The agricultural sector received a lot of government subsidies before the arrival of the Salinas administration that did a lot of budget cuts. The sector is now struggling in order to be competitive with the agreement of NAFTA. So what is the development of the sector? Could you give us some figures?
I think subsidies have been instrumental. But we have to start to analyze a sector according to the development policy; that is to say the policy which helps a sector representing a favorable frame for economic development. And moreover, the policy, which provides this economical development with social questions and with the well being. In Mexico we had to do major changes as much to the policy as the instruments. Indeed, the context in which the sector was developing had also changed; either by the commercial opening or by the role of the government in the economy, by an effort of deregulation of the economical activities and by the choices given by the commercial opportunities. They require that we put emphasis in the productivity as base in order to have a better competitiveness. The objectives of the policy, in the agricultural sector, are to improve the all round conditions. The strategy to follow has been to back capital investment. Nowadays, our subsidies are mainly going to the aids for the investment and to the subsidies for the profit. The subsidizing for profit is not a strange element; politics is different according to the country and elements can also be different. Nowadays, the United States is giving 35% of profits to grain producers. The fact that we have a commercial opportunities means that all that happens in other markets affect us, political instruments belonging to the government are moving toward the producers aid, are going to subsidize capital investment to help, in a certain way, people who live in marginalized areas. In one extreme we have an advanced agriculture and in the other extreme we have an agriculture which is falling behind. But only one of both parts is commercial, the other one is a self-consuming agriculture, which obviously affects the commercial environment. However, what does it mean to subsidize the profit? In the profit we have mainly the following instruments: < The Procampo> which is delivered to 14 millions of producers per year. It represents a subsidy by hectare, which is updated; thus it does not loose worth with the inflation. We have an outline of aid to product commercialization. It means, on one side, the producers profit does not increase, despite the fact that International prices are not positive, and in the other side the buyers, the industry and the livestock sector do not loose the competitiveness. The task of these forms of invention is to compensate the purchaser with transportation, storage and financial costs, which can be higher than the one of the International market. Nevertheless, we are looking for the maintenance of the competitiveness of the productive channel. For example, the livestock sector that is the main consumer of grains, pay as much as it would cost him to bring it from a broad. Therefore, our producers are receiving 70% more than the International contributions. So we are able to improve the contributions for our producers without losing competitiveness. It is a complex tax, we have not heard from doing that in other countries. Obviously, the fact that we are at a loss producing grains is favorable for us in the formation of those prices because the reference price in the stock exchange of Boston, of Kansas, of Winnipec, they add up to bringing grain in Mexico and it becomes a higher price reference for the buyer of there in the commercialization aid base. Nowadays, we have an important difference in the producers of grains. The United States giving 35 % of subsidies over the profit and we with a really minor proportion we are reaching highest prices for our producers and our industry is not losing competitiveness. The < procampo> helped the commercialization and disaster situations. So in conclusion it would be the pack of instruments for the profit defense, but the more constructive and significant thing for us is the aid for the productive investment, that is to say there are an economical and social objective; in the first case you subsidy the producers who could not do the investments on their own, for example if a producer wants to put a pressurized system of risk, it would probably cost him between 1000$ and 1500 and, the subsidies we give in our program < alliance for the country> between the government of states and the federal government will give him in total 450 $ per hectare, that means if we speculate that investment will be 1000$ per hectare 45 % , minus the water, the fertilizing cost and the yields automatically increase. Today, we have already provided about 400 000 hectares of that kind of investment, and to give you an idea of the impact, in the saving of water in those areas, it is like to feed a population of 20 millions of inhabitants. This programs are also for cattle breeder, for example if a small cattle breeder can not do either infrastructure in his ranch or improve his pasture, or make the divisions, or manipulate the water we also give him a subsidy for once and with that he has to do all the investments. Thus, if he wants to buy a stud, a bull to improve genetically to improve genetically we also give him an aid but to the small ones only. Nevertheless, regarding these programs we give priorities to the technical assistance and to the training. So, the subsidy has to be shared between the producer and the professional in order to create a relation between particulars, an we give of course emphasis to health questions such as the productivity and trade strategy. Generally this programs of subsidies are managed by state government, the Minister does neither buy anything nor hire anybody, he has just to do an agreement with every State Government in order to, eventually, cut the producers costs guarantying the clarity of the money used in those programs. In the other hand, inside <alliance for the country. >. We give subsidies to the smallest producers, which are living in important situation of falling behind. In lots of cases we give until between 80% and 90% of the productive investment, for example to more than 200, 000 of small producers of café, with less than 5 hectares we gave recourses in order to make them duplicate the number of plants per hectare to 15 o 16 quintal per hectare. The effect of this in the profit is very important.
