Support to agriculture
Economic reform
Recent agricultural policy changes
Land ownership
NAFTA

Support to agriculture
Until recently, Mexico provided substantial support for agricultural producers and consumers of basic agricultural products. Levels of that support are indicated by producer subsidy equivalents (PSE) and consumer subsidy equivalents (CSE), which estimate the value of monetary transfers to producers and consumers. Mexico's PSE's and CSE's trended down as Mexico opened its economy until an increase in 1995. This trend holds at the aggregate level, for crops and for livestock. Agricultural Policies in Emerging and Transition Economies 2000, by the Organization for Economic Cooperation and Development, provides information about the calculation and current estimates of Mexico's PSEs and CSEs, and the underlying policy changes they reflect.

Economic reform
Before 1985, the Mexican government was involved in most sectors of the economy, including agriculture. Self-sufficiency was a goal, and, to that end, the government established price and border controls. The government supported nearly every stage of production and marketing for agricultural commodities:

• Producers. Most grains and oilseeds had support prices, with heavy emphasis on corn and dry beans. Agricultural inputs, such as irrigation, fertilizer, crop insurance, credit, improved seed, electricity, and fuel, were subsidized. In addition, there were limits on the amount of individual land used for production. Communal lands could not be rented or sold.
• Consumers. The government set price controls on almost all basic foods for consumers (corn products, wheat products, rice, beans, vegetable fats and oils, fresh and canned milk, butter, eggs, and poultry), and it subsidized the processing industry to offset losses from high raw materials prices and low prices set to help consumers. Domestic feeding programs, particularly for corn tortillas and milk, were in place. State trading restricted imports, particularly of corn, wheat, sorghum, powdered milk, and soybeans.

After the debt crisis of the early 1980's, Mexico started its current reform path, which has included:

• Accession to the General Agreement on Tariffs and Trade (1986)
• The first business and labor agreement, the Pacto Solidaridad Economica (Economic Solidarity Pact) which permitted Mexico to control prices and costs (1987)
• Wide-ranging economic, financial, and trade-liberalization measures implemented by President Salinas, 1988-94, including the decoupling of most farm programs from prices and the establishment of the PROCAMPO farm program

Recent agricultural policy changes
Since the launching of NAFTA, Mexico has altered its domestic agricultural policies to encourage free trade. In general, Mexico moved to policies that provide farmers with lower support levels while simultaneously "decoupling" this support from production decisions. If transfer payments are unrelated to production of current and future quantities of a commodity and to the quantity of inputs used in production, a program is decoupled.

• Development of ferti-irrigation, a system using irrigation canals to deliver liquid fertilizer
• Use of quality seeds
• Improvement of livestock through genetics and management practices.
• Encouragement of mechanization
• Training in modern technologies
• Poverty elimination

The ALIANZA agricultural programs' budget increased 37 percent in 1999. Out of expenditures totaling U.S. $490 million, 66 percent supported investments, training, and technology transfers.

Producer support
The main support program for farmers is Programa de Apoyos Directos al Campo (PROCAMPO), introduced in 1993, now an arm of the Alliance for the Countryside. PROCAMPO is a 15-year program of direct payments scheduled to end in 2008, which compensates producers for the loss of input subsidies, price supports, and import protection. By providing transitional support for farmers, it allows Mexican agriculture to undergo structural change in response to market conditions. The program provides support to approximately 3.5 million farmers who produce basic commodities—about 64 percent of all farmers—with fixed payments per hectare of cropland. Payments per hectare under PROCAMPO increased by 13 percent in 1999 to M $626 (U.S. $66) for autumn and winter crops and to M$708 (U.S. $74) for spring and summer crops.

Food assistance
Food assistance programs are integral to the social safety net in Mexico. Prior to its closure in 1999, the National Basic Foods Company, (Compania Nacional de Subsistencias Populares, or CONASUPO), implemented price supports for barley, dried beans, maize, wheat, rice, cottonseed, sesame seed, sorghum, soybeans, safflower, and sunflower seeds. CONASUPO subsidized milk and maize tortilla prices, and assisted in the import and distribution of skim-milk powder for social programs. CONASUPO's phase-out eliminated most general food subsidies. For example, price liberalization in the market for maize, a main staple in the Mexican diet, increased tortilla prices 41 percent and flour prices 11 percent.

