Estudiante

What is the problem of intervention in food products markets to support the producer with “high” prices? Case of study: Maize in Mexico

As we know, the countries that contribute the most to food commercialization, at list in staple products are the industrialized countries, (annex 1, 2) and, even though internationally the tendency is to reduce the barriers that were taken for all countriessince the beginning of the 60s, there is also a sensitive issue when it comes to trade products from a country which subsidizes its agricultural production to another that does not have the same policy. Even though the World Bank in 2007 predicted that Latin America is expected to shift its economy from being a net importer of cereals to being a net exporter by 2030 (various, 2011), a closer look isrequired to see which are the changes within the regional market. It is worth to remark that even though the Global Hunger Index (GHI) is decreasing consistently in the region from 25 to more than 50% in 2011 (von Grebmer, et al., 2011) we need to consider in each country local staple food products that may have a different effect based in particular conditions. In this context, we hypothesizethat: governmental intervention within a country is a good strategy to support agriculture and regularize fair market prices, but this policy can be seriously threaten when large quantities of staple food are imported from a larger subsidized country; and if this food is produced by the same enterprises that could lead to a oligopoly in prices and a very high cost volatility of other countries’economy. In this paper we will analyze the North American Free Trade Agreement (NAFTA) Agreement and specifically its consequences in the commercialization of maize between USA and Mexico within seventeen years of existence. Even when NAFTA was signed in 1994, detractors were announcing that USA corn will outperform Mexican corn quickly diminishing Mexican farmers’ profit early in 1993. (Relinger,2010) NAFTA supporters were predicting that the agricultural sector will shrink due the increment of industry in the country; and the Mexican government was slowly diminishing its budget for agriculture from 6.4% in 1994 to 2.9% in 2000. (foro en defensa del maiz, 2011) This was especially noted in 1998 when Companía Nacional de Subsistencia Populares (CONASUPO) ceased in its functions. CONASUPO wasthe former institution that supported maize farmers in Mexico, it had guaranteed a fair price for the producers, and it was the entity responsible to distribute this product in rural areas (Yúnez & Barceinas, 2000). After 1998 CONASUPO became Distribuidora Conasupo S.A. (DICONSA), which is now the institution that aims to contribute in the poverty alleviation supplying staple food and complementsto rural communities (DICONSA, 2010), but DICONSA has a wider variety of products where maize is just one more item that does not receipt the support that CONASUPO used to provide. This is reflected because until 2001 DICONSA was importing corn

instead of buying in the local market; situation that ended in 2003 after the confirmation of transgenic maize imported by DICONSA (de Ita, 2007) TheMexican governmental policies along with DICONSA’s cooperation incremented the gap between small scale agriculture and commercial farming; being the small scale corn agriculture a sector that started to shrink since NAFTA, which just between 1993 to 2004 (Annex 3) was reduced to one third of its population (Relinger, 2010), a number that in 1994 equaled 3 million farmers. (Thomas, 2010) That isrepresenting an exodus for the rural employment that equals a loss of 1.7 million jobs between 1994 and 2001. (Jönsson, 2011) In the late 1990s Mexico started to have high levels of migration into the cities (Relinger, 2010), and even though this was a predicted outcome of NAFTA (Annex 4), the amount of people and the lack of jobs made this an enormous challenge for the Mexican economy. The...