The economic and social impact of recent developments on rural and agricultural policies and institutions in mexico

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Jose G. Vargas-Hernandez

School of Public Administration

Carleton University

The aim of this paper is to explain and analyze conditions, implications and impacts that have had rural and agricultural policies and institutions in Mexico on growth and rural welfare under the framework of the neoliberal economic development model during the last sixteen years. By achieving this purpose, we also can identify several disfunctionalities between the existing agricultural economic structure and the implementation process of the recent changes on agricultural policy reforms. We contend that these severe disfunctionalities have been created, induced or at least further deepened by the recent changes on macroeconomic strategy and policies and institutional structure.
Our work hypothesis states that most of the existing disfunctionalities in the rural and agricultural sector in Mexico, have had until now a direct influence on the low levels of effectiveness and productivity of farm economy, and thus, affecting the equity of social development and the stability of the political system.
we start by describing the most outstanding events within a historical perspective and analyzing the implications and impacts of state policy and institutions, that led to the consecutive models of rural and agricultural development after the Mexican revolution. The Agrarian Reform distributed land and met partially the challenges of the landless. The import-substitution industrialization (ISI) favored more the manufacturing sector and the urban dwellers and neglected the rural and agricultural sector. Although production of basic grains and other food stuffs achieved self-sufficiency by the sixties, shortages started to appear during the seventies mainly due to an increasing population and lack of investments in farming. The food crisis was solved by increasing imports. The new project

called “shared development” failed to attract private investment to the agricultural production. A turning point in rural and agricultural policy after the Mexican crisis of 1982, under the framework of imposed structural adjustment and economic stabilization policies, brought commercial liberalization and international competition to the sector through constitutional reforms of land tenure and the opening of the North American Free Trade Agreement.

We resume the analysis by identifying in the agricultural economic structure of Mexico, the main factors that blockade growth and productivity. We categorize those factors in two types. A first type of factors are grouped is the physical and geographical environment, considered as limiting factors and obstacles that are difficult to change because they are part of the nature endowment. The second set of factors refer to the agricultural and institutional policies which are more dependent on political will. We show that in the case of Mexico they have been erratic. After analyzing the overall impact of these policies and institutions on economic growth, social welfare and equity and political instability, we turn to offer some considerations for the formulation of alternative policies. Finally, we make some concluding remarks.