To conclude, the administration is here making an extreme effort and the subsidies are moving toward the productive sector, this is a fundamental change of massive technological transference, that is to say everything is managed in order to improve technologically the output. By doing that, we have programs of aids of temporal jobs for the producers who are falling behind because of the seasonal nature of the job, which means there some periods without grain. So, during this space of time we give them subsidies as long as they do improvements either in infrastructure in their pieces of lands, canals, paths, energy lines. This pack of measures give us good results and we would like to improve them even more. In production and trade terms, we propose to ourselves the objective that the sector increase the production of food faster than the population, situation we had not had, we lost this situation in the past. The result is that during the 4 past years, in all the areas, the production is increasing faster than the population. Nevertheless, in the graphs I gave you there is a very similar to the <FAO>. Moreover, it is possible to see the production in the annual average compared to the past years, for example in basic grain the increase was of 8.4%, knowing that the population increase of
7 %; regarding fruit the increase was of 14.4%; regarding vegetables 29%, regarding industries (café, sugar) 9.3%, regarding forraging 26 %, regarding animal protein meat 6%, regarding eggs 15% and regarding milk 11%.
These first results have been very interesting.
Nowadays our poultry farming is the fourth or the
fifth in the world, it has a growth rate very high.
It is the cheapest animal protein that the population
can have. For example, you can consume in bird's
meat the double of the worldwide average. Regarding
eggs the consumption is 70% over the worldwide average.
It is clear that having this national rise of animal
protein production and because the worldwide imports
have also increased, that Mexican population is
consuming more protein. This symptom shows clearly
that the diet has improved and as consequence the
profit is also better. Another chapter that explains
the development of the sector is the external trade.
The growth rate of our export worth of any kind
such as vegetables and fruits, which also includes
food and agriculture such as Beer and Tequila which
makes an annual total of 13.3 %, and our imports
in this last four years have increased of under
the annual 8 %, that is to say the sector has a
favorable development regarding the external trade.
The global trade has increased this 4 or 5 years
of 61%. Nowadays entries and exits of worth in food
are around 15 billions of dollars, 82% is with the
United States (NAFTA) and it is there we can assess
the importance of trade question as much as with
the United States as with Canada. Our comparative
advantages are very clear regarding fruits, vegetables,
café, tropical products, honey, beverages,
etc. show us that our market looks very competitive.
Nevertheless, it is very important to strengthen
our relation with Europe, knowing that is the biggest
market regarding the food imports. |
Where do you think you benefit within the Treaty?
The department proposed rules of negotiation, that we were ready to open everything as long as it was reciprocal, that is to say if we open a product they have to do it also. But with the condition that subsidies won't be given to exports which are distorted in the case of Europe and that we have some healthy clear rules. It is the first time Europe signs an agreement with these criterias. However, because of its agricultural and poultry breeding, Europe con not really do without the subsidies of exports, for which this opening gives us limited space of work by principle but which removes structural obstacles. For example if you have a small share and you also have a growth rate, through time this small part will increase. I think the negotiation is really exciting for both sides, because the problematic chapters are not incorporated. Therefore there is neither cereal, dairy milk nor meat. It does not represent lots of problems because we have the possibility of being acquired by the United States or by Japan. Nowadays, Mexico has no disadvantages in comparison with other countries, like we had before, because it counts on several negotiations.
Are you going to pursue the negotiation?
No, the negotiations are already done. We are now at the stage of the Parliament's approval. However, the Treaties rules ratified by Europe involve posterior stages of work. The conceptual compromise is to bring the trade with Europe and to equalize its treatment with NAFTA even if there are some changes through the years. You can not reach the action of the Treaty in degradation rates with NAFTA. Thus, today the country has Treaties with the two most important blocks in the world, in which it is very competitive. Mexico is very diversified in food industry and country product. Actually there are few countries which can offer as much. We have also a much advanced stable condition compared to the one of developing countries. Moreover, the health situation is very good, and we are working ahead to other countries for the <fruit
Safting> where you still have to seed some applicable criteria and rules. The result will be a better standard of quality and health, which will become an advantage for Mexico.
