Growing Troubles in Mexico

Under the tranquil skies of the Toluca Valley, where Raul Lara and his forefathers have grown corn for 4,500 years, the recent turmoil in Seattle concerning global trade was much closer than it seemed.

Lara’s town is one of thousands dominated by corn, a ubiquitous and, for some Mexicans, sacred crop at the heart of an ancient but fast-changing culture. According to government estimates, corn is grown by one-fourth of the population--about 23 million people--mostly on family milpas, or small farms.

But corn prices have fallen to historic lows, pitching small and large farmers alike over a financial precipice and forcing thousands to sell, rent or abandon their land. And they’re pointing fingers at free trade, Wall Street and biotechnology--the boogeymen of Seattle--for turning agriculture in Mexico, the “cradle of corn,” upside down.

“These prices are eliminating us. There is too much supply, and no one wants to buy,” Lara said as he and his son Daniel silently loaded ears of corn into huge burlap bags. Working in the shadow of a prehistoric ruin 40 miles west of Mexico City in a region where corn has been traced to 2,500 BC, Lara said he’s still growing it because it is all he knows.

Lara’s troubles, and those of thousands of farmers like him, can be seen as trade-offs in Mexico’s rapid rise in global commerce. While its once-protected corn growers are reeling from global competition, Mexico has become a powerful exporter of automobiles and electronics. And Mexican tomatoes, melons and strawberries are stocking U.S. supermarkets as never before.

Despite the ravaged corn industry, Mexico’s agricultural trade deficit is a modest $343 million out of $10 billion in annual farm trade.

Besides, the consolidation of Mexican agriculture and the elimination of small farms like Lara’s are inevitable as Mexico industrializes. In the United States, only 2% of the population makes a living from agriculture, and the American family farm increasingly is a quaint memory.

But that great shift north of the border was played out over the last century. In places like Mexico, the forces of globalization are drastically, and sometimes brutally, speeding up the process. The backlash against globalization gaining steam around the world is in response to just such dislocation.

So it is that on Lara’s farm, the ground-level impact of international deals struck by trade ministers in limousines--and the relevance of distant, faceless bureaucrats in the World Trade Organization--hit home.

Corn is more than Mexico’s largest crop: It is the nation’s dietary mainstay and symbol of life itself. Farmers’ reluctance to give it up despite its punishing economics reflects the resistance of a deeply agrarian society to fast-moving change, and illustrates why agriculture is one of the most intractable facets of globalization.

Corn’s extraordinarily deep roots in Mexico--it was first cultivated here--also inflame the biotechnology debate. The possible introduction of bioengineered crops has farmers, environmentalists and academics fretting about the pollution of primeval corn varieties and the destruction of 5,000 years of traditional farming practices in Mexico. Corn provided food stores for what archeologists believe were the first pre-Columbian metropolises.

Free Trade, Record Crops Depress Prices

But the immediate source of grower Lara’s vexation is more mundane: The price of corn is in the tank.

Prices have tumbled to their lowest inflation-adjusted level since records have been kept, said Ed Allen, an economist at the Department of Agriculture in Washington. Today’s average price of $1.80 per bushel is down from $5 a bushel as recently as 1995.

Free trade is hardly the sole cause of cheap corn, which is helping consumers even as it hurts farmers worldwide (except livestock farmers, who benefit from cheaper feed). The recent Asian economic crisis and record crops around the world, notably in China and Australia, have created a huge glut.

But Lara and others blame globalization’s most vivid expression, the 1994 North American Free Trade Agreement, for simultaneously opening the gates to cheap U.S. grain and taking away Mexico’s safety net--the system of domestic price supports and subsidies that once ensured a profit for growers.

Indeed, Seattle wasn’t the only scene of protest last month. In Mexico City, enraged farmers from Sinaloa state rode on horseback into the federal capital to protest low prices and the loss of corn subsidies.

The Mexican government seems to tacitly accept the free trade trade-offs. While acknowledging the painful dilemma faced by many growers, Jorge Kondo, director of the National Institute of Agricultural Research in Mexico City, said: “The only option is that agriculture is more productive. It must complement the economy.”

Until NAFTA, U.S. corn was allowed into Mexico only during shortages, the USDA’s Allen said. Meantime, the government stimulated production by paying farmers higher-than-market prices and by selling tortillas at subsidized rates at the government’s chain of retail stores, the biggest outlet for corn.