1.- Introduction.
Agriculture is at the center of the development debates in Mexico nowadays. Historically speaking, it has always played the most important role in the economic, social and political development of Mexico. The development of the rural sector in Mexico has have until now, direct consequences on the growth of other sectors of the economic structure. Thus, while the macroeconomic and political environment gives form to the economic development model and this in turn define the rural and agricultural policies and institutions, the consequences of the application of these policies on other sectors, on the economy as a whole and on the social and political systems, can not be ignored. We use this systemic approach in our research.
2.- A historical perspective of the agricultural development problem.
The old revolutionary Zapatista slogans of “land and liberty” and “land is for those who work on it”, have been since the Mexican Revolution period (1910-17) and still are the expressions of the aspiration of millions of rural Mexicans: to own a piece of land. Before the Mexican Revolution, the agrarian structure of Mexico was comprised of large states formed during three hundred years of colonial rule (1521-1821), which have continued concentrating the land after the independence of Mexico. On the eve of the Mexican revolution, more than two thirds of the arable land was owned by the rich “hacendados” who represented only 1% of the Mexican population. The rights of peasants to hold and farm a plot of land by redistributing large states was the popular demand of the Mexican Revolution and a fundamental goal which was written into Article 27 of the 1917 Mexican Constitution.
A).-The Mexican Agrarian Reform.
Peasants gained political leverage when the Agrarian-Reform program was effectively implemented by President Lazaro Cardenas from 1934 to 1940, based on the breaking up of the colonial hacienda system and redistributing the land by creating rural communities called ejidos.
As a product of those demands for land, Article 27 created a new form of communal ownership, the “ejidos” which essentially are community centered plots of land worked by the farmers themselves in order to maintain the rights to farm and hold them and which can not be transferred, sold, leased, mortgaged, used as a collateral, etc., in an attempt to avoid a new re-concentration by few land holders. An ejido is a communal group which manage rural land primarily in common (Thompson and Wilson, 1994). The term ejido refers to an agrarian community which had received and continue to hold land in accordance with the agrarian laws growing out of the Revolution of 1910. It consists of at least twenty-five individuals, usually heads of families called ejidatarios. All rights to ejido crops are granted to individual families on an usufruct basis. Ejidatarios are these agricultural workers 16 years old or older (unless married) who have legal rights to a plot of ejido land. A person is counted as ejidatario even if he has not yet received his share of ejido land. Rights to these lands may be passed on to heirs, but they may also be lost if the land is not under cultivation for two consecutive years (De Vany and Sanchez, 1997). Community holders of ejidos, called ejidatarios, could work individually in small assigned plots or collectively the communal land, but did not have the right to sell, rent or mortgage their parcels. In practice, however, farmers continue to be economically marginalized.
The Agrarian Reform redistributed the land benefiting more that three million of poor households and establishing 29, 951 ejidos, (Torres Torres, 1994), although it is estimated that 85% of the land distributed between 1952 and 1982 was not arable (Quintana, 1994), and three quarters of all ejido lands are common lands. In the eyes of these poor rural communities, the Mexican state acquired legitimacy when Cardenas began to promote the Ejido as the basis of its agricultural program. The Mexican state played an active role in the Agrarian reform.
However, it has been questioned that this Agrarian Reform resulted in a community-farm structure which allocated only the extension of land necessary to satisfy subsistence needs of the holder’s family and provided them very poor incentives for work and investment. Most of the criticisms addressed the inefficiency and low productivity of the system, and were in favor of larger private estates for large-scale crops production for the market.
In fact, the original Article 27 of the 1917 Mexican Constitution had established a dual policy strategy for land tenure. It has preserved the private ownership of land subject to some limitations in the extension according to the quality and type of land exploitation, but also has recognized the rights of indigenous communities to hold rights on communal ownership land, the Calpulli that has persisted from the pre-Hispanic as a tenure regime for holding marginal lands. Article 27 also created a new form of communal land tenure, the ejido.
Since 1943, international research organizations colaborated with the Mexican government in a project called the “green revolution” to facilitate rural and agricultural development through the promotion of higher-valued crops. Although rural policies became more complex in the following decades, the Agrarian Reform encouraged the peasants to increase productivity of their lands at an average annual rate of more than 3% and to achieve yields of corn to more than 1.2 tons per hectare by 1960. In the northwest of Mexico, the successful “green revolution” program achieved the development of dwarf wheat varieties, cultivated in irrigated land. Finally, the mids-1960s was the period when Mexico achieved self-sufficiency in the production of basic foodstuffs.
Despite this encouragement, Barkin (1994:30) sustains that “the peasants were condemned to poverty by a rigid system of state control of credit and by prices of agricultural inputs and products”. In fact, the Mexican state became strong during the 40’s coinciding with economic policies that conceived the emerging process of industrialization as a priority and even at the expense of Mexican peasant farmers who should not only provide cheap food for the urban population, but as a source for cheap labor.
B).-The import-substitution industrialization development model on rural and agricultural policy.

The import-substitution industrialization (ISI) development strategy, as it was called the new economic policy, privileged manufacturing of goods for urban consumption over agricultural production and development, and thus creating a highly polarized rural society. On one hand, an international market oriented agricultural sector emerged, capitalized and financed by generous programs of credit-subsidy and incentives to introduce modern systems and agricultural infrastructure for production of fruits, vegetables and cattle. On the other hand, most small landowners did not have access to credit and incentives programs and were relegated to traditional cultivation systems of basic grains, maize and beans for family consumption at levels of subsistence. Most of them were displaced as producers by large agroindustrial transnational corporations, and those who could not engage as a contract producers or day laborers had to emigrate.

