Hungry Mexico Tries Reforms Down on Farm

This fall, for the first time in years, the dams are full. There will be enough water to irrigate next year’s crop.

But everyone who walks the dusty streets of this northern Mexico town, not far from where so many Westerns have been filmed, knows the water is running out.

Decades of raising thirsty crops such as cotton and alfalfa have drained the underground water supply. Once a model of how agricultural technology can make the desert bloom, this area--known as La Laguna (the Lake)--is facing serious trouble.

Such local problems, multiplied throughout hundreds of communities, are the components of a national crisis.

Once the cradle of the Green Revolution--that intensive use of irrigation, fertilizers and hybrid seeds that transformed world agriculture during the 1950s--Mexico now is a major grain importer and the world’s biggest milk importer.

Money needed to modernize the country’s industrial base as Mexico attempts to make itself a place in world trade must instead be spent on wheat, dairy products and eggs.

And the situation is getting worse.

This year’s abundant rains brought in a bumper crop that offers a short reprieve. But over the past 25 years, increases in agricultural production have not kept up with population growth. The result is an ever-widening gap between how little Mexico produces and how much its people eat.

Despite farm loan subsidies, price supports and extension programs tried by four presidents, that trend has continued--and, in fact, become more pronounced over the past four years. Agricultural production has grown less than 1% a year during that period. Last year, it actually fell.

At the same time, rural poverty has deepened. Farmers in Mexico’s south have incomes half the national average--this in a country where the minimum wage is barely more than $4 a day.

Now, Carlos Salinas de Gortari--the president who has toppled the head of the mighty oil workers union, sold off hundreds of government-owned companies and openly declared that he wants free trade with the United States--is taking on one of his country’s most enduring problems: the countryside.

With Mexico’s bank debt renegotiated and sales of government-owned industries slated for completion next year, the administration has dispatched the young technocrats who previously helped implement financial and commercial reforms out to the farm.

Under the direction of Agriculture Minister Carlos Hank Gonzalez--one of the few Mexican politicians who is also a noted businessman, the owner of a major trucking company--the technocrats have brought domestic prices into line with the international market and announced plans for an agricultural commodities market, beginning with next year’s wheat harvest.

They also are actively encouraging agribusiness to form partnerships with peasant farmers, a practice that previously was considered questionable, at best, in a nation whose history in the 20th Century has granted the independent small farmer a hallowed role.

This could be the toughest test yet of the Salinas administration’s free-market economic policies. Even if Mexico overcomes the domestic obstacles to efficient production, it then faces a highly protectionist international market.

The few, isolated success stories in Mexican export agriculture--frozen broccoli and cauliflower in central Mexico and fresh tomatoes in the northwest--have run afoul of U.S. growers, especially those in California and Florida. Bound by stricter labor and pesticide regulations than are their Mexican counterparts, U.S. farmers feel threatened.

With the Irvine-based Western Growers Assn. already expressing reservations about the flow of competing vegetables from south of the border, agriculture is expected to be one of the hottest issues when U.S. and Mexican negotiators try to work out a free-trade agreement next year. Presidents Bush and Salinas are sure to discuss it as they meet today and tomorrow in Monterrey, about 200 miles east of here.

Still, Mexican technocrats hope that the new links they are creating with U.S. agribusiness will provide not only capital and technology, but also allies against hostile sectors of U.S. agriculture.

Vegetable packers Bird’s Eye, Del Monte and Campbell’s already buy vegetables in Mexico, providing technology to their suppliers. Tropicana, a juice packer, is involved in plans to plant orange groves. And Pepsico’s recent acquisition of Mexican cookie maker Gamesa could involve the soft-drink manufacturer in yet another undertaking.

Tyson Foods, a chicken marketer, is a partner in a project that technocrats hope will once again make La Laguna an agricultural model.

In a joint venture, Tyson--along with the Japanese trading companItoh and Mexican chicken producer Trasgo--is investing in a $40-million project to turn cotton and alfalfa farms into sites for chicken coops.

Chickens need only one-third as much water as cotton and one-tenth as much as alfalfa, explained Rafael Villegas, the Cornell-educated president of Trasgo, which is based here. They also provide farmers seven times the profits, according to Trasgo’s calculations.

