminated or severely reduced. Public
agencies that were in control of marketing, input supply, storage, and
other agricultural services were either closed or privatized. In addition,
in 1992, in an effort to set the institutional framework conducive to
agricultural development, Article 27 of the Mexican Constitution was
amended to allow for the rental and sale of communal landholdings
(ejidos). The land reform sought to give security to those who owned
land by enhancing property rights and with this to promote invest-
ment. However, ejidos remain poorly integrated to the national and
especially international markets mostly because they suffer from a lack
of roads and marketing networks (Foley 1991), but also because the
constitutional reform was not adequately accompanied by policies
to deal with incomplete or segmented credit markets or with water
allocation issues.
Since its creation in 1965, CONASUPO played a major role in Mexican
agriculture by supporting prices for the producers of important crops—
Table 3 162
Outline of Main Agricultural Policy Events in Mexico, 1954–2010

Years Policy Brief Description
1954–1982 Stabilizing development Emphasis on continuing industrialization with the state as an important
agent. This period was brought to a halt by indebtedness and a
major devaluation of the Mexican peso, forcing government to
change development strategy.
1986 Mexico joins GATT Most agricultural import licenses were eliminated. Reduction of tariffs
on most agricultural commodities.
1987 PRONADRI (National Program for Integrated Government supports minimum farm gate prices in line with
Rural Development) production costs and world market prices.
1992 Reform of the Agrarian Law (Article 27 of the Peasants to put up their land as collateral for a loan.
Mexican Constitution)
1992 BANRURAL (Agrarian Development Bank) is Provided loans for the agricultural sector.
declared bankrupt
1994 Mexico, Canada, and the United States launch Import and export licenses are substituted by tariffs. Each country
NAFTA keeps its right to choose internal subsidies, rules of origin, and
other regulations.
1993–1994 PROCAMPO (Farmers Direct Support Program) Cash transfer program designed to compensate small farmers for the
losses brought by the liberalization of agriculture.
1995 ALIANZA PARA EL CAMPO (Alliance for the Designed to stimulate rural productivity and capitalization. Federal,
Countryside) state, and local government participate.
1997 PROGRESA (Education, Health, and Nutrition Cash transfer program designed to address extreme poverty in rural
Program) areas, mainly aimed to assist women.
The American Journal of Economics and Sociology
1999 Mexico fully liquidates CONASUPO (National Guaranteed prices for most agricultural commodities are eliminated.
Company of Popular Subsistence) Support prices for beans and corn are also eliminated.
2002 Blindaje Agroalimentario (Agri-food Armor) Fundamentally designed to protect Mexican farmers from impacts of
U.S. Farm Bill of 2002
2003 National Accord for the Countryside Agreement to define food security and rural development policies
between government and farmers and peasant organizations.
including corn—which effectively helped to maintain rural income.

CONASUPO also helped producers with storage, processing, and
distribution of these crops, and also regulated their trade through direct
imports. Although CONASUPO was not fully liquidated until 1999, its
dismantling began in the mid-1980s. In an attempt to minimize the
impact of its elimination, the Mexican government created ASERCA
(Support Services for Agricultural Marketing), which supports market-
ing for grains and oilseeds, provides information about markets and
contracts, and promotes exports. However, ASERCA does not buy,
store, process, or distribute merchandise as CONASUPO did. Besides,
thousands of small-scale farmers do not produce for the market and are
not prepared for exports. Consequently, the reach of the marketing
support system is limited to few large commercial large producers.
Although conditional transfer programs are still not very common in
developing countries, for the case of Mexico, this kind of initiative is
gradually displacing traditional policy instruments to alleviate poverty,
promote food security, and foster rural development (Ruiz-Arranz
et al. 2006). Two such programs are PROCAMPO (Program of Direct
Support for Agriculture), which is linked to cultivated land and
payments are made on a per hectare basis, and PROGRESA (Educa-
tion, Health, and Nutrition Program), which is linked to increased
usage of government schooling and health care facilities. PROCAMPO,
launched in 1994, is the income support mechanism designed to assist
farmers during the adjustment process produced by the liberalization.
PROCAMPO constitutes the largest agricultural support program,
and is about one-third of the total budget of SAGARPA (Ministry of
Agriculture, Livestock, Rural Development, Fisheries and Food), the
Mexican agricultural secretariat. PROCAMPO current rates amount
to approximately US$104 per hectare for producers with less than five
hectares and US$92 per hectare for producers with more than five
hectares. It is important to note, however, that those farmers who have
irrigation systems are entitled to receive two payments when taking
advantage of the two agricultural seasons in Mexico. Therefore,
despite the fact that the program was designed to assign support
based on the size of the cultivated land, PROCAMPO payments can be
made twice a year but only to those farmers who own irrigated land,
which reveals a bias in favor of richer farmers (Fox and Haight 2010).
PROGRESA, created in 1997 and renamed OPORTUNIDADES

