Americas Policy Report The Mexican Farmers' Movement: Exposing the Myths of Free Trade

by Laura Carlsen | February 25, 2003

Even long-time Mexico observers sat up and took notice on January 31. The march that day by campesino organizations, which counted on the support of unions, universities, and civil society groups, broke the mold in a city accustomed to large demonstrations.

By the time they reached the Zócalo, the sum of the tidy contingents-each filed behind its identifying banner-came to nearly a hundred thousand. Not since agrarian reform under President Lázaro Cárdenas in the late thirties had so many campesinos marched in the nation's capital. And perhaps not since the revolution had such a diverse crowd united behind such radical demands. The farmers no longer demanded government programs to alleviate their poverty or help sell their products. The central demands of the march-renegotiation of the agricultural chapter of NAFTA and a far-reaching national agreement on rural development-shot straight to the heart of the neoliberal model and called for a new vision.

The reemergent Mexican farmers' movement reflects not only the serious crisis in the country's rural sector but also a crisis of faith in free trade itself. With the common slogan "El campo no aguanta más" (The countryside can't take it anymore), a wide range of rural organizations have set off a national debate on NAFTA. As a result, some of the fundamental myths of the free trade model are being questioned as never before in Mexico.

1. The Myth of the Free Market

   The first is the myth that free trade exists at all. Mexican farmers are quick to point out that reality deviates far from the logic of free trade-namely that prices are determined by the laws of supply and demand, and that the product produced most cheaply and efficiently always wins. Three major factors-subsidies, financing, and oligopolies-have created distorted market conditions made-to-order for the world's most powerful U.S.-based transnational corporations. As a result, small farmers south of the border are being driven off the land.

   The first distortion comes in the form of U.S. government farm subsidies. The 2002 Farm Bill authorizes a whopping $248.6 billion in farm supports. Federal government subsidies now make up 40% of the U.S. net farm income. Though they ostensibly serve to keep family farmers afloat, actually the billions in subsidies flow disproportionately to corporate farmers. Along with export-import financing, they assure that huge food and agriculture transnationals increase their profits and global reach. Mark Ritchie of the Institute for Agriculture and Trade Policy (IATP) notes that U.S. export subsidies end up in the pockets of the world's largest grain traders, primarily Cargill and Archer Daniels Midland.

   What does this do to the Mexican market? A recent IATP analysis of the year 2001 reveals that corn cost an average of $3.41 a bushel to produce in the U.S. and sold on the international market for $2.28 a bushel. Food First, a California-based policy institute, reports that California rice costs between $700 and $800 an acre to produce but receives $650 an acre on the world market and that U.S. wheat is exported at 46% below cost.

   There's a name for this-dumping-and it is supposedly prohibited under both NAFTA and World Trade Organization (WTO) rules. According to the above calculations, the over five million tons of U.S. corn sold in Mexico in 2001 carried a dumping margin of 25%. Analyses from past years show dumping margins of over 30%. Dumped U.S. surpluses erode producer prices; the value of Mexican corn dropped 64% between 1985 (when Mexico signed the General Agreement on Tariffs and Trade-GATT) and 1999. They also leave Mexican producers without a market. The United Nations Development Program estimates that worldwide U.S farm subsidies cost poor countries about $50 billion a year in lost agricultural exports.

   Mexican farmers cannot and should not be forced to compete with grains sold at less than U.S. production costs. They lack credit, economy of scale, fertilizers, chemical weed and pest controls, farm equipment and, most importantly, significant government supports. As U.S. farm support increases, Mexican government programs have followed IMF prescriptions and all but disappeared. During the period from 1990 to 1994, Mexican farmers received 33.2% of their yearly income from the government. For 1995 to 2001, that figure had dropped to 13.2%.

   In addition to subsidized prices, cheap and ready access to U.S. financing has played a key role in the glut of grain imports to Mexico, which has devastated domestic prices. In 1996 the international price of corn rocketed due to fears of shortages. Despite the high cost, that was the year Mexico more than doubled imports.

   The Center for the Study of Rural Change in Mexico (CECCAM) reports that an overriding incentive for importers both in 1996 and in other years has been financial. U.S. exporters and government export-financing organisms, particularly the Commodity Credit Corporation (CCC), offer low-cost loans to Mexican importers buying U.S. grains. Although rates have decreased in recent years, prevailing credit rates in Mexico in the mid-1990s were over 30%, while the CCC offered between 7 and 8%. For Mexico-based import companies, the CCC's sweetheart rates were like rain in a drought.

   The Mexican government, facing the same tight money problem following the 1995 devaluation crisis, looked to the same solution. The $100 billion bailout orchestrated by the Clinton administration in response to the peso crisis included a $1 billion credit that obligated Mexico to purchase corn directly through the CCC program. In the single year between 1995 and 1996, corn imports rose 120%-double the quota stipulated under NAFTA, and all imports were tariff-free. Mexican importers assumed over $1.5 billion in CCC credits that year, and Mexican producers were sold down the river.

