Going Against the Grain on Easier Trade : NAFTA: Mexico’s requirement that imported corn be dyed is one example of problems U.S. exporters face. More roadblocks may lie ahead in wake of Proposition 187.

Want to sell corn to Mexico? If so, you’ll need to dye it green. Or at least half of it anyway.

Mexico’s requirement that all corn imports be sprayed with green dye is just the most bizarre of a string of problems stifling U.S. and Canadian grain exports to Mexico in the first year of the North American Free Trade Agreement.

An Orange County trade specialist warns that the grain industry’s problems may be mild compared to what California businesses can expect as Mexican resentment grows following the passage of Proposition 187.

The initiative, which would prohibit public schools and hospitals from serving illegal immigrants, has embittered many in Mexico, according to Newport Beach trade consultant Lucia de Garcia, president of Elan International.

“Mexicans are too polite to say this to North American business people--but they tell me--and what they are saying is that this was seen as an anti-Mexican thing,” she said.

“I have just come back from Mexico, and business owners there are talking about boycotting California businesses (in protest of Proposition 187).”

The ballot initiative isn’t the only barrier to free-and-easy trade between Mexico and the United States, as the grain situation shows. De Garcia said that some Mexican businesses have been hurt by NAFTA because it is enabling U.S. businesses to compete more directly.

“I talked to one Mexican who imports caustic soda (used in oil refining), and he said that he lost $300,000 last year” because U.S. companies have started selling the chemical compound directly to Mexican buyers at lower prices.

“He says they are dumping caustic soda in Mexico,” de Garcia said.

Such stiff competition is breeding resentment that is being communicated to the Mexican politicians who are responsible for implementing NAFTA in that country, she said. De Garcia suggests that as Mexico’s politicians hear from their constituents, U.S. companies could begin seeing more blockades like the green dye rule.

The U.S. and Canadian grain industry saw NAFTA creating a huge and hungry market for its products. But instead of record numbers of heaping boxcars rushing untroubled across the border, trade is being hit, grain industry leaders say, by badly designed regulations, bureaucratic delays and the inadequacies of Mexico’s railroads.

Although trade has risen, it has not been spectacular, and many blame market restrictions outside their control.

“We thought free trade would bring fewer obstacles, less control. . . . Almost a year into NAFTA, we see bilateral trade is easier in some aspects but more and more difficult in others,” said Victor Hakim, chairman of Continental Grain in Mexico.

*

Heading the list of complaints are some of the import rules imposed by Mexican officials as they try to set up a regulatory regime in line with NAFTA.

“The Mexican government is prone to just changing the rules overnight and has not been very responsive to practical observations from the industry,” said a U.S. executive from a major grain export company.

“It changes the regulations and wants them implemented immediately.”

The green dye ruling has the industry up in arms.

With international corn prices far lower than those guaranteed to Mexican farmers, authorities say they need to be able to follow the grain’s distribution inside Mexico to prevent it being imported and then resold to the government.

The only way to do that, they say, is by making sure all corn shipments show at least 50% green dye coverage.

But U.S. exporters, Mexican clients and shipping companies say the spraying orders are disrupting trade.

They are pushing for the government to track the corn with paperwork, not paint.

“It is turning into a non-tariff barrier to trade,” said Sergio Munguia, head of the grains division of CANACINTRA, Mexico’s chamber of manufacturing industries.

Munguia said inconsistent application of the regulations has caused heavy holdups at ports of entry.

“Ships are detained, and, while we resolve it, days pass and we have to pay for the delays.”

Industry officials say the dye ruling is also making rail transport slower and more costly because rail cars have to be cleaned of dye residue before they can be returned to service.

“In the time it takes to come here and return to the U.S., I can make two or three cargo trips inside the United States,” said Eduardo Luckie, the Mexico representative of the Santa Fe Railway Co.

“The authorities are making decisions without really thinking (of) the impact they are going to have,” Luckie said.

Some fear that U.S. railroads, already struggling to handle the huge U.S. crops this year, will simply refuse to allow their cars to be filled with corn that has been sprayed.

Mexico’s rail network is old and distribution is slow. Analysts say advances have been made in cutting bureaucracy and promoting private investment but that many years of heavy investment are required to bring the network up to scratch.

*

“We have a serious problem with rail grain in Mexico,” said Rick Calhoun of Cargill Inc.’s grain division.

“The number of cars available to go through Mexico has been reduced by several railroads and the productivity on returning cars into Mexico has not improved. Something needs to be done.”

U.S. agricultural exports to Mexico for January-July were up 9% from last year, whereas total exports rose 19%. While this year’s bumper crops and low prices in the United States have boosted grain shipments in recent weeks, the figures are lower than many in the trade had hoped for.