Mexico's Reforms Transform Agrarian Sector
Legalizing property rights paves way for farmers to win loans, enter partnerships
LEO DE GARIO GONZALEZ RODRIGUEZ wants a tractor. Scarcely lifting his eyes from his mudcaked sandals, the Mexican farmer explains how 90 families from three nearby communities have formed an association - uniting 172 acres of land in all. "We want to work the land," Mr. Gonzalez Rodriguez says softly, his voice edged with frustration. "But we need the tools to make a living at it."
This humble, straw-hatted farmer embodies both the hopes and challenges facing Mexican agriculture as it embarks on the most radical changes seen in the countryside since the beginning of this century.
The changes spring from two sources: sweeping market-oriented agrarian reforms passed earlier this year and the yet to be approved North American Free Trade Agreement (NAFTA) with the United States and Canada. And throughout Latin America, where similar reforms are under way, the Mexican example is being closely watched.
Since 1917, under the Mexican Constitution, the government has distributed land to peasants under the ejido, a communal farm system. The land belonged to the state. The ejido farmer managed the land and could pass the right to use it along to one son. But until now he could not rent the property, sell it, or borrow money against it.
The ejido was intended to distribute resources more fairly and avoid creating a landless rural class. But population growth has far outpaced available land. There are now some 28,000 ejidos covering half the surface area of Mexico. Most ejiditarios live on small plots, barely feeding themselves, let alone the rest of this nation of 86 million.
Among Mexico's biggest farm imports are corn, cattle, beans, and dried milk (dietary staples), plus sorghum and soy (for animal feed).
"Productivity is low. We have 30 percent of the population living on 7.8 percent of the national gross domestic product. In short, poverty is a rural problem," says Luis Tellez Kuenzer, undersecretary of agricultural planning and a key architect of the agrarian reform.
Defying political sensibilities and historical precedence, the Mexican government enacted reforms that begin by legalizing Mexican farmers' property rights, so they can begin to borrow money or cut deals with domestic or foreign agroindustrial corporations. Ejiditarios such as Gonzalez Rodriguez can combine properties for efficiencies of scale and try to attract investors or secure loans for mechanized machinery.
The government, which once set market prices and bought all crops for distribution, now hopes for better efficiency by turning these activities over to private enterprise. This process is under way for all but a few commodities.
The Ministry of Agriculture and Water Resources lists more than 140 private farm investment projects just begun or on the drawing board. But capital is still scarce and Mr. Tellez is the first to admit that turning around Mexico's farm sector won't be quick or easy.
"The problem is that the farm sector does not have the image of being a good place to do business," says Luis Munozcano Alvarez of the National Agricultural Council, an organization of private farm producers.
Productivity is lower and production costs are generally much higher than in the United States and Canada. Due mostly to the cost of imported feed, Mexican chicken production costs are 27 percent higher than in the US, according to the National Union of Poultry Producers. Mexican bean farmers harvest about one-third as much per acre as US growers. Thus, growing a ton of beans costs almost three times as much in Mexico as in the US.
The technology gap can be even wider.
With the opportunity to farm larger plots, Gonzalez Rodriguez and other Mexican farmers can now efficiently use tractors. But there aren't many around yet. Mexico has two tractors for every 100 farmers, versus 1.5 tractors for every US farm worker.
Mexican government officials see NAFTA as the next step in attracting more investment, forcing local producers to be more cost- competitive, and boosting productivity.
For example, when the agreement goes into effect, the cost of farm equipment should drop because tariffs and import permits on new and used machinery will be eliminated. The 15 percent tariff on imported sorghum will be eliminated immediately, thereby lowering poultry and pig production costs.
One of the biggest benefits of NAFTA will be the assurances it gives investors, Mr. Munozcano says. "The free-trade agreement gives us a long-term view of what will happen in the farm sector. This enables us to make financial decisions and the government to set a clear development policy."
NAFTA will also open up Mexican farmers to outside competition while phasing out government subsidies. "We're self-sufficient in corn and nearly so with other basic grains, but at a very high cost. We want to change production to more value-added crops, such as fruits, vegetables, and cattle," Tellez says.
Jose Luis Calva, an agricultural expert at the National Autonomous University of Mexico, admits the changes may foster the most efficient use of Mexican soil. A large portion of the land now producing grain, for example, would likely be converted to cattle ranching. Dr. Calva says that as grain subsidies are reduced and the door is opened to US and Canadian imports over the next 15 years, the result will be a forced exodus of 20 million campesinos.
"To absorb all those displaced workers, the Mexican economy will have to grow by a minimum of 7 percent annually," he figures. He guesses many Mexicans will head for the US.
Tellez is well aware of the problem. The short-term fix is the multibillion-dollar national public works/antipoverty program known as Solidarity. It includes building roads and putting in electricity in rural areas, thereby lowering transportation costs and improving living standards. But long term, he says, "We hope the agricultural sector as well as the economy in general will be more dynamic. That's what we signed the free-trade agreement for, to attract investment - because that's the only permanent way to improve the welfare of farmers."
But like the tomatoes in Gonzalez Rodriguez' field, reform programs take time to ripen. He has been to the bank for a tractor loan. The bank's response: No land title, no money. The government has promised to speed up the snarled titleship process. Meanwhile, he is petitioning Solidarity for the cash. And he's hoping his five sons find farming a more profitable livelihood than it has been for him.