From around 1945 and until 1970, the import-substitution industrialization strategy was considered as the “Stabilizing Development” model aimed to protect the domestic production of manufacturing goods for the internal consumption, and for export of surplus. The agrarian structure was mainly characterized by unfavorable policies, unsupportive environment, dominance of public owned enterprises, and import barriers, compensated by large public investment programs and partial land reform, which addressed structural problems and had resulted “in modest increases in agricultural output and modest reductions in rural poverty. Rent seeking by large farmers and bureaucrats has, however, often reduced the efficiency of public expending, which has steadily shifted from investment in public goods (for example, irrigation) to distortion subsidies for privately used inputs (for example, water and electricity), eroding the basis for long term growth” according to Binswanger and Klaus (10997) who categorized the agrarian structure of Mexico within the third group of countries in the typology they developed.
The “Stabilizing Development” model was the dominant framework for policy making on Mexican agricultural and rural development. In part, the analysis of Almazan (1997) give us an idea of the situation and the conflicts that prevailed in “rural Mexico” during this period of time, when he explains that “Rural communities, both indigenous and mestizo, were subjected to severe economic exploitation, which in turn led to low economic standards of living in comparison with urban centers. At the same time, rural unrest was controlled by co-opting would be leaders or repressing violent outbreaks. The unrest, however, tended to be sporadic and highly localized. On the whole, the pueblos were willing to sacrifice economic development for territorial security and viewed the Mexican state as the guarantor of the late.”
It is quite clear that in order to favor industrial development, the state had benefited the urban dwellers and had to inflict high levels of social costs on other sectors such as the rural population. In fact, most part of peasants and farmers were socially excluded of welfare benefits; opportunities of education, health, housing, etc., and other democratic forms of participation. To exercise a rigid and more strict political control on rural population, the one-party regime created the Confederacion Nacional Campesina (CNC) or National Peasant Confederation, one of the three main organizations of the Partido Revolutionario Institutional (PRI) in power since its foundation in 1929.
At this point, we argue that institutional and other academic accounts in current literature, have exaggerated the economic, social and political achievements of the stabilizing development period in Mexico, describing them as the “Mexican miracle”. The impressive results of 6.9% as yearly average of economic growth, the social development and the political stability of this period should be questioned. The truth of the matter is that in order to maintain political stability -the main argument that the one party-regime had at the time- a type of benevolent authoritarianism and patrimonialist state had developed. Once the Mexican government was called “the most perfect of the dictatorships” by the Peruvian, now Spanish writer Vargas Llosa. One good example that challenges the existence of the alleged “social and political stability” is the student movement of 1968 when the Mexican Army killed some hundred of students, -nobody knows the exact number- in a public demonstration against the antidemocratic government in the Plaza de las Tres Culturas or the Three Cultures Square in Tlatelolco.
In the mid sixties, three years before the killing of Tlatelolco, the “stabilizing development” model started to show signs of exhaustion in all sectors of the economy, and a crisis appeared in agricultural production, crisis that has been since then recurrent and cyclical. Since then, Mexico hardly has achieved food self-sufficiency. In other words, to regain the nutritional sovereignty of Mexicans, has been the objective of any agricultural plan of all governments, but the real achievements have been far away in most of the years.
C).-The “shared development” economic model on rural and agricultural policy.
Starting on 1970, the next two six-years governmental periods experienced more intervention of the state in the economy structure of Mexico. Under the guidelines of a new economic development model called “shared development”, based on a “mixed economy” with direct participation in production of the private, public and social sectors, and export oriented, the state policies were aimed towards seeking new structures and forms of collaboration for production between the manufacturing and the rural sectors. Several experiments were settled down with heavy public founding which later turned into unfruitful spending because the achievements were always behind the expectations, such as the case of the so called “Industrias del pueblo” or “People’s industries” that visioned a new approach to social participation under a framework of “Social solidarity societies” formed in 43 municipalities in the South of the State of Jalisco. Twenty two years after the end of the experiment, marked by the last day in power of President Echeverria in i976, part of the infrastructure is being used by the communities such as for example roads, some buildings, etc., but it is sad to see that other part of the infrastructure has been neglected due to lack of budget for maintenance, and is useless or even in ruins. A good examples are several agroindustries, fruit processors, etc. that now remain as “white elephants” in the scenography of rural communities.