Trasgo bases the figures on seven years of experience in working with Mexican farmers. The firm provides a guarantee that helps groups of farmers get 10-year mortgages to finance construction of industrial-size chicken coops. After the farmers complete a two-week course on chicken raising, the company sells them chicks and feed.

In a few weeks, it buys the fattened chickens back at cost plus a minimum profit, with bonuses for productivity. Payments on the chicken coop are deducted from the profits.

Trasgo then turns the chicken legs into yakitori-- chicken on a skewer--that is exported to Japan and marketed through C. Itoh.

To date, the other chicken parts have been sold within Mexico. The planned expansion would allow the joint venture to increase its exports to Japan and to begin exporting chicken parts elsewhere in Latin America for Kentucky Fried Chicken.

The farmers around La Laguna are eager to participate in the expansion, said Trinidad Villarreal, Trasgo’s assistant director for aviculture production.

“Before, we had to pick cotton in the sun or do the dirty work in Torreon (a nearby city),” explained Refugio Perreyra, a farmer who works with one of the 11 chicken coops the project initially built seven years ago. “We had nothing. Various partners have cars now. Before, none of us even had bicycles.”

The obvious prosperity of farmers such as Perreyra and his partners helps to minimize objections to an alliance between big business and peasant farmers that, until recently, would have been heresy in class-conscious, nationalistic Mexico.

In Mexican lore, business has no place on the farm. That is the province of the peasant, working his own small plot.

Indeed, “Land or Death” was the cry when Mexican peasants took up arms in the revolution of 1910. Since then, land redistribution has become part of the mythology of the continuing revolution that the ruling Institutional Revolutionary Party, or PRI, has promised the Mexican people.

But the fertile land was given away long ago. What was left for later distribution was marginal.

Differences based on soil quality and rain frequency widened further when the Green Revolution made irrigation, fertilizers and hybrid seeds available--to those who could afford them. Increased yields from farmers using new technology allowed national production to increase 10% a year during the 1950s, masking the problems of poorer farmers.

Those differences caught up with Mexico in the late 1960s, when the limits of technology were reached and production slumped to 2.5% yearly increases.

Still, government policies treated all farmers alike. Everybody got the same interest rates on loans and the same price supports, whether they were rich exporters or peasants, who continued to produce nearly all the corn and beans--staples of the nation’s diet--but grew poorer and poorer.

New policies being advanced by the Salinas government put farmers in three categories:

* Those who run commercial operations and need no government assistance, about 2% of the total.

* The 18% who could become commercially competitive with government assistance, such as loan guarantees.

* And the four of five Mexican farmers who are so poor they need social welfare--better health care, education, utilities and roads--before they can even hope to benefit from development help.

The Agriculture Ministry is concentrating its efforts on those in the middle group, trying to link them with domestic and international agribusinesses that can provide them with technology and financing.

The Trasgo project in La Laguna exemplifies the kinds of deals the government is encouraging. A dozen others, involving investments of $500 million, are under way.

Those include Tropicana’s plans for $5 million worth of orange groves in the state of Veracruz, on the Gulf of Mexico. The company will work with Mexican farmers to improve their citrus orchards and use the fruit to make pasteurized orange juice for sale in the United States.

Such arrangements are radical for the Mexican countryside but do not go far enough to satisfy entrepreneurs who have come to expect rapid, drastic change from the Salinas administration.

They want the government to lift restrictions on the amount of land an individual or company can own. And, most of all, they want Salinas to divvy up ejidos-- communal farms modeled on pre-Columbian land ownership systems--into private plots. The ejidos, long sacrosanct, control half of Mexico’s cultivated land and are a lightning rod for criticism of agricultural policy.

In a recent seminar on the role of private enterprise in agriculture, Jose Andres Casco, director of agricultural and forestry studies at the Agriculture Ministry, was asked point-blank by an irate businessman: “Why doesn’t the government just abolish the ejido ?”

Casco took a deep breath and replied, “The administration policy is that solutions can be found within the existing land-ownership structure.”

Ejidos have been equally distrustful of agribusiness, always suspecting that investors’ overtures were a disguised attempt to gain control of their land. But now that the government no longer has money to lend the ejidos and other peasant farmers, officials are encouraging them to work with their old nemesis.