REPORT - MEXICO Part two

Agriculture once again takes center stage

While some larger states in the north are using technology-based farming practices to increase productivity, the Ministry of Agriculture recently suggested that only 6% of the country’s farmers are efficient.

In a country that has a diversity of regions and ecosystems, and is neighbour to a range of lucrative export markets, the Mexican agricultural sector should be thriving. Since the North American Free Trade Agreement (NAFTA) came into effect in 1994, the average annual growth of Mexican agricultural exports has stood at 10% (amounting to $13 billion in 2007). Along with the rising prices of commodities such as maize and sugar, both farmed extensively on Mexican soil, dark clouds should, for now at least, have dissipated from the horizon.

However, a major protest by farmers in Mexico City on January 31st against the banishing of NAFTA’s last tariffs on maize, sugar, milk and beans was perhaps the noisiest indicator that all is not well in rural Mexico.

While some larger states in the north of the country are using efficient farming practices to increase productivity, the Ministry of Agriculture recently suggested that only 6% of farmers are highly efficient. Home to 25% of the population, rural Mexico is a cause for concern as poverty is still a reality and subsistence farmers are often under-producing.

In light of the recent NAFTA developments, the possibility of cheaper produce entering from the north has created discontent, but in reality much of Mexico’s needs for these products come from shortfalls in domestic production, raising further questions about the sector’s productivity levels.

The situation is such that in order to fulfil domestic needs and international trade ambitions, the agricultural sector must become more competitive. This can only be done if producers, processers and agricultural associations make a widespread commitment to change and modernization. Commitment is also needed in terms of policy and funding, both issues that are the responsibility of the federal government.

According to the president of the National Agricultural Council (CNA), Jaime Yesaki, that commitment is finally coming as agriculture is back on the political and financial agenda. In 2007, the agricultural sector was discussed at a Mexican bankers’ convention for the first time in 15 years. “We hope that the finance sector’s words become a reality,” says Yesaki, ”and that competitive funding is provided, but not on terms that make getting credit impossible.”

Felipe Calderón’s government’s awareness of the need for rural development was evident in the recently launched National Development Plan for 2007-2012. Along with plans for improved infrastructure and economic diversification in rural areas, the agricultural sector itself has been positioned as a key industry for development. Training, better organization, more research that will lead to the production of more suitable and cost-effective crops, and a better market strategy to meet domestic and international demands are all part of the plan that aims to see Mexico taking better advantage of its strategic position and unique geography, and better care of its people.

Yesaki adds, “As businesspeople in the agricultural sector, we have hopes that this government will make important decisions that will improve our competitiveness.” The president of the agricultural holding company Grupo Ceres Guillermo Elizondo also has confidence in Calderón’s government. “We believe that President Calderon has shown that he is willing to achieve things,” says Elizondo.

However, drawing plans up is not the same as implementing them. Sector support for transgenic crops, an alternative that, according to Yesaki, would greatly improve productivity, still battles a negative public image. According to Elizondo, however, it is a losing battle: “I think that biotechnology and genetic improvement by gene transfer is here to stay, and we will have to adapt.”
Better use of technology in the Mexican sector depends on the training and funding provided, in addition to attracting higher levels of Foreign Direct Investment (FDI), which currently stands at 0.01% of the country’s total FDI. Upping FDI levels depends, in turn, on creating the right conditions and opportunities for investors.

In 2007, the agricultural sector was discussed at a Mexican bankers’ convention for the first time in 15 years

Some regions that are showing how Mexican agriculture can really compete are doing so by growing alternative crops, such as fruit and vegetables, which are currently dominating Mexico’s agricultural exports. In the eastern state of Sinaloa, fruit and vegetables, along with maize, are the main products.This gives the region the competitive advantage of being a winter supplier of fresh produce to the U.S.

Sinaloa Secretary for Economic Development José Ignacio de Nicolás Gutiérrez says his state can contribute even more, however, by adding value to the production process. Working hand in hand with local businesses, the government is developing a strategy to create a Sinaloa brand. “We plant, harvest, care for and water our products, and we only earn a quarter of what the product will get once in the U.S., ” says de Nicolás. “Now we’re going to promote the branding of these products.”

To ensure success, Sinaloa would do well to follow the example of some of Mexico’s best-known products. Secondary products such as beer, tequila and bakery products have become staple favourites outside Mexico, proof that international markets are receptive to quality Mexican goods.
Meanwhile, adding value does not only mean good branding. Jaime Yesaki says that it should also come from adding another stage to the production process. “Mexico sells commodities; we export fruit and vegetables instead of selling preserves or other products. To change this, we need to innovate, train producers and invest in productive associations among our farmers.”

This will also require greater cooperation between producers and processers, according to Juan Carlos Zabludovich, president of Mexico’s consumer products industry association, who says that the agreements between beer manufacturers and barley farmers are examples of the “close relationships between producers and consumers” that are much more preferable to having to import basic ingredients because of a domestic shortfall.