(Opportunities) in 2002, is designed to target poverty by providing
cash payments to families in exchange for regular school attendance,
health clinic visits, and nutritional support. Although PROGRESA is
one of the most generous federal antipoverty programs, operating
in more than 50,000 communities and taking up to 20 percent of
the Mexican government budget allocation for poverty alleviation
(Ruiz-Arranz et al. 2006), PROGRESA beneficiaries are not eligible for
other antipoverty programs or education subsidies.
With regard to credit to farmers, the government significantly
reduced official credit subsidies, which became very costly due to the
high and persistent rates of default of credits granted by BANRURAL
(Agrarian Development Bank). BANRURAL was declared bankrupt in
1992 but it was maintained until 2003, when the government replaced
it with another private unsubsidized development bank named FIN-
ANCIERA RURAL (Rural Financing). The measure, however, did not
stop the sharp decline in credit subsidies and coverage needed by the
rural sector. The expectation was that private credit institutions would
fill the credit needs in rural areas. Yet, poor bank penetration in rural
areas due to market imperfections, market segmentation, and banking
crisis implied that private credit did not reach poor farmers, particu-
larly in remote locations.
ALIANZA PARA EL CAMPO (Alliance for the Countryside), initiated
in 1995, is a matching fund federal program but administered by state
governments designed to assist farmers in capitalizing and moderniz-
ing their production processes. Although the intent of the program
is to generate structural changes in order to address the needs for
agricultural development, the program basically consists in subsidies
for the purchase of agricultural machinery that support irrigation,
mechanization, pasture land development, and technology transfer,
among others. The decentralized nature of the program where states
are supposed to define the target beneficiary population—a task
that has not been fulfilled by most states—has made evident some
problems with regard to coverage and focus. Indeed, the evaluation
report by SAGARPA-FAO (2008) calls for a more precise definition of
the target population so that resources can be better focused on the
population that ALIANZA PARA EL CAMPO is supposed to attend.
In summary, as Yunez-Naude and Barceinas (2006) have argued,

evidence suggests that although Mexico experienced a series of radical
public policy changes, the structure of agriculture was not fundamen-
tally transformed. The sector did not develop adequately to face the
challenges that world markets imposed once the sector was open to
compete internationally. Reliance on corn imports also implied being
more exposed to the fluctuations in international prices, which can
become a serious threat to food security, a weakness that can be
greatly exacerbated by currency devaluations like the ones experi-
enced in 1985 and 1994.
Agricultural Policy in the United States
At least since the 1930s, the United States has implemented a set of
generous government agricultural programs that over time have
shifted from maintaining minimum prices to a system of farm income
support, particularly with respect to corn (Table 4). Although there
are other pieces of legislation dealing with agricultural policy, the
Farm Bill is the primary agricultural and food policy tool of the federal
government that mainly deals with policies designed by the U.S.
Department of Agriculture (USDA). While government support poli-
cies are not the only factors influencing prices, production, and
income in terms of international trade, such policies deserve the most
attention since the WTO has established some rules that regulate their
implementation in its efforts to promote free trade. From 1970 up to
1996, the hallmark of U.S. agricultural policy was that benefits were
based on the quantity produced, while market prices were allowed to
fall below predetermined support levels. Coupled direct payments
essentially established the incentive structure to increase production.
According to the WTO, distorting domestic farm programs are classi-
fied as amber box subsidies and are subject to an Aggregate Measure
of Support (AMS) limit. In contrast, green box subsidies are considered
to have no, or at most minimal, production and trade-distorting
effects. As such, these payments are exempt from AMS restrictions.9
Thus, determining whether payments are coupled or decoupled is
extremely important because current WTO rules impose maximum
amounts for those policies considered production and trade-distorting.
Table 4 166
Outline of Main Agricultural Policy Events in the United States, 1970–2010

