Business Week November 18, 2002
FARMERS ARE GETTING PLOWED UNDER
By Geri Smith in Mexico City
With tariffs disappearing, U.S. exports to Mexico may soar It was quite
a parade. Farmers in Mexico recently marched hundreds of squealing pigs
through La Piedad, a small town in Guanajuato state. The show of porcine
heft was a protest against an expected avalanche of U.S. bacon, ham, and
pork chops when import tariffs on a variety of farm products are eliminated
next year under the North American Free Trade Agreement. Some U.S. pork
cuts already cost just 27 cents a pound in Mexico, vs. $ 1.14 for domestic
pork, and import prices will likely drop further. ''If our situation doesn't
change quickly, Mexico's 15,000 pork producers face complete collapse,''
says Carlos Ramayo, head of the Confederation of Mexican Pork Producers.
Mexico and the U.S. are headed for a major food fight. Starting on Jan.
1, Mexico must scrap tariffs on a dozen key products, including rice,
potatoes, pork, and chicken, that have enjoyed special protection under
NAFTA. To Mexicans, agriculture's importance is not measured in dollars
-- in fact, the sector contributes 4% of gross domestic product. But 10
million people, about one-quarter of the Mexican workforce, still live
off the land. And the dirt-poor campesino remains a potent symbol of Mexico's
revolutionary legacy.
No wonder this latest round of tariff cuts is fast turning into a hot-button
issue in Mexican politics. What especially galls the Mexicans is that
they have to fight with one hand tied behind their backs. According to
Mexico's National Agricultural Council (CNA), the average Mexican farmer
receives just $ 722 in annual subsidies, while U.S. farmers stand to collect
$ 20,800 a year as part of a $ 180 billion farm bill approved earlier
this year. Mexican President Vicente Fox in October warned fellow rancher
George W. Bush that the U.S. subsidies could push up unemployment in Mexico's
countryside and drive farmers across the border. ''Many farms are going
to disappear,'' warns CNA President Armando Paredes, who figures at least
750,000 jobs could go next year alone. American farmers point out that
Mexico's agricultural exports to the U.S. have nearly doubled, to $ 6.3
billion, over the past decade. ''It's been a win-win situation for both
countries as far as increasing exports goes,'' says Terry Francl, a senior
economist at the American Farm Bureau Federation. Mexico has fared particularly
well with labor-intensive crops: Today, more than half the cucumbers and
over one-third of all tomatoes eaten in the U.S. are grown south of the
border. But U.S. producers, with their large, capital-intensive farms,
superior technology and infrastructure, have boosted their exports of
rice, cattle, dairy products, and apples by more than 15% a year since
NAFTA took effect.
Mexico's agro deficit with the U.S. reached $ 4.1 billion last year.
Mexico has been reluctant to tarnish its free-trade credentials by resorting
to nontariff barriers such as anti-dumping duties, and sanitary restrictions
-- means by which U.S. tomato and avocado farmers have kept Mexican products
out of some markets. But the gloves are expected to come off as the country
heads for midterm elections in July, 2003. This month, Fox is due to announce
a raft of new measures to ''armor-plate'' the agricultural sector from
increased competition. Expect more anti-dumping measures, such as the
46.6% duty officials imposed on U.S. shipments of Golden and Red Delicious
apples starting in August. ''We will not hesitate to utilize all of the
protective mechanisms established by national and international legislation,''
Fox told a gathering of Mexican farmers in early November.
But no matter what Fox does, the countryside will suffer from the new
onslaught. Mexican farms average just 13 acres, a legacy of a land reform
introduced after the Mexican Revolution. Farmers also pay 40% more for
diesel fuel and face sharply higher interest rates on loans. ''If Mexico's
farm sector is to survive, the government is going to have to give out
more subsidies,'' says Juan Habermann, a prosperous grower of green beans
and sorghum in the state of Sinaloa. Fox might be happy to oblige. But
there's little room in the tight federal budget for such largesse. For
Mexican farmers, bringing home the bacon keeps getting harder. � URL:
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