“Que solo los caminos queden sin sembrar” which means “that only the roads had left without crops” was the agricultural slogan at the midst seventies. Unfortunately, the efforts to join public and private interests in agricultural production which would lead to a food self-sufficiency, failed. Private investors benefited from public investment in agricultural infrastructure such as irrigation, roads, etc., but when they needed to invest in more risky projects, they rejected any possible partnership with the state. However, the opposite meant that private capital was willing to invest if businessmen foresaw rapid returns on investment wrapped up with financial incentives, subsidies or any other kind of public financial support. By the last years of the seventies, it was evident that a new agricultural policies were required to promote rural development of Mexico. The Mexican government was aware of the need of new agricultural policies and “began to argue” in favor of changes. Almazan (1997) recognizes the fact that “Criticism of the Ejido as an unproductive economic unit began to be voiced” and that “...the Mexican government had wanted to modified the ejido since the late 1970s.”
Nevertheless, the twelve years of these two governmental periods that had experienced the model of “shared development”, -also they were called the “tragic dozen”, to recall the “tragic dozen”, a famous battle of the Mexican Revolution- were marked by constant conflicts between the state and the entrepreneurial elites, remarkably more with the financial groups of the North. These domestic conflicts and the turbulent shifts of the international economic environment, such as the oil crisis of the seventies, led to the country to become highly indebted. Finally, an economic crisis exploded on September of 1982, leaving a nation with large fiscal deficits, devaluation of the peso, increasing interest rates, capital flights, etc., and economic recession. To worsen things off, in a hopeless move to stabilize the economy, at his last address to the nation, the leaving President of Mexico nationalized the banks in a direct confrontation with the holders of the powerful financial groups.
D).-Structural adjustment and economic stabilization policies and their implications on rural and agricultural development.
The new President that took over government in 1982 was determined to change the economic policies, as a turning point in the Mexican economy. He belonged to a new generation of professionals well trained mainly in elite USA and European universities, known as “technocrats”, which have in power since then. The new economic strategy was based on trade liberalization, export oriented policies and less state intervention. In the context of this economic development model, several measures were imposed by international financial institutions that provided credits to solve the crisis, based on structural adjustment and stabilization policies oriented toward manufacturing exports. All these the measures were fully addressed by Mexican government after Mexico joined the General Agreement Trade and Tarifs (GATT) in 1986.
These measures considered that the agricultural sector was a burden to sustain and thus, it has been the most affected by these policies of all other economic sectors. Criticisms against the Ejidos were increasing after President de la Madrid took over office. He have considered the risks to reform Article 27 of Mexican Constitution to make radical changes in land tenure, as Allan Riding, an acute reporter wrote in 1984 in his book Distant Neighbors, “the political risks of tampering with the ejido system still outweighed the advantages of addressing its built-in inequalities and inefficiencies” (Almazan, 1997).
The explicitly objectives of the structural adjustment and stabilization policies were to modernize the agricultural sector by plunging into a market oriented economy, privatizing agricultural state-owned enterprises, deregulating farm prices while maintaining them at low levels to control inflation and establishing price-subsidies mechanisms to control agricultural production. The imposition of these neoliberal policies had abandoned the commitment to food self-sufficiency by the encouragement to produce crops for export, until annual food imports rose at alarming levels in the late 80’s. Since then, the state policies to channel resources to the agricultural sector, only have benefited the richer and large producers. Small landowners and peasant farmers have been neglected and excluded from incentives for producers of basic foodstuff, maize and beans.
Structural adjustment and stabilization policies applied in Mexico during the presidential period 1982-88 resulted in restrictions to public expenditure in all sectors but the rural sector was the one most affected. Public investment diminished also which was reflected in a withdrawal from most of all policies directed toward promotion and support of rural and agricultural activities. However, we can argue that although the Mexican stated was determined to intervene less in the sector as in any other sector, it has not stopped to intervene. There are sufficient evidences to sustain that state intervention is still high in regulating and enforcing the rules of the new game.
Although it is true that not all the small farming plots represented a real option of subsistence for peasants and their contribution to the agricultural economy was not significant, due mainly to reasons such as the extension of land, bad quality of soil, lack of technical assistance and credit support, etc., it was evident that they also represented the major political-ideological factor which maintained the Revolution alive and the fundamental link of submission to the Mexican state. On the other hand, however, ejidos and indigenous communities contributed to safeguard the regional cohesion and to preserve and diversify one of the most important world’s reserves in vegetal and animal genetics. (Torres Torres, 1994). The State played an active role in the Agrarian Reform.
The wrong regulatory measures adopted by the Mexican state to protect producers against the falling of production during the seventies and eighties, had negative effects. Import permits, trade and tariff barriers, subsidies, etc contributed to the deepening of the crisis. Instead of these regulatory measures, it was necessary to invest more in infrastructure and to provide more credits. Besides, a corrupt state interventionism and lack of profitability provoked absenteeism of private capital. The freezing and backwardness of the guaranteed policy prices slowed down capitalization of the countryside (Morales Aragon, 1994).
The agricultural policies of the 1988-94 presidential period displayed as “Actions of transformation in the countryside” the following:

-Deregulation and administrative simplification in institutions of attention to the


-Adaptation of the property regime in the countryside to strength initiative and

entrepreneurship of rural producers.

-Rationalization of subsidies scheme and its substitution by an scheme of agricultural


-Development and promotion of a modern scheme of commercialization of agricultural


-Commercial opening in the agricultural sector to support modernization of production

and to promote its increasing specialization in such areas where exist comparative


-Establishment of programs to fight poverty in the rural areas.
From these general policies followed some programs, among which are important to mention because they left serious consequences, the Amendments to Article 27 of Mexican Constitution, the program Procampo of direct subsidies, and the North American Free Trade Agreement (NAFTA).
D.1).-Ammendments to Article 27 of Mexican Constitution.
According to the Agricultural Census of 1991, more than three million ejidatarios and comuneros, (they are holders of rights of lands in ejidos and indigenous communities respectively), organized in 29 951 ejidos and indigenous communities holding 102.9 millions of hectares, 52% of 196.7 millions of hectares which formed the total national area. Most of the communal land were organized in individual plots and hold 20 million hectares of arable land, more than half the total, accounted for 55% of the total maize production and were the social factor for the proclaimed long period of Mexican political stability.

When in June 1990 the Mexican government decided to enter negotiations of a North American Free Trade Agreement (NAFTA) with United States and Canada as a partners, it was clear that agriculture would be a major stumbling block.