Years Policy Brief Description
1970–1996 Coupled direct payments Farmers received direct payments from the government based on quantity
produced. Price support policies were gradually substituted by income
support polices.
1973 Agriculture and Consumer Provides farmers with direct payments of the difference between the target
Protection Act price and the market price.
1980 Federal Crop Security Act The number of insurable crops and acreage was expanded. The law allowed
that private companies sold and serviced crop insurance. Policy was
amended and expanded in 1994.
1983 Payment in Kind (PIK) Program Farmers voluntarily participating divert land from production to approved
conservation uses and in return they are compensated with surplus
agricultural commodities.
1985 Marketing Loan Program Farmers received the difference between the market price and a loan rate as
direct payment when the market price is below the loan rate.
1994 Mexico, Canada, and the United States Import and export licenses are substituted by tariffs. Each country keeps its
launch NAFTA right to choose internal subsidies, rules of origin, and other regulations.
1996–2005 Decoupling direct payments Direct payments are not directly linked to current production or prices, but
to expected market returns based on past production or price levels.
1996 Agricultural Marketing Transition Act Allowed farmers to enter into 7-year production flexibility contracts, which
removed the link between income support payments and farm prices by
providing fixed payments.
2002 Farm Security and Rural Investment Replaced production flexibility contract payments with direct payments, and
The American Journal of Economics and Sociology
Act (2002 Farm Bill) introduced countercyclical payments.

2002 Countercyclical Payments Program Provided payments based on the difference between a target price and the
higher of the loan rate or the season average price minus the direct
payment rate.
2008 Food, Conservation, and Energy Act Continuation of the 2002 Farm Bill.
(2008 Farm Bill)
Before 1996, it is clear that coupled direct payments were trade-

distorting as they encouraged production, depressed prices, and
stimulated exports. However, since 1996, probably due to the pressure
exerted by the objectives of the WTO in eliminating trade-distorting
subsidies, agricultural policy switched to decoupled direct payments,
which are not directly linked to current levels of production but to
expected market returns, an thus are allowed under WTO current
rules. The new policy package also included countercyclical payments
(CCP), which provide payments based on the difference between a
target price and the higher of the loan rate or the season average price
minus the direct payment rate. These payments, which are intended
to protect farmers from fluctuations in market conditions, depend on
the level of market prices. CCP are decoupled and thus also allowed
under WTO regulations. Therefore, after the policy switched to decou-
pled payments, the bulk of direct payments under current WTO
regulations are not considered trade-distorting and thus are not subject
to any limitations.10 Exploring the details and intricacies of these
policies is beyond the scope of this article. However, as Wise (2004b,
2009a) has argued, the magnitude and structure of the support that
the U.S. government provides to its farmers produce significant asym-
metries and distortions that are critical to Mexican agriculture and its
farmers.
Major Consequences
The ineffectiveness of the current model for rural development adopted

by Mexico in the 1980s, in combination with the deleterious effect
produced by U.S. agricultural policies, is magnified when considering
the socioeconomic implications that have emerged in the last few
decades as direct and indirect consequences of opening the agricultural
sector. After 30 years of the change in the development strategy and
16 years after the signing of NAFTA—a time period long enough to
examine the income distribution impact of the liberalization policies—
rural poverty and inequality provide evidence of the persistent devel-
opment differences between Mexico and the United States.
Building on colonial legacies, and despite the efforts to modernize
the Mexican countryside, the rural Mexican population remains mostly
segmented between a large number of small and peasant asset-poor

