Mexico Greets Free Trade Warily : Commerce: Easier access to the international market will benefit some, but it will not overcome poverty.

Melchor Gomez and Maria Ynez Torres each raised their families in adobe huts in the Bajio--Mexico’s heartland, a rich agricultural and industrial valley--sacrificing to send their children to nearby universities.

Today, the old Gomez home is the tiled, wood-paneled office of a thriving agricultural company. And Gomez’s sons plant the old family wheat farm in broccoli and cauliflower, selling their crops to international frozen food corporations for export to the United States. While their father drove a 10-year-old pickup truck, they supervise their far-flung fields from air-conditioned, four-wheel-drive vans equipped with cellular telephones and two-way radios.

Torres converted the front room of her house--with concrete floors and adobe peeking through the cracked stucco--into a tiny, dark store where neighbors can buy a soda pop or candy on their way home from work in the local shoe factories. She never expected to get rich from the store--the only source of income for Torres and her disabled son. But lately, business has slowed to almost nothing because shoe manufacturers, hit by import competition, have been laying off her customers.

As Mexico negotiates a new commercial pact with the United States and Canada, the Gomez and Torres families exemplify the promise--and the limitations--of free trade in improving life for Mexico’s 81 million people.

The Gomez brothers are among the families ready to become part of the world economy, to make a better life through international commerce. They see free trade as the first step in a liberalization that will eventually bring Mexico more social, economic and political freedom as well.

But there are also families such as the Torreses who are locked into poverty that no free-trade agreement can overcome. Many of those families depend on industries that flourished during Mexico’s four decades of protectionism but are floundering against international competition. They are as vulnerable to the changes that will accompany free trade as any Detroit auto worker.

The approaching upheaval and its effects on Mexicans are already evident in the Bajio, a region where free trade is becoming a reality even before an agreement is signed.

“The economy of the Bajio is dependent on shoes, tanning, textiles and grains, the very industries that will be hardest hit by free trade,” noted Vicente Fox, a federal deputy whose district lies in the Bajio.

Two of Mexico’s best-maintained, four-lane highways cross at Irapuato, in the center of the Bajio, or lowlands, a fertile plain that curves around the ore-rich mountains northwest of Mexico City.

Semitrailer trucks zip down Route 45, carrying shoes from Leon to join the trucks moving east across Route 90, loaded with flour, pork and milk for the capital city’s 18 million consumers.

They pass fields of wheat--hybrids developed by local cooperatives, then planted and harvested with John Deere tractors. Refrigerated trucks turn out of the fenced parking lots at Bird’s Eye and Del Monte packing plants, heading north with frozen broccoli and cauliflower for U.S. tables.

The agricultural center is anchored by industry. Salamanca in the southeast is the site of a major oil refinery. On the other end of the Bajio is Leon, the self-proclaimed “capital of the shoe industry” and home to 550 tanneries that produce two-thirds of Mexico’s leather.

Sergio Gomez saw change coming to the Bajio seven years ago when Green Giant vegetables opened a packing plant in Irapuato.

A chemical engineer with a degree from the nearby University of Guanajuato, he was already planning to revamp the family’s farming association, a legal structure created in response to Mexican laws that limit ownership of agricultural land to 247 acres a person.

Price controls and rising fertilizer prices made grains only marginally profitable. Fresh vegetables were too risky, with huge price fluctuations likely between planting and harvest. But the prospect of working with an international food-processing company that offered a firm contract price and technical services, from seeds to fertilizers and pesticides, looked like a good option.

“I waited a year and saw they didn’t have problems with people, that they were a serious company that did not promise more than they could deliver,” Gomez recalled.

Then, he negotiated his first contract with Green Giant. The decision to enter the international market has had a major effect on the Gomez family farm and the 150 people who work there, planting, pruning and harvesting vegetables.

Company agronomists make weekly visits to fields contracted to Green Giant, filling out white slips that tell Gomez when to plant and what fertilizers and pesticides to use.

Impressed with the Green Giant experts, Gomez hired two full-time agronomists of his own, over the strong objections of his father, now 83. He could have hired 10 farm workers for the same price, the patriarch pointed out.

With the profits from vegetable growing, the Gomez brothers bought more land and put two-way radios in their vans to keep in touch.

These days, Gomez plants 60% of the farming association’s 1,000 acres in broccoli, cauliflower and snow peas for the export packing companies that operate in the Bajio. About one-third of the acreage grows fresh garlic, tomatoes and chilies for the domestic market; the remainder is still in grains.

As he planted more vegetables, Gomez added more jobs. Mechanized grain production had required few people, but vegetables need lots of tending.

“These are pretty good jobs,” said David Runsten, research director at the California Institute of Rural Studies who has been following development of horticulture in the Bajio since 1983. “The prosperity of growing for export has allowed people to pay more.”

As Gomez’s market became international, so did his suppliers. Besides the seeds, potting soil and fertilizer imported under orders from the packing houses, Gomez imports machinery on his own initiative.

“I have to. Otherwise I can’t compete,” he said.

David Banda, 23, operates Gomez’ $30,000 laserplane. Linked by an electronic beam to a $60,000 air-conditioned tractor, the gadget helps the Gomezes level their fields. Level fields help them cut water use, increasing productivity.

Banda went to school eight years--twice the national average--and now earns $40 a week, twice the minimum wage, plus an annual bonus that he said was $3,500 last year.

Said Gomez: “The mentality is changing. Farm workers are seeing that their children go to school now.”