In preparation for clearance of the road to NAFTA, Mexican government was determined to imposed the necessary measures on agrarian reforms, following recommendations “especially as these were being urged by the United States-dominated World Bank and were therefore seen as a condition for reaching a full trade agreement. Both in March and May 1991, this institution issued reports recommending that the Mexican government allow peasants to sell or rent their ejido parcels and to enter into partnership with private firms” as Almazan (1997) sustains. A controversial proposal for amendments to article 27 of Mexican Constitution were presented by the President to the Congress in November 1991, claiming that “these would bring much needed capital to Mexico’s rural areas and lead to higher standards of living for the campesinos...Supporters of the amendments also pointed out that given the new international environment, Mexican farmers must become more competitive in order to survive and this in turn depends on attracting capital investment to the countryside”. However, behind the smoked scenes was the strategy to concentrate plots of farming land through the policy of privatization of ejidos and indigenous communities which will enable to apply economies of scale production.
The amendments included to provide private ownership of ejidos and communal lands in such a way that their owners could celebrate any type of contracts, such as to sell, rent, mortgage, give their property rights of land as collateral, and to enable corporations to invest in rural areas. The discussions, comments and arguments of those political analysts, politicians, scholars, etc., who were in favor and opponents, reached high levels of heated controversy. However, Congress approved the amendments in a short period of time.
On January 1992 a constitutional reform to Article 27 reorganized land tenure by allowing the ejidatarios and comuneros to rent, sell and mortgage their rights to hold land. Also corporations and private sector were allowed to acquire land and to finance farming infrastructure and cultivations. Since the pre colonial era, the settlers of indigenous villages and communities have been holding communal land, which even the Spanish conquerors had recognized, respected and assigned to other new townships.
So, the amendments to Article 27 has broken down one of the oldest and most respected traditions of indigenous people who had a different sense of belonging to the land. They perceived the amendments as a major threat to their survival. Almazan (1997) quotes a Jesuit priest in close contact with some indigenous communities who commented in relation to the amendments: “From the perspective of the reforms to Article 27, land is conceived as a productive resource...but land for the Indian, is something totally is his culture. And all of this is not being contemplated in the reform even though the government says that it will protect the territorial integrity of the indigenous communities. One doesn’t see how it will be able to guarantee this. One can’t see any way, because all the reforms and economic measures being taken go in the opposite direction.”
In short, the constitutional amendments have been highly criticized by its pervading effects for millions of small landowners and farmers who after being isolated from institutional and financial support, finally they have to be driven out of their own land and thus, facilitating land concentration, the main cause that motivated the poor peasantry to fight during the Mexican revolution. The same pressures of poverty are the driving forces of peasants to sell their land to private firms and corporations, leading to a concentration of large properties of land and the creation of disguised latifundios as they existed before the Mexican Revolution. There is a general consensus among the poorest indigenous people of Mexico, that another revolution is needed, as it has already uprising in Southern Mexico.
These changes of rural and agricultural policies under the agricultural modernization program and the neoliberal model of development mean a treason to the Agrarian Reform for the critics. But, on the other hand, other critics recognize (Barkin, 1994, 32) that these policies offer “the prospect of a bright future for a small but significant segment of the population...Local producers throughout the country are already beginning to enter into various kinds of production agreements with Mexican and foreign interests to produce under contract for export and local specialty markets...Recent advances in the achievement of food self-sufficiency, for example, are based on important advances in yields, resulting from the use of new seed varieties and agrochemicals. This is evidence of the official decision to promote domestic food production without trying it to the traditional producing groups who, in the official view, would hold back the pace of modernization.”
There is substantial evidence, however, that proves the contrary. Who once were successful producers needed to organize themselves in regional coalitions, such as the movement of el Barzon in the West of Mexico, to declare being in bankruptcy and to resist legal actions taken against them by their financial creditors. An account by Morris (1995) captures the essence of the conflict when he describes the situation: “ late 1993, protests and violence with agricultural interests organized in El Barzon movement cut into the government’s traditional bases of support in the countryside. Demanding solution to their debts with the banks, the agricultural workers used tractors to occupy first the center of Ciudad Guzman and later Guadalajara, gaining much national attention and the jailing of their leader.”
However, full implementation of the neoliberal policies to the entire rural and agricultural sector during the next following years in Mexico, means the elimination of all kinds of governmental financial support in forms of guaranteed prices which the government had applied to basic grains -already gone-, the elimination of subsidies in inputs, such as fertilizers, seeds, fuel, etc., -partially done-, and the elimination of direct subsidies such as Procampo. Small scale producers of basic grains who had beneffited from guaranteed prices and subsidies for several decades for the domestic markets are already resenting this dramatic shift in agricultural policies and the effects on the overall productivity of the sector have been already measured in terms of a declining percentage of gross domestic product, but the social and political ramifications are enormous ( Quintana, 1994).
According to Barkin (1994, 32), “there was an explicit commitment to eradicate the traditional forms of cultivation of basic food crops in rain-fed areas. In fact, the present Under-Secretary of Agriculture, Luis Tellez, has stated unequivocally that it is the government’s intention to encourage the emigration of more than 13 million people from the rural areas during the remaining years of this decade, people who do not only were “redundant”, but were actually preventing progress in rural Mexico.” In fact, Tellez predicts an average annual exit of 1 million farmers each year for 10 years from Mexican agriculture, which amounts to 10 million people (Lehman, 1994, 72). It’s clear that the dislocation and migration of peasants and small-scale farmers is an inevitable consequence of Mexico’s changing economy. But this massive migration from he rural areas to the urban centers and to United States has occasioned environmental, political and social problems beyond the capabilities of the system to be managed.
D.2).-Procampo, a program of direct subsidies.