producers and a small number of large-scale modern firms. The
constitutional reform privatizing traditional landholdings has left many
poor farmers even more vulnerable and marginalized, since some of
the ejido land has been either sold to larger more powerful farmers or
to corporations. Thousands of peasant farmers who own land have
limited amounts or own land of poor quality. Most do not have access
to irrigation systems, to more advanced technologies, or to formal
credit channels, and lack access to markets where they could sell their
products. On the other hand, large commercial landowners have
control of the most productive assets operating large-scale modern
farms. In addition, their political and economic ties grant them a
position to influence the formulation and implementation of policies
to their benefit. PROCAMPO, for example, which was designed to
compensate small farmers for the losses brought by the liberaliza-
tion of agriculture, employs a regressive allocation of resources. As
reported by Fox and Haight (2010), PROCAMPO has no ceiling that
limits resources to those that have large extensions of land, so it is
biased in favor of large and typically rich producers. Further, David,
Dirven, and Vogelgesang (2000) have argued that, given the large
number of small and peasant producers, it is not surprising that social
programs alone are insufficient to tackle the development gap. As
a result, although rural poverty has slightly declined following the
national downward trend, it still remains significantly higher than
urban poverty. According to data from the National Council for the
Evaluation of Social Development Policy (CONEVAL), the average
annual difference between urban and rural poverty rates over the last
20 years was a 23.7 percent point difference in food poverty and a
21.9 percent point difference in patrimony poverty.
Given the deep state of inequality and backwardness in the coun-
tryside, and in their struggle to adapt to the rapidly changing eco-
nomic conditions, Mexican farmers are resorting to a diversified set
of strategies in order to supplement their income and, for some,
to survive. Wiggins et al. (1999), for example, report that rural house-
holds maintain a diverse portfolio of income-earning activities based
on farming, salaried work, small-scale enterprises, and temporary
migration. Fitting (2006) also reports that poor Mexican farmers earn
Figure 5
Rural Population
26,000,000 45%
40%
25,000,000
35%
24,000,000
30%
23,000,000 25%
22,000,000 20%
15%
21,000,000
10%
20,000,000
5%
19,000,000 0%
1970 1975 1980 1985 1990 1995 2000 2005 2010
Rural Population Percent of Total Population

(ECLAC).
their income from combining subsistence and commercial agricul-

ture with income from other activities, which include construction,
running a small store in town, selling goods at the local market, and,
in growing numbers, migration to either urban areas or other coun-
tries, mostly to the United States.11
With regard to domestic migration, data show a clear decreasing
trend in the percentage of the total Mexican population living in rural
areas (Figure 5). While this percentage was 41 percent in 1970, it was
only 21 percent in 2010. The urban bias embedded in the develop-
ment strategy favoring industry and commerce activities produced
massive rural-urban migration. Consequently, as farmers leave their
villages in search for employment in the urban areas, they frequently
have no alternative but to sell their land. This means that land
ownership has become increasingly concentrated, typically benefiting
the already large-scale modern farms and their owners (Fox and
Haight 2010). In the urban areas, on the other hand, a growing

informal sector partially allows excess labor to escape from extreme
rural poverty and underemployment. However, not only are the living
and working conditions often not much better, but rural migrants are
exposed to the social problematic endemic of large cities—pollution,
lack of public service, and crime.
With regard to international migration, despite the expectation
that Mexican migration to the United States would decline with the
opening to international trade, data since 1980 show otherwise.
The population of Mexican origin, which includes second- and third-
generation Mexicans, quadrupled since 1980. Also, the Mexican-born
population increased almost seven times in the same time period
(Table 5). Further, most of the increase took place within the last 15
years, which coincides with the period that NAFTA has been in place.
Table 5
Mexican Population Resident in the United States and
Remittances (Selected Years)
Population of Mexican Mexican Born Remittances
Origin* (Thousand) Population (Thousand) (USD Million)
1980 9,071 2,199 —