Another important point is that the agribusiness from the beginning of the NAFTA treaty has received around 19% of the foreign investment. It is very important as destination of the external investment. Today, it represents almost 6 billions dollars. Additionally to its division, the government of all the commercial aspects such as the activity of < trading> of financing the harvest, it is a new space of business for the private individual, which are entering the market a lot more now. I seriously believe that the sector is a big receiver of attractive investment for two reasons: first it shows that it is very competitive in the International market, its growth rates prove it. Mexico's position in the market is very interesting because it is the most important supplier of the United States. It means that more than 9 out of 10 lemons that are consumed in the United States, more than half of the cucumbers, one out of two turnips, one out of three tomatoes are produced in Mexico. We are also starting to participate in the meat market, selling even the animals, for example pork cutting meat. Meanwhile, the health was certified. During a short time the state of Sonora started to export between 80 and 90 millions of dollars in cutting pork meat. This dynamics are going to develop because of the program of certification in health which is improving very well and because our process costs are less than in the United States and in Europe. So, it creates a worry regarding the investment in every part of the livestock sector. However our main expectations regarding the European Treaty are to increase our exports.
We spoke about the corn QPM with Mr Jorge Lopez, sales manager, who asserted that the country will produce in more than 500 000 hectares for the 2000 spring. How many hectares are you planing to reach this year?
Answer Within the 2000 summer we are going to have available seed for 500 thousand hectares. It is not only a question of surface. But, the seed are also different according to the height above the level of the see, for which we have to incorporate this new corn genetic to all varieties that we are using, knowing that we are the Country which has most varieties. We are thinking that within 2001, we will have seeds for 2 million hectares, bordering of 2.5 million hectares. There are two effects very important for us: the first consists in that the corn producers do not only produce but consume it, so it makes the possibility of increasing the corn yield double or even more. They can not consume it for the simple reason that the apparent consumption per capita in Mexico is a 120 kilos per year. Therefore it is impossible that producers consume 240 kilos per year. We have had other changes in the technological environment such as the systematization of risks, the diminution of chemical fertilizing by adding organical fertilizing. It helps a lot with the production cost. To conclude we can assert that, Mexicans, have a solid policy and instrumentation that work, they require more recourse without doubts, but they are going in the right way. Nowadays, the government has formed State Council in each state of the republic and with the federal state. With the Federal government, they are taking measures related to the sort of production they are realizing.
Mr Labastida was Minister of Agriculture, do you think if you win the presidential elections it will helps the sector?
I am sure of that, knowing that Labastida realized different good actions for the Department such as the unification of the State government. Thus, he showed his helped for the program < alliance for the country>, for the programs with Procampo and for commercial questions. However, he knows the necessities of the sector, knowing that it was an important key in order to help people.
what is the percentage of jobs in the agricultural sector?
currently, it is assessed that between land owners and land workers there are between 9 and 11 million people. In 1992-93 this figure was approximately 8.5. However, I do not have the exact figures, but I can assert that production has increased and has diversified. If we have a more important rhythm in the export than in the imports, logically the sector is benefits from job creation. For example, France has 20% of rural population, but only 7% is linked to agriculture; in the United States there is 24% of rural population and only 2 or 3% is linked to the agriculture and in Mexico we have 275 of rural population and 17% is linked to the agriculture. Nevertheless jobs must diversify. But with this new commercial frame and this strategy for the development of productivity, give us the possibility to assess again Mexican products of the country, which are very competitive.
If you could attract investors in which part of your sector do you need them more?
I am sure that we are going to see more investment. For example, the beer industry consumes all the hops, but we export 600 million dollars of beer. Regarding cotton we can not supply the demand which represents the opportunity of selling it to the United States. Recently, Mexico has became the main textile provider for which the increase rhythm of cotton, there is not anyway of providing it with local production. Anyway, we will acquire it. We are ratifying investments in the northeast coming from Michigan or Minnesota. They are coming in order to produce grain with Mexican corn and it is the only plant, which is exported.
Can you tell us about your background and what are the successes you are proud of?
I am a civil engineering and I studied at Stanford. I worked in different fields, which have to see with the agricultural sector such as the National Commission of Water and Hydraulic Recourse. However, I can assert that the public sector in Mexico is gratifying, because the impacts we have reached in the peoples lives conditions has a big transcendence, and like that the feeling of realization and contribution that is very important was born.
Particularly, this government made lots of efforts to find a solution for the lack in this sector. Meanwhile we have the opportunity of always taking off; that is to say it is a robust economy. And we are analyzing the <basics> of an economy. We will be able to verify that we have a very clear government platform, a result of the effort we made altogether. |
Livestock and Rural Development