So far, too little has been done to stop this process and to support the transitional period between the traditional guaranteed prices for basic grains and the new rural and agricultural policies such as Procampo launched in late 1993 with 11,790 million new pesos in land subsidies as a transitional income-support program. Procampo was designed to provide direct support payments to 2.2 million very poor and smaller subsistence farmers to help them make a transition to other more market oriented crops. For some analysts (Morales Aragon, 1994) Procampo does not introduced any radical element different to other traditional types of subsidies and has contributed to increase disfunctionalities in the rural sector. As any other former schemes of subsidies, it has tended to benefit the more capable agricultors and to partially solve the more harmful effects of consumer’s falling income and have not benefited the marginal agricultors.
Procampo, progreso para el campo con justicia y bienestar (progress for the countryside with justice and welfare), was crafted as a market oriented program not only to provide relief to low income agricultural producers but also had another second intention, as the analysis of Morris (1995) clarifies, it “offered an avenue for Salinas to nurture his image, but it also tried to ‘breack...alliances between bureaucrats actors and particular interests,’ weakening the old corporatism and establishsing a new alliances between state and society.” Furthermore, Procampo have targeted electoral results conditioning to a some extent the application of the benefits to those peasant farmers in need.
D.3).-North American Free Trade Agreement (NAFTA) and its impact on the rural and agricultural sector.
With the opening of the North American Free Trade Agreement (NAFTA) in January 1994, under a free market scheme, trade barriers and tariffs between Mexico, United States and Canada started to be lowered and will be completely eliminated in a phase-in period of fifteen years, although unilateral elimination of trade barriers and tariffs started in Mexico ten years before. NAFTA represents the main instrument through which the Mexican government has confirmed and consolidated the application of full “free market” oriented initiatives, privatization schemes and other neoliberal economic policies of development.
Specifically in agriculture, liberalization of corn markets in a fifteen-year transition period has been an important agricultural policy codified in the North American Free Trade Agreement (NAFTA) since 1994 when Mexico became partner of a commercial agreement to accelerate economic integration with United States and Canada. Maize is the main crop in Mexico and because small peasant farmers grown it for subsistence and medium and large farmers produce it for larger infra-marginal rents, it becomes the main rural employer. Production of maize has been protected and supported with subsidies which represent a high fiscal cost. Liberalization of maize has distributional implications in rural employment and on welfare of peasant farmers.
Although NAFTA represents the main instrument to consolidate agricultural market oriented policies, has not established institutional mechanisms to attend the affected sectors. Four years after the opening of NAFTA it means for the poor peasants of Mexico face direct and unfair competition from Canadian and United States agribusiness. One good example is the case narrated by Darling (1995) of the avocado which was exempted from NAFTA because the Growers of California and Florida used “political muscle”. Maxican avocado was restricted for decades to enter Alaska (where the little critters freeze to death), because there were claims that “may carry seed weevils, avocado ruths and other destructive pests”. It was until July 1995 when the Department of Agriculture “proposed to give Mexico a permit to export avocados between November and February to 19 cold-weather U.S. states. But even these limited concessions annoy the U.S. avocados interests”. NAFTA can not be challenged without the resources, capital, technology, equipment, etc., necessary to achieve higher rates of agricultural productivity.
Until now, the transitional costs of the liberalization process under NAFTA have impacted already the rural sector. Rich (1997) contends that “contrary to what many Americans believed when NAFTAwas being debited -that Mexicans would steal American jobs- there are signs that, thanks to lack of capital, mexican jobs are being lost to the better-trained and technologically empowered American and Canadian labor market...” In fact, NAFTA have had serious consecuencies on the redistribution effects and has already impacted the social welfare, not only of the poor peasants and farmers, but also more heavily in indigenous communities. NAFTA has deepened the differences in Mexican society creating an immense mass of socially excluded people. Now, as some analysts recognize (Barkin, 1994:31), this “redundant” people are “engaged in an increasingly difficult struggle to survive, as the neoliberal policies of modernization through international economic integration threaten their very existence.’
The impacts of NAFTA on the rural sector have been very distressful as some analysts evaluate. Almazan (1997), for example, contends that NAFTA and the negotiations leading up to it had two kinds of impacts, “They gave added impetus to a series of agrarian reforms, which in turn led to a loss of legitimacy for the Mexican government in the eyes of indigenous communities; and they awakened certain sentiments among large numbers of Mexicans, sentiments that were taken advantage by the Ejercito Zapatista de Liberacion Nacional (EZLN), a rebel group that claims to speak on behalf of all of Mexico’s indigenous peoples”.
In fact, with the uprising of indigenous peoples in Chiapas the same day, First of January of 1994, that the trade agreement initiated to be implemented, Mexico was rudely reminded that many communities in rural society had been permitted to participate “neither in the fruits of the revolution nor in the benefits of more recent material progress” (Barking, 1994). The Chiapas uprising occurred partly because of the threat that indigenous peoples and peasants perceive coming from NAFTA and related changes. In Chiapas, has said the famous Mexican writer Carlos Fuentes, “an entire campesino culture has felt threatened” (Rich, 1997), because the land is its culture. The oppressed and impoverished peasantry had in the armed struggle the only alternative to express their primary concerns over land tenure in a state where the agrarian reform never was fully implemented.
Despite these assessments of the uprising of indigenous communities and most poor peasants of Mexico, we contend that NAFTA was not the main cause that triggered the decision to initiate the movement. There are clear evidences that they have long standing grievances, lasting more than five hundred years ago, against the different dominant regimes since the colonial period when they were dispossessed of their land. Since then, they have been the forgotten people, condemned to levels of infra-subsistence. The rebellion in Chiapaz, according to a report of the Economist (1996) “where some peasants still plough by jabbing sticks into the ground before them, was fed by demands for more land and more help in farming it.
But the impacts of NAFTA are more far reaching. It had offered Mexican agricultural producers many expectations in obtaining financing and new opportunities through a process of modernization and integration in international markets. But very soon, just eleven months after the beginning of NAFTA, the Mexican economic crisis of November 1994, had worsened off the financial conditions not only of small landowners but medium and large scale agricultural producers as well, to the point of becoming highly indebted.