With the elimination of general consumer price supports, federal food assistance programs targeted specifically to low-income regions and households assumed a new importance. Today, about one in five Mexicans receive benefits from at least one federal food assistance program. The five largest food assistance programs in Mexico are: LICONSA, DICONSA, DIF, FIDELIST, and Progresa.

LICONSA is the oldest existing Mexican food assistance program, begun in 1965 to safeguard children's health. The LICONSA program provides milk powder and liquid milk at subsidized prices (about 25 percent lower than market price) to low-income families with children 12 years old and younger. In 1997, the milk program distributed 11 percent of total domestic milk consumption, benefiting over 2 million children in rural areas and 3.4 million children in urban areas.

DICONSA was created in 1972 to distribute basic commodities-corn, beans, rice, sugar, corn flour, powdered milk (in cooperation with LICONSA), and tortilla products-at subsidized prices to people living in poor urban and rural areas. DICONSA's operations have grown significantly over time. In 1976, DICONSA operated 1,500 rural stores. By 1997, 23,344 DICONSA rural stores benefited 31.2 million consumers. Over 82 percent of total DICONSA sales take place in rural areas. In 1995, DICONSA's selling prices were 19 percent lower than market prices in rural areas, and 13 percent lower in urban areas.

• Food Rations Program (PRA)—the most important DIF program; provides milk powder, corn tortillas, and beans to over 7.3 million people, half are children
• Food Assistance to Families Program (PASAF)—provides monthly food baskets to 1.7 million families in extreme poverty located in rural, indigenous, and poor urban areas
• Popular Kitchens and Integral Services Units (COPUSI)—provides an "integrated package" of food, health, and educational services throughout the country to rural and indigenous populations, which benefited 256,425 people in 1997
• The School Breakfast Program—provides free breakfasts to school children located in the poor districts of the four largest cities, and to elderly, destitute, and handicapped people in social assistance centers. In 1997, the program benefited 2.6 million school children per day with 20 percent of the breakfasts distributed in Mexico City
• The Community Breakfast Program—provides free breakfasts to children under 5 years old and pregnant and lactating mothers in rural and indigenous areas with fewer than 1,000 inhabitants

FIDELIST (Trust Fund for Tortilla Subsidy Payments) supports the Program to Subsidize the Consumption of Tortillas, established in 1990 to replace targeted food stamps. In that year the program provided 2.1 million low-income households with tortilla stamps to obtain 1 kilogram (kg) of free tortillas per day from tortilla manufacturers. The free tortillas distributed through this program represented 3 percent of the total annual corn consumption in Mexico and about 50 percent of the daily household consumption of the targeted households. In 1997, over 1.9 million kg of tortillas were distributed.

Progresa is the most recent food assistance program implemented by the Mexican Government. Initiated in 1997, it links food assistance to health and education programs for recipients who live in certain areas and are impoverished. Currently benefiting over 400,000 urban and rural families in 12 States, the goal is full coverage of the country in the next few years. Each month, the program grants 110 pesos to families. To help ensure that the money is used for food, the grant goes to the female head of household. The amount is indexed to inflation so purchasing power remains constant. A major aspect of the programs deals with nutrition. Beneficiaries must visit health providers, and parents must attend health courses. Through educating families, officials hope to improve Mexicans' nutrition and wellbeing.

A Comparison of Food Assistance Programs in Mexico and the United States provides further information about Mexico's food assistance programs.

Land ownership
Significant policy changes regarding land ownership and rights occurred in Mexico in the 1990's. When the Mexican government first distributed land to farmers in 1917, the goal was to guarantee farmers a subsistence livelihood. Land fragmentation and low capital investments resulted because commonly held land (the ejido) could not be used as collateral for loans. To remedy these problems and improve rural productivity, a 1992 amendment of Article 27 of the Mexican Constitution allowed farmers to rent or sell their cultivated land, to open the way for larger farms and economies of scale. However, land privatization moves slowly; by early 1996, only six farmers' cooperatives voted to disincorporate.

NAFTA
NAFTA eliminated many tariffs and quantitative restrictions between the United States, Mexico, and Canada on January 1, 1994. Remaining barriers to trade will be eliminated through the 15-year period (to 2008) of the life of the agreement. Trade liberalization under NAFTA secures Mexico access to a much larger North American market and encourages the flow of investment capital to Mexico.

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page updated: December 12, 2002