1990 14,094 4,447 2,494
2000 23,208 8,072 6,573
2001 23,997 8,494 8,895
2002 25,487 9,900 9,815
2003 26,663 10,237 15,041
2004 26,871 10,740 18,331
2005 28,059 11,027 21,689
2006 29,307 11,132 25,567
2007 30,266 11,812 26,069
2008 34,745 13,978 25,137
2009 36,753 14,918 21,181
*Includes second- and third-generation Mexicans.
Source: “Población residente en Estados Unidos,” Consejo Nacional de Población
(CONAPO), Mexican Interior Secretariat.
One of the most significant aspects of Mexican farmers migrating

to the United States is the size and role of remittances, particularly in
supporting economic development in rural areas. The amount of
remittances sent to Mexico reached a record level of more than US$26
billion in 2007. Some migrant farmers send money to Mexico as a way
to supplement household income. Regularly, these funds are used for
consumption goods and, in some cases, to finance investment in
infrastructure and other productive uses in small towns (Hamann
2007). Other migrant farmers, however, utilize remittances to subsidize
agricultural activities of the families they left behind and, somewhat
paradoxically, many do so as a strategy to keep their land, using these
remittances to buy investment goods such as trucks or tractors, instead
of consumption goods.
Another important aspect of migration is the feminization of the
Mexican countryside. Although several forces are at play explaining
the broadened and deepened role of women in agriculture, one
fundamental factor is the migration of male farmers to mainly the
United States, but also to urban areas. As a result, in addition to
looking after their families, their children, and the elderly, women are
increasingly taking charge of farms as men either migrate for extended
periods or engage in off-farm employment. Further, since typically
women have less education and more limited opportunities to own
land and access to credit, they have suffered disproportionately from
the fall in household income produced by the decline in corn prices.
Figure 6 shows that despite the decline in the rural population, the
percentage of the female economic active population in agriculture
has doubled since 1990, from 16 percent to 32 percent. These figures
suggest that more women are undertaking agricultural fieldwork and
tasks, working longer hours on the farm, and possibly even making
most of the farming decisions.
Fixing Mexican Agriculture
The formulation and implementation of effective public policies that

promote rural development has proven to be extremely challenging.
The consequences for the countryside of changing the development
strategy during the 1980s, coupled with the policies implemented in
Figure 6
Feminization of a Declining Rural Population
40%
1980
35% 1985
1990
30% 1995
2000
25% 2005
2010
20%
15%
10%
5%
0%
80
82
84
86
88
90
92
94
96
98
00
02
04
06
08
10
19
19
19
19
19
19
19
19
19
19
20
20
20
20
20
20
Rural Population / Total Female Rural Economic Active Population

(ECLAC).
the United States for the last 30 years, have called into question the
current set of policies pursued by the Mexican government. It seems
evident that mostly due to tradition and historical factors, small
farmers do not switch to more efficient productive efforts in response
to market signals. Thus, they are in no position to compete domesti-
cally with large-scale landholders, or internationally with highly sub-
sidized farmers. Further, the present economic conditions created by
domestic and international policies are not conducive for thousands of
small farmers to overcome poverty.
As an economic sector in the development strategy, agriculture
has essentially played a passive and supportive role, providing suf-
ficient low-priced food and manpower to the expanding industrial
economy. But given the evidence of the last 30 years, it is increas-
ingly apparent that far from playing a passive role, the agricultural
sector must play an indispensable part in the development strat-
egy. In redefining the role of the government, new policies should
seriously acknowledge important characteristics of the Mexican agri-