An example is David Banda’s cousin, Jose Soledad Banda, now 34, who began working in the fields when he was 8. “I went to grade school a few years,” he said, “but the truth is, I can barely write my name.”

In contrast, his five children, who range from 6 to 13, are all still in school. “I cannot make them stay in school, but I will let them,” he said.

Yet, better paying jobs also prompt some parents to send their children into the fields, continuing a tradition of child labor that a free-trade agreement seems unlikely to halt.

On a neighboring farm a little boy picked cucumbers for pickles as a steward for the farm workers’ union watched. “He’s not really working,” the steward said. “I mean, he’s not on the payroll. Look, people here are paid by how much they pick. If his parents tell him to help, what can I do?”

Despite such problems, the Bajio is a good test of Mexico’s hopes that free trade will help it achieve its goal of exporting products, not people, to the United States.

In May, Green Giant closed a plant in Watsonville, Calif., that employed many Mexican emigres, at the same time expanding operations in Irapuato and Ohio. But Watsonville City Councilman Oscar Rios doubts that moving jobs to the Bajio will reduce, much less reverse, Mexican immigration to California.

“Given the deep-rooted problems in Mexico, this is a Band-Aid,” Rios said in a telephone interview. “Mexican wages are a pittance--$6 or $7 a day. People who have lived in California 10 or 15 years are not going back to work for that.”

By rights, Jose Luis Murrillo Torres should be part of the new generation of managers and entrepreneurs riding the rising tide of Mexico’s economic opening, looking forward to North American free trade.

Instead, his family’s income is tied to an endangered industry that the agreement could destroy.

Maria Ynez Torres and her husband came to the bustling industrial city of Leon from a village in the nearby state of Jalisco and settled in the working-class neighborhood where Murrillo Torres was born.

Most of their neighbors worked in nearby shoe factories or family shops employing 15 people or less, the type of business that accounts for 82% of the Bajio’s industry. But the Murrillo Torreses had a different vision for their son.

They resisted the temptation to put him to work supplementing his father’s small policeman’s salary. Instead, they sent him to college.

Maria Ynez Torres was sure they had made the right decision when Jose Luis was rapidly promoted from sales representative to sales manager for a consumer products company three years ago. But three months later, an automobile accident left him with brain damage.

By then a widow with no previous work experience or job skills, Torres saw little alternative but to convert their front room into a tiny neighborhood store, one of hundreds such shops that dot Mexican cities and villages.

The timing could not have been worse.

Leon was already reeling from a national depression that had sharply reduced shoe sales. Then, in 1987, the import tariffs on shoes dropped to one-tenth the previous level. Shoe imports rose from $682,000 in 1987 to $3.6 million a year later.

Factories laid off workers. From 1985 to 1989, Guanajuato--the state where Leon is located--lost nearly 10,000 shoe manufacturing jobs, over one-fourth of its shoemakers. Tannery employment was cut nearly in half, to 3,201 workers.

In Leon, where shoe manufacturing is so important to the economy that the local newspaper publishes a weekly four-page section on the industry, the effect has been devastating.

Torres sees the evidence in her tiny store. “Sometimes I wait all day for nothing,” says the plump woman with soft, gray curls, who wears a cobbler’s apron.

“I hope the free-trade agreement will give people a chance to get a job at a decent salary,” she said. “Maybe a chance for Mexican workers to come back home to work for U.S. and Canadian companies here.”

In the short-term, that hope seems ill-founded.

The shoe industry is still protected by a 20% tariff--Mexico’s highest. A trade agreement that will eventually eliminate tariffs is bound to produce a further shakeout, resulting in fewer jobs, not more. Factory owners fear that they will be driven out of business by highly automated foreign operations that move into other regions of Mexico with the idea of selling to the whole North American market.

Industry wages are high by local standards--$2.10 a hour plus fringe benefits in larger factories--and companies are trying to cut costs.

For example, Emyco, Leon’s biggest shoemaker and second in the nation with annual revenues of $100 million, has increased production from 7,000 pairs a day to 11,000 at the same time it reduced the work force 10%, to 2,000 employees.

“Either we change or Emyco is going to disappear,” said Felipe Pablo Martinez, chairman of the company his father founded in 1926. Once a family-run domestic manufacturer, Emyco has brought in high-powered international executive talent to help with imports, exports and retailing.

Imports, which now account for half the shoes Emyco sells domestically, have required few new workers. Martinez hopes to triple exports--now $15 million annually--over the next three years, but that will be done more with automation than by hiring workers.

Similarly, while new companies are being started to take advantage of free trade, they barely absorb the labor force of companies that have failed or cut back.

When a new tennis-shoe-top factory opened in Torres’ neighborhood last month, the owner, Antonio Orozco, simply went down to the recently defunct Jaguar tennis shoe factory, bought 10 used machines and hired 10 experienced--but jobless--workers.

Orozco got his first order by persuading Tres Hermanos--Mexico’s second-largest shoe-retailing chain--that he would be a better supplier than a Taiwanese firm for Tres Hermanos’ new athletic shoe maker. “We can be more flexible on colors as fashions change because we are closer,” Orozco explained.

Orozco resigned as sales manager at a local sandal factory and went to work, producing 1,200 pairs of shoe tops the first week. By year-end, he plans to be making 5,000 pairs a week.

“I’ve been watching the progress of the free-trade agreement,” said Orozco, who is completing a graduate degree in marketing. “We are going to be part of the world economy.”