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Cultivating of the Agriculture Sector
During the drawing up of the Europe-Mexico Free Trade Agreement, agricultural issues proved to be a major source of wrangling. Europeans were afraid a barrage of cheap Mexican imports would enter their markets, endangering their producers. Mexico, on the other hand, was concerned terms of the agreement would not leave the playing field level - to its disadvantage, and that its products would not be able to compete against heavily subsidized European produce. Especially since the Salinas administration heftily cut back on subsidies to the sector.
Despite such sticking points, the agreement was reached, allowing for completely open markets on both sides for reciprocal products, with clear sanitary regulations, making it the first time Europe has reach an agreement with such criteria. Cereals, lactates and meats were left out, to push the agreement forward, but Agriculture Minister Romarico Arroyo Marroquin says that's no worry for Mexico, since it has developed deals with the United States and Japan which encompass these products. The agreement assures that when the European winter sets in, fruit bowls will be stocked with pineapples, melons, grapefruit, avocados and grapes from Mexico.
Alongside the competitive Mexican commercial agro-industry, characterized by the high sanitary standards, advanced technological equipment and farming methods, grows the produce for subsistence farming. With 27% of the population living in rural regions, 17% of which lives off of farming, it is important that the nation be on the forefront of policies and trade to ensure the sector's growth.
Trade in agricultural products currently totals about $15 billion, with 82% of Mexico's produce going to the United States and Canada, a proof of its competitiveness. But a little variation in outbound markets wouldn't hurt, Arroyo said, which is where the pact with the European Union comes in. Mexico's exports are growing at a 13.3% annual rate, while agricultural imports are increasing yearly by 8%. Mexico has a very diversified foodstuff and agricultural products industry. "In reality, there are few countries that can offer such a wide variety of products under advanced sanitary conditions in developing countries," Arroyo said, a condition other countries have noticed. Since NAFTA opened trade relations with Mexico's agro-industry, it has received 19% of foreign investment flowing in, which comes to about $6 billion per year. And it continues to be a new space for the private sector, with some of the larger operators still entering the market.
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Flourishing Agro Industry
The sector presents many avenues for investors to peruse, cotton being an important one. Mexico's cotton industry cannot keep up with U.S. consumer demand, making it a principal textile provider to its northern neighbor. In Mexico, Bachoco , a poultry producer and distributor, is one of the few agriculture companies with a strong presence on the market with six production complexes, and operations covering over 60% of national territory. Its recent acquisition of Grupo Campi from conglomerate should give it a market share of 30-31%, and boost last year's revenues of $240 million. Bachoco, planning to participate in further consolidation of the sector, became institutionalized in 1997, and has listed about 16% of its shares on both the Mexican stock exchange, and the New York Stock Exchange. The extra liquidity will be in hand when an opportunity to expand arises. Desc , trying to move away from commodity products and shift toward name-brand products, sold Campi in November. Desc holdings cross many sectors, with food branch Agrobios, Girsa, its petrochemical unit, Unik, its auto-parts arm and a real estate branch. Almost 41% of Desc's sales come from exports, which makes it highly sensitive to currency fluctuations. Though it reported losses last year, it is expecting a rebound in 2000, mainly due to higher oil prices and new U.S. contracts for its auto-parts.
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Mexico has a growing need for barley, a key raw material in beer production. It currently imports $30 million worth of barley per year, while its beer exports total $600 million. Mexico has two major beer producers, Grupo Modelo , known worldwide for its Corona Extra beer, ranking among the top five most popular beers in the world, and Femsa , which comes in a not too distant second. Grupo Modelo registered sales of $20.6 million, with Femsa bringing in $13.5 million in 1998. Femsa has also positioned itself for growth by promoting its main products - like Sol, Tecate, and Dos Equis - in outbound markets. Mexican beer is not the only national drink to gain recognition abroad. Tequila over the past five years has gained popularity unseen in it decades on market shelves as a very Mexican spirit. Casa Jose Cuervo , one of the producers to gain a strong presence outside of Mexico, has been able to ride on this wave of popularity. Tequila producers have secured their market when they won a ruling last year stipulating that Tequila could only be processed in Tequila, Jalisco, when countries with similar climates took up growing and harvesting the blue agave cactus particular for Tequila production. Producers, however, are facing a problem not related to competition ... supplies. At the present explosive rate of demand for Tequila in Mexico and abroad, the blue agave plant available will last another five years or so. Cultivating agave is at least a seven-year process, leaving Tequila manufacturers little time to resolve how they will have enough raw materials to keep their doors open. The demand has also driven prices to outrageous highs, making what was once a popular drink for the average Mexican almost impossible to afford.
Mexican wines are also on the rise, and why not, since Mexico has the oldest recorded vintners in the history of the Western Hemisphere, when Spanish conquistadors ordered grape vines to be planted in the early 1500s. Baja California Sur has become a mini Napa Valley, where small, exclusive vintners have emerged, their wines gaining recognition in distinguished French wine competitions. The small wine industry, however, could use some competition, since the quality is still not on par with other minor Latin American producers, and the prices, in turn, are excessive. Casa Pedro Domecq is a national commercial expert in grape-derived beverages. With a variety of wines and brandies on the market, it is a leading producer of alcoholic product lines in the domestic market.
Some food manufacturers have made their fortunes with wheat and corn-flour based products, namely to make bread and tortillas. Grupo Bimbo is the nation's foremost food producer and among the top fifteen companies in Mexico. It is one of the few Mexican companies that has been able to compete against well-established foreign companies ... on their own turf. As the third largest producer and seller of bread products in the world, in the United States it runs against heavyweights like Wonder and Mrs. Baird's with 17 plants there, 12 in Latin America and 47 in Mexico. Grupo Maseca, known as Gruma , firmed its position in much the same way as Grupo Bimbo. It is the world's top corn-flour and tortilla producer, with annual sales surpassing $250 million. A large part of its growth can be attributed to incursions into the U.S. market since 1976, where it is the No. 1 tortilla brand, and plans to spread more, in response to increasing demand, says Gruma Director General Ricardo Alvarez-Tostado. Aside from tortillas, Gruma's product line also includes snacks, canned food, farming products and machinery for tortilla and snack production. But it has recently launched a brand of white and sweet breads to compete in the $3 billion market against current leader Bimbo. Other markets it has penetrated include Central America, Northern Europe and most recently, Venezuela. Gruma strives to become the primary source of both corn and flour packaged products, Alvarez-Tostado says. Maizoro and Gamesa have product lines in the snack and corn- and wheat-flour products, and provide hearty competition for similar products of Bimbo and Gruma.
The nation's corn-flour products may soon be using improved materials in conjunction with a government project headed by the National Institute for Forest Agriculture and Fishing Investigations (INIFAP), which is working on strains of Quality Protein Maize (QPM). With the widest variety of corn in the world - over 40,000 - Mexico hopes to have several million hectares of QPM maize sown because it is the population's staple food. If maize's protein quality can be enriched, everyone's diet will be improved, says INIFAP Director Jorge Kondo . Scientists have also seen dramatic effects on animals fed QPM maize, showing greatly improved health compared to animals fed normal maize. Mexico produces 32 million tons of grains yearly, of which 18 million is maize. The QPM materials have genes native to a Mexican strain with more Triptophane and lysine - essential amino acids for humans - than normal, and have been crossed with strains with higher tolerance for pests and diseases to produce strong industrial quality. |
MEXICO