NAFTA gave U.S. farmers the right to export 2.5 million tons of corn annually duty-free to Mexico starting in 1994, with the ceiling gradually being lifted until 2008, when U.S. farmers will be able to send all the corn here they want duty-free.

Currently, any shipments over the quota are supposed to be assessed duties, which would raise prices on the imported corn and thus let Mexico’s farmers keep prices higher too.

But the more U.S. corn that is let in, the less Mexican growers plant because they can’t compete. Thus Mexico has repeatedly waived the tariff because its own production was inadequate and “they ended up needing more corn,” Allen said.

The upshot has been a flood of corn from the U.S. Total U.S. shipments here reached 5.6 million tons in 1999, or a quarter of all corn consumption, according to USDA estimates. That’s a 15-fold increase over pre-NAFTA 1993, when U.S. corn supplied just 2% of Mexico’s corn consumption.

The free trade agreement also mandated the end of the costly subsidy program. The result is that small subsistence farmers such as Lara are competing head-on with highly efficient agricultural combines in the U.S. Midwest--a losing proposition.

In letting in duty-free U.S. corn, the Mexican government is performing a delicate balancing act in this, a presidential election year. It is making consumers and industry happy by keeping prices down, but stirring a hornet’s nest of farmers.

The policy has led to intense debate. In Guanajuato state, a prime growing region in central Mexico where the corn harvest is expected to decline 30% this year, agriculture officials have petitioned the Mexican commerce secretary--unsuccessfully--to repeal NAFTA’s corn provisions, much as Japan protects its rice.

“There is no way to compete with our American friends when they are driving a car and we are going on foot,” said Alfredo Fernandez, Guanajuato state agriculture development undersecretary.

The social implications are huge.

Fully one-fifth of the 250,000 families who were working the land in Guanajuato in 1990 have since left their farms, Fernandez said--a population shift that has been repeated across Mexico.

They are migrating to cities and inflating the jobless rolls, creating political pressure and a potential trade backlash. To be sure, others have found work at the booming maquiladoras, the foreign-owned manufacturing plants located mainly along the U.S.-Mexican border. But many have illegally entered the United States.

Talk of shifting demographics and economics is lost on Julio Diaz, a 73-year-old farmer in Jajalpa, just up the road from here, who said he is financially “on the edge.”

“Banks don’t loan any money, since people can’t pay. There is no profit,” Diaz said, standing in front of the outdoor seed-corn bins where he leaves part of his harvest to dry in the open air, later selecting the best ears for seed as generations before him have done.

Then there is biotechnology--specifically, so-called transgenic, or bioengineered, corn developed by U.S. scientists who have tinkered with the grain’s genetic structure to make it more pest-resistant.

Such technology also inflamed protesters in Seattle who see it as a threat to global ecology. And while corn growers upset about prices were marching on Mexico City last month, environmentalists tried to prevent offloading of what they claimed was genetically altered corn at the port of Veracruz.

Although transgenic corn is not yet allowed into Mexico in seed form, Kondo of the agricultural research institute said the government might consider allowing transgenics if the benefits--”say, feeding 5 million hungry people”--outweigh the risks.

Growers Examine Ways to Survive Change

Mexican farmers aren’t giving up. Guanajuato’s Fernandez recently returned from a trip to the commodities exchange in Chicago, where global corn is bought and sold, to “see what we were up against.” He is now organizing about 1,000 local growers into cooperatives to pool fertilizer, transportation and financing costs to try to achieve the economies of scale enjoyed by U.S. competitors.

“We are looking for some intelligent means of surviving,” Fernandez said.

Peasant farmer Lara is fatalistic--and worried about making it through the year. While most of his crop goes for his own family’s consumption, he has always depended on selling corn locally for cash needs during the year. No more. With prices so low, Lara can’t hope to compete.

Lara’s two sons may soon join the line out: They want to leave the farming life. Most mornings, they gather with 200 or more other youths outside the Mercedes-Benz plant just up the road looking for work, so far without success.

Living off corn “is like a lottery,” said Lara, who at 55 sees no other options. “Without our fields, there is nothing else.”

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An Earful

Since NAFTA took effect in 1994, American corn has swamped Mexico, where production has fallen. Total Mexican corn consumption and imports from the U.S., in millions of tons:

Source: U.S. Department of Agriculture

Note: Figures measure corn used to make food products, such as tortillas and livestock feed, but not fresh corn consumed as a vegetable.