After four years of NAFTA implementation, there is a generalized consensus that only the big producers have benefited and that it has crushed and excluded the aspirations and the productive efforts of millions of small and medium-scale agricultural producers. What is evident is that producers with lower productivity are the ones who are confronting NAFTA under very unfavorable conditions. These producers are the ones who have more risks to be displaced by the external competency. They have two alternatives: to change their crops to a more profitable ones, or to emigrate.

It is also well known that the operation of NAFTA is destroying “the immense cultural and ethical reserve that represents the familiar rural agriculture and would leave enormous investments not only to create in the cities the jobs lost in the fields, but to build an infrastructure and public services for the millions of displaced people” (U.S. Congress, 1994). Therefore, still the main problem persists, millions of poor peasants need to produce basic grains for family surviving strategy, meanwhile they need institutional and financial support to diversified production more market oriented to improve economic and social conditions. Otherwise, these 13 million of Mexicans are “redundant”.
The resulting polarization in the countryside between those farmers who are able to engage in the market and those who are not, becomes the central focus of social and political tensions and imbalances between rural and urban economic growth and social development. Protests and demonstrations of discontent against the state policies have mushroomed. Not only the very impoverished peasants of Mexico, but also the once prosperous farmers, both are rejecting already the agricultural and rural institutions and policies imposed by the neoliberal economic development model of the actual ruling elites.
The last Mexican government (1988-94) was proud of some of its impressive results: Mexico had less peasants and farmer producers and only more billionaires, according to a survey conducted by Seneker (1992), which reported 8 Mexican billionaires among the wealthiest people of the World, the same number that Hong Kong, just behind United Sates, Germany, Japan, Canada and France and before than Switzerland, Italy, Taiwan and United Kingdom. The argument given was that “when entrepreneurs flourish so dos an economy”. In the case of the Mexican economy, there is substantial evidence to disapprove this argument.

6.- Conclusions.

Different aspects of rural and agricultural sector have been changing their behavior during the last sixteen years essentially by two fundamental facts: the impact of structural adjustment and stabilization policies on the sector and the radical modification of functions of Mexican state. Liberalization of the agricultural and rural sector in Mexico clearly has hurt the majority of small-scale farm producers, and the implications are far reaching on the economic growth, rural labor markets, social welfare and equity and political instability.

Rural and agricultural policies play an important role on the distribution of wealth and can lead to higher levels of economic growth and social equity. Policies are always the product of a political decision making process. When this process satisfies certain ideal conditions, it can be consistent with any kind of desired ends, such as maximization of growth, maximization of social welfare, etc. The desired ends of the political decision making process justifies, to a certain extent, the variations of rural and agricultural policies. It is clear that when these policies are directed towards the maximization of a desired end without satisfying other ideal conditions, then the whole process can be distorted. However, distortioned policies have a large impact on economic growth, social equity, welfare and political stability. Wrong agricultural policies can result in deep disequilibria of the whole economy.
Amendments to Article 27 of Mexican Constitution, desired or not by peasant organizations, are present already in the in Mexican countryside. It is clear that organizations that are not capable of integrating themselves into the main stream will challenge difficult situations.
The natural resources of Mexican countryside can not be converted in one large agricultural laboratory for patents of large transnational corporations only because of its biodiversities are “universal heritage”. However, in such a case, the trends toward economic globalization and liberalization of markets should preserve and protect these resources applying the most appropriate technolocal advances.
We argue that the explicit liberal premises of the dominant idelological-political system that constitute the framework of reference of rural and agricultural policies in Mexico, as we have shown on our analysis, have been erratic, leading to an inefficient results and low productivity. The are substantial evidences that the final balance of applied rural and agricultural policies in Mexico during the last sixteen years have resulted in controverted results. There is a contradiction in rural and agricultural policies since the announcement that the Mexican state would withdrew intervention in the rural economy structure, but in a certain way the state has reinserted intervention even deeper than ever before.
There is a general consensus among policiy analysts and scholars that the policies have benefitted more to the export oriented agriculture of a few large-scale producers than to the small-scale producers for family subsistence. Thus, the large-scale and export oriented producers of non traditional crops have a more promising perspectives under the dominant neoliberal framework of policies. Since the actual agricultural policies of Mexican government are pressuring for elimination of guaranteed prices and subsidies, we expect the situation of small-scale agricultural producers in Mexico to deteriorate further in the coming years.
The possibilities of modernization of the rural and agricultural sector are at the crossroads of de Mexican economic development. The dominan economic project of agricultural modernization is well determined to exclude agriculture of of the beneffits of any type of state support. Projects of modernization of this sector exclude the majority of peasant farmers who are condemned to levels of agricultural subsistence. Twenty eight percent of the total labor force of mexican economy is located in the rural sector, among which we find 13 million of the most poor peasant who form the “redundant” labor force.
The displaced peasant farmers from the rural Mexico have several alternatives: a less viable option is to change traditional crops for more export oriented crops. The most viable options available to the poor peasantry of Mexico are to emigrate to the large urban centers or to “The North” and the deseparate alternative, to join deliquent organizations (drug trafikers, drug dealers, kidnapers, etc), to join revolt groups such as the Revolutionary Armies of South and Southern Mexico. Each one of the most available alternatives have tremendous consecuences for social and political stability in the near future of Mexico.
Our analysis of rural and agricultural policies and institutions in Mexico for the last sixteen years supports the claims that the contribution of agriculture to the whole economy is weak, the levels of poverty on rural population are increasing and thus, the gaps of social welfare and equity are widening, and political instability is also increasing.
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