Agricultural Policy Failures in Mexico

During the last decades, the institutional framework of the agricultural sector in Mexico was transformed. The reform of Article 27 altered the property regime of farmland, allowing the creation of private farms instead of the ejido (a form of governmental property over the land). Through NAFTA, the domestic agricultural market was opened to international markets, increasing the correlation between internal prices with external ones. The structure of subsidies changed from indirect subsidies (low prices in inputs and fixed prices to producers) to a scheme of direct support (monetary subsidies and liberalization of prices in inputs and agricultural products).

It was expected that these changes could reduce the rural poverty by the improvement of the agriculture activity; one of the most important economic activity in these regions. The policies designers expected that the agricultural yields of poor states (namely, Chiapas, Oaxaca and Guerrero) would eventually converge with those states more efficient (as Sinaloa and Sonora), and even more, reduce the gap with those yields obtained in United States; increasing the productivity and so, the income of the farmers. This expectation was based on three factors: Technological access, decreasing returns in agricultural yields and markets of farmland.

The new regime of property rights in the farmland promoted by the reform of article 27 had a completely different approach than the ejido. The farmland, before to the reform, had a form of private property with limitations; it was almost impossible to use the land in any mercantile operation, not only in buying-selling operations but as collateral in loan credits. After the reform, the farmers gained plenty private rights, allowed them to sell, buy, or use as collateral their properties. Through this measure it was expected that the agriculture could have access to credit, and more important, allowing the consolidation of small agricultural units (minifundios) to wide agricultural surfaces, letting the introduction of new technological advances to exhaust the opportunities of scale economies.

It was expected that trough NAFTA it could be possible to have access to technologic advances, and therefore, reduce the technological gap not only intra-regions, but with the yields achieved in agricultural sectors of United States and Canada. The green revolution experimented in Asian countries, was driven principally by genetically improved seeds, fertilizer, machinery and equipment, and other chemical products; improvement importantly the yields, it was a key factor in poverty reduction of these countries, principally in China and India. It was expected a green revolution in Mexico.

In agricultural activity is very clear the law of increasing relative costs, which said that with fixed and variable inputs (say surface and labor) beyond some point, each additional unit of variable input yields less and less additional output. In this way, the policies forecasted that regions with low agricultural yields were more plausible see gains in its yields than the rich ones. This assumption was supported by the other policies, principally technological advances and the change in the property rights.

However, despite of these policies, there is not evidence of convergence. An analysis based on compound indexes, found that while Sinaloa was 14% more productive than the national average in 1980, in 2006 was 97% more productive. On the other hand, while Chiapas was 19% more productive in 1980 than the national average, in 2006 was 5% less productive than the national; these results are also observed in Guerrero, Oaxaca and Michoacán. The presence of divergence rather than convergence finds that the expected outcome was not reached, at least in the improvement of production conditions.

Recognizing the failures of these policies is important to promote a debate to redesign the agricultural policies. However, that is complex; the political economy of the agricultural sector limited the possibility of a discussion with objectivity. The way of doing politics in Mexico has led to farmer organizations as extensions of political parties; therefore, organizations are more linked to political platforms than a structure of economic interests themselves. The delayed this discussion can mean loss a opportunity to fight effectively against the high rates of poverty in Mexico.

Salvador Omar Rodríguez Hernández

salva.rguez@gmail.com