The Agricultural Puzzle in México

The extreme poverty in Mexico is increasingly concentrating in rural regions. According to CONAPO, “[w]hile in 1992 the percentage of rural poor […] was about 2.7 times that seen in urban areas, [..]in 2000, the ratio increased to 3.4 times”. This unfortunate outcome is partially linked to the poor performance of agricultural activity, the main economic activity in rural regions. During 1993-2006, the sector grew 1.9%  annually while rest of the economy did it by 3.7 percent. And most important, those states where the rural poverty is concentrated, as Chiapas, Oaxaca and Guerrero, this sector grew modestly, 1.7 percent annually (in per capita terms the growth was negative given that these estate have high rates of natural population growth).

 

This fact supports agriculture policies as tool to reduce poverty. For example, a crucial thesis that shares any agriculture policy is, to reduce poverty in rural regions is condition improve technological capabilities of farms. That will elevate agricultural yields, and it will cause a major agriculture surplus. The agriculture surplus, as Adam Smith wrote centuries ago, allows support other economic sectors, given the gains from agricultural activity that leave resources to be employed in other economic activities. That fact justify why the Mexican government support directly purchase of tractors by farmers (Acquisition of Productive Assets).  

 

The objective to improve the technological endowment of farm in Mexico has been partially achieved. According to agricultural census of 2007 and 2001; the quantity of tractors has raised very importantly in the period. The importation of fertilizer, in real terms, grew outstandingly. And other agricultural inputs grew heavily too. But its consequences, the desired growth in productivity and agricultural income, has not been achieved.  The corn yield in Mexico has grown steadily, 44 percent throughout the period 1992-2007 (without Chiapas, Oaxaca and Guerrero). However, corn yields in Chiapas, Oaxaca and Guerrero, where poverty principally is and main agriculture product is corn , has not shown any secular increase in their yields, the yield increased only 10 percent in the same period.

 

But it is not only the hypothesis of technological support to boost farm productivity that has not worked; there are more. There are many assumptions behind the underdevelopment in agricultural sector has been broken that has not worked yet. Principally those reforms started during the modernization of our economy, early 1990 decade. For example:

 

·        The constitutional reform related to the article 27, didn’t result in how it was predicted. Land tenure, despite being private (after a long period being a semi-estate ownership tenure), is still highly dispersed, causing that scale economies required to produce competitively corn, for example, has not been reached.

 

·        Minimizing price volatility through price coverage to reduce income uncertainty, has not allowed increase investments to produce more efficiently. Further, the scheme  has create incentives to produce those products that enjoy this support, limiting the diversification induce “naturally” by market --according to prices movements and other economic and natural advantages.

 

·        Hydraulic infrastructure. One of the main hydraulic project, supported during the tenure of Carlos Salinas de Gortari, the Aguamilpa Damn, was built not only to hydroelectrically energy purpose but to improve agriculture activity. Its results are very limited, in Nayarit, where the dam was built, irrigable area in the state dropped from 61,790 hectares in 1992 to 56,411 hectares in 2007, given lack of market opportunities to demand for water to irrigation, lack of complementary irrigation infrastructure, and geographic limitations.

 

Thus, the fight against rural poverty shows a very uncomfortable outcome. Given the relation between rural poverty and agriculture economy activity, is important make a deep revision of agricultural policy in Mexico and its assumptions. Maybe the incentives created to keep some prices artificially high --namely, corn and sugar cane, have limited the productive diversification. Maybe it requires more market rules. Perhaps, as government implicitly thinks, we need time to see results, the learning curve is very long and for better results we must waiting for and expect the culmination of the natural urbanization process in Mexico to see better figures in poverty fight. Or maybe we must evaluate the return of those old programs as technical assistance, subsidies to inputs, and remake our agriculture development banks with enough fund to finance intensively this activity, or create regional policies according to every region problematic, to solve this problem.

 

It is not enough offer the classical receipts to have quick results. As every current economic puzzle, from current financial crisis to the classical equity premium puzzle, solve low levels in agricultural yields demand extraordinary discussions, proposals, a serious commitment, and policy actions by government and private involved, because that is crucial to solve the poverty.