   Free trade cannot exist in the context of global oligopolies. In contrast to a World Bank report that 73% of Mexico's rural population lives in poverty (a significant increase over the pre-NAFTA period), the major U.S. agribusiness transnationals have grown by leaps and bounds under the auspices of the free trade model. As international traders with both export and import activities, many receive a triple subsidy under NAFTA: 1) as exporters of below-cost U.S. farm products, 2) as recipients of direct export subsidies, and 3) as Mexican importers. They also get Mexican subsidies; for example, Cargill receives the lion's share of subsidies in the state of Sinaloa-Mexico's most heavily subsidized agricultural state. Couple that with the added advantage of wiping competition off the map through below-cost prices and the deal is complete.

   None of these factors stem from farmers' productivity-the culprit in the failure of farmers to compete, according to Mexican Secretary of Agriculture Javier Usabiaga. Instead, these factors converge to stack the deck against Mexican small farmers.

   In light of all these negative tendencies, planners predicted that the majority of Mexican corn farmers would have left the sector by now. They were wrong. Figures for the year 2001 show that national corn production actually grew by 10% compared to 1994. Nearly three million Mexican farmers throughout the country still grow corn. How, and even more importantly, why, do these farmers persevere against the global- market odds?

   The answer is that in spite of all that's been said, the Mexican farming sector is indeed highly subsidized, though not by a government concerned with assuring the viability of agriculture and the security of the country's food supply. Mexican farmers themselves, and particularly southern farmers living in poverty, are subsidizing national corn production. The subsidies come from unpaid family labor, from small-scale commercial activities, and from the more than $9 billion in annual remittances sent home by Mexicans working in the United States.

   The remittances have a dual role. First, the money sustains agricultural activities that have been deemed nonviable by the international market but that serve multiple purposes: family consumption, cultural survival, ecological conservation, supplemental income, etc. Second, by sending money home, migrants in the U.S. seek not only to assure a decent standard of living for their Mexican families but also to maintain the campesino identity and community belonging that continue to define them in economic exile. Their money, whether individual or organized, subsidizes rural infrastructure, farm equipment, inputs, and labor and conserves cultural identity.

   The combination of these personal subsidies and subsistence tenacity account for the otherwise unaccountable growth in corn production in Mexico-despite the overwhelming "comparative disadvantages" of a distorted international market. They reflect a deep cultural resistance to the dislocation and denial inherent in the free trade model.

2. The Myth of "Comparative Advantages"

   The U.S Grains Council estimates that in Mexico only 1.7 to 2 million hectares have the capacity to produce close to the U.S. standard of 8 tons of corn per hectare (2.47 acres). The strong implication is that farmers tilling the remaining 6.5 million hectares currently in corn production should look for other work.

   The first reason why these marginal corn producers still have not become factory workers or mango growers is that they can't. The idea that Mexican agriculture can be restructured to exploit comparative advantages on the international market is a pipe dream. The characteristics of Mexico's land and climate limit regions where fruits and vegetables-the NAFTA "winners"-can be grown, and investment is concentrated in a very few regions in the north. Thus the model exacerbates regional polarization and southern exclusion. Moreover, foreign investment needed to convert crops and develop export industries has failed to arrive. Since the onset of NAFTA, 0.3% of all foreign direct investment went to agriculture-a dismal showing by all accounts

   Several sectors already favored by natural resources, capital, proximity to the U.S. market, and infrastructure have grown during the NAFTA years, but particularly in terms of rural employment, they offer an option to very few farmers. Export agriculture also employs some of the most socially and environmentally harmful methods of food production in the countryside, including the intensive use of migrant family labor, application of chemical inputs with severe short- and long-term health and environmental effects, documented discrimination against women, exploitation of child labor, and violations of human rights. lose the parenthesis

   Post-NAFTA agricultural trade has not always been a bowl of cherries even for this privileged group. Mexico's agro-export sector has repeatedly faced trade barriers in the United States. Counter-seasonal tomato farmers in Sinaloa have fought a permanent battle with their counterparts in Florida, who have succeeded many times in closing the border to protect U.S. growers. Often under the pretext of sanitary rules, the same protectionist measures have been applied against Michoacán avocado farmers.

   Still, free marketers insist that Mexican agriculture merely needs social "safety net" programs to assist while employment adjustments are made. What they fail to realize is that small-scale corn production is the millennia-old safety net for all of Mesoamerica. Trying to fit this maize-centered campesino economy-based on cultural preservation, subsistence, and small-scale sustainable agriculture-into the free trade model of comparative advantages