cultural sector that in the recent past seemed to have been given little
weight or even ignored. Namely, agriculture is not a perfectly com-
petitive industry, market failures are present, and segmentation still
remains. Further, development efforts should consider the factors
holding back the agricultural sector such as entrenched poverty,
inadequate access to credit and insurance, poor provision of infra-
structure, and lack to access to technological innovations, institutional
structures, and administrative competence. With regard to interna-
tional trade in particular, as attractive at it is typically portrayed in
terms of exploiting comparative advantages, the liberalization of agri-
culture should contain criteria that balance productivity-enhancing
programs to assist those farmers in the expanding sectors with equity-
enhancing social programs to assist those farmers in the contracting
sectors. Evidently, this can be not only difficult, but also expensive.
In fact, this partially explains why, given the need for structural
adjustment and healthy public finances experienced in Mexico in
the 1980s, many social programs were dramatically reduced or even
dismantled. However, the current economic conditions, as well as the
international position of Mexico, are different from those 30 years
ago. As argued by Alain de Janvry (1997), the lessons learned by
the recent experiences could significantly improve agricultural policy.
For example, small farmers should be provided with a package of
assistance that includes credit (since commercial banks rarely reach
poor farmers in remote locations), technical assistance, marketing,
and insurance.
In terms of addressing the agricultural policies in the United States,
Wise (2004a) has argued that small-scale Mexican farmers are
unlikely to benefit much from reductions in agricultural subsidies
because U.S. farmers, rather than reducing production in response to
lower unsubsidized prices, simply switch production efforts to other
crops. Consequently, as long as production levels remain high, prices
do not rise and dumping margins continue in place. Thus, the nar-
rative addressing U.S. agricultural policies should call for a com-
prehensive reform that focuses on ending agricultural dumping in
all shapes and forms, rather than only focusing on the elimination or
reduction of subsidies.
Despite these challenges though, a few efforts have been put in place
to ameliorate some of the deleterious effects brought by the opening of
the agricultural sector. For example, Iskander (2005) examines how
government and local communities have worked together to channel
migrant remittances to productive investment, presumably generating
employment and economic growth. These initiatives, although valuable
and perhaps even effective in some cases, do not directly deal with
the cause of the problems, but merely constitute palliatives to the
consequences. Further, it should be recognized that finding the proper
policies to promote rural development within the frame of NAFTA and
the WTO, and facing the adverse situation produced by agricultural
policies implemented in the United States, does not leave Mexican
policymakers with many options. However, NAFTA allows trading
parties to apply anti-dumping and countervailing duties laws to goods
imported from NAFTA partners, leaving agricultural exporters that
heavily subsidize their farmers vulnerable to legal action. Some scholars
have actually observed that Mexico could join Canada in its claims of
dumping against U.S. corn producers (Wise 2009b).
Finally, although the research examining the linkages between
the liberalization of agriculture and the environmental consequences
produced by it is still limited, scholars have identified potential nega-
tive effects in soil quality, water resources, and the loss of genetic
resources (Nadal 2000). These facts are extremely relevant in terms of
informing policy since environmental concerns can become a useful
vehicle for effective protective policy action given that WTO and
NAFTA regulations may allow for protection of biological diversity as
an environmental good. Based on these arguments, Wise (2007) has
pointed out that Mexico could apply to the Cartagena Protocol con-
cerning biodiversity and environmental protection.12 One big problem
with this approach is that to date only Mexico has signed and ratified
the Protocol. Canada has signed but not ratified it, and the United
States has done neither.
Notes
1. Plan Puebla is an agricultural development project that was started in
1967 by CIMMYT (the International Center for the Improvement of Maize and
Wheat) in Mexico.
2. Perhaps due to the speed at which the negotiation and signing of

