Salinas Announces Shift in Farm Aid to Ease Adjustment to NAFTA : Mexico: Subsidies for growers will be tied to acreage rather than crops. The move is aimed at reducing incentive to migrate.

President Carlos Salinas de Gortari on Monday announced a new farm subsidy program that is expected to strengthen Mexico’s agricultural competitiveness and decrease the chances of stepped-up rural migration to the United States if the proposed North American Free Trade Agreement is implemented.

Under the new farm support program, existing price supports for specific crops will be replaced by direct subsidies to farmers based on the acreage currently planted in those crops. The immediate effect of the program will be to almost double Mexican government farm subsidies to $4 billion in 1994, from about $2.2 billion this year.

The new plan conforms with the General Agreement on Tariffs and Trade, of which Mexico is a member, and is designed to help Mexican farmers adjust to NAFTA provisions that would phase out agricultural tariffs. GATT prohibits crop subsidies but allows payments to individuals.

Some analysts say that phasing out tariffs under NAFTA would allow low-cost U.S. and Canadian grain products into Mexico, in effect slicing in half the prices that Mexican farmers receive for traditional crops such as corn and beans.

The loss of income could force more than 600,000 Mexican farmers to migrate to the United States, said Raul Hinojosa-Ojeda, a UCLA researcher who has studied the problems of Mexican agriculture.

By providing direct payments to farmers throughout NAFTA’s 15-year phase-in period, the new program is expected to keep farmers on the land as they adjust to foreign competition.

“This keeps up income in rural areas,” said Tim Josling, a researcher at the Stanford University Food Research Institute. “If you removed price supports without an alternative system such as this, you would get massive migration.”

While the program is expected to remove incentives for rural migration--which has a great effect on California--it also has the potential for making Mexican farmers more competitive with California growers for some products.

For example, subsidies to the most productive farmers will drop, according to a senior Mexican official, encouraging them to switch crops. Currently, Mexico provides price support for nine crops, including corn, beans and wheat, grown for domestic consumption. By providing payments tied to land rather than specific products, the new program could finance Mexican farmers who want to switch to more profitable export crops.

As Mexico has cut other farm subsidies--such as water and electricity for irrigation--more sophisticated farmers have begun to grow fruits and vegetables, often for export in competition with California growers.

“It is a revolutionary change that is likely to result in long-run benefits,” said Hinojosa-Ojeda. “It is an important step forward in transforming production while maintaining employment in the countryside.”

Mexican consumers will also benefit.

By making direct payments to farmers rather than using price supports that keep prices artificially high, the government can quickly push Mexican agricultural prices down to international levels, a senior administration official said. That will save consumers about $1.3 billion a year.

“This shifts the burden onto the federal budget from the consumer,” Josling said.

The official acknowledged that the Mexican government expects difficulties in implementing the program.