NAFTA took place, a very narrow number of studies examining its potential
negative impact on agriculture were conducted. Josling (1993) examines the
available pre-NAFTA literature and argues that although some qualitative
research was conducted, only a limited amount of quantitative research
diligently explored the potential repercussions of opening the agricultural
sector to trade.
3. For example, based on data from the National Institute of Statistics and
Geography (INEGI), the average annual corn production during the 2000s
(20.62 million metric tons) was substantially higher than the average annual
corn production registered during the 1970s (9.03 million metric tons), the
1980s (12.16 million metric tons), and the 1990s (17.23 million metric tons).
At the same time, the average annual production during the 2000s of avoca-
dos, coffee, beans, tomatoes, mangoes, oranges, potatoes, bananas, and
grapes combined only reached 15.55 million metric tons.
4. According to data from the National Council for the Evaluation
of Social Development Policy (CONEVAL), the average annual difference
between urban and rural poverty rates over the last 20 years has been
substantial: a 23.7 percent point difference in food poverty, a 24.9 percent
point difference in capabilities poverty, and a 21.9 percent point difference in
patrimony poverty.
5. ECLAC, the Economic Commission for Latin America and the Carib-
bean, is one of the five regional commissions of the United Nations. It was
founded with the purpose of contributing to the economic development of
Latin America.
6. The other 10 percent is composed of livestock producers.
7. Wise and Waters (2001) provide an overview of how the most affected
by liberalization have reacted to the challenges and opportunities created by
it.
8. For a more inclusive review of the evolution of recent agricultural
policy in Mexico, see Yúnez-Naude and Barceinas (2006).
9. For a more complete discussion on the limits to domestic support
within the WTO rules, see Schnepf (2010).
10. For an analysis on whether decoupled payments are actually distorting
or not, see Goodwin and Mishra (2006).
11. For a discussion of the impact of agricultural policy reform on small
communities, see Wiggins et al. (2002).
12. The Cartagena Protocol, which entered into force in 2003, is an
international agreement on bio-safety that seeks to protect biological diversity
from the potential risks posed by living modified organisms resulting from
modern biotechnology.
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2013 Corn and Mexican Agriculture What Went Wrong?

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Corn and Mexican Agriculture:

What Went Wrong?

ABSTRACT. The debt crisis of the 1980s caused the development

The debt crisis of 1982 marked the beginning of a period characterized

recommendations based on the use of fertilizer, timing, and plant

poor farmers have increased, forcing them to diversify their income

The Unmet Expectations

The implementation of liberalization policies in agriculture, particu-

land, labor, and capital. In turn, these resources would be reallocated

1980 1.74 42.2% 12.37

percent of agricultural entrepreneurs and transitional producers,

Land Use in Non-Traditional Crops

Source: “Agricultural Statistics and Indicators,” Estadísticas de América Latina y El

increases in corn production come from a combination of extensive

within a free trade regime even before NAFTA was implemented.

Price Indices of Tortilla and Food (2000 = 100)

available financial statements of Gruma, for example, its profit margin

Overall Performance of the Agricultural Sector

In contrast to the expectations set forward by policymakers when

Total Rain Fed Irrigated Mexico USA

1980 16,039,480 13,238,896 4,585,347 1.21 6.87

Exports of Fruit and Horticultural Products

Fruit & Horticultural Exports/Total Agricultural Exports

Source: “Balance of Payments Accounts,” Banco de México (BANXICO).

Agricultural Trade Balance (Million US$)

Agricultural Policy and Other Factors

agricultural producers. Given the significantly large government

Agricultural Policy in Mexico

During the 1980s, the implementation of policies of austerity and

Outline of Main Agricultural Policy Events in Mexico, 1954–2010

including corn—which effectively helped to maintain rural income.

PROGRESA, created in 1997 and renamed OPORTUNIDADES

In summary, as Yunez-Naude and Barceinas (2006) have argued,

Agricultural Policy in the United States

Outline of Main Agricultural Policy Events in the United States, 1970–2010

Act (2002 Farm Bill) introduced countercyclical payments.

Before 1996, it is clear that coupled direct payments were trade-

The ineffectiveness of the current model for rural development adopted

segmented between a large number of small and peasant asset-poor

Rural Population Percent of Total Population

Source: “Agricultural Statistics and Indicators,” Estadísticas de América Latina y El

their income from combining subsistence and commercial agricul-

Haight 2010). In the urban areas, on the other hand, a growing

1980 9,071 2,199 —

One of the most significant aspects of Mexican farmers migrating

Fixing Mexican Agriculture

The formulation and implementation of effective public policies that

Feminization of a Declining Rural Population

Source: “Agricultural Statistics and Indicators,” Estadísticas de América Latina y El

seriously acknowledge important characteristics of the Mexican agri-

2. Perhaps due to the speed at which the negotiation and signing of

Acevedo, D., and T. J. Espenshade. (1992). “Implications of a North American

Hamann, V. (2007). The Impact of International Labor Migration on Regional

A Village-Town CGE Analysis from Mexico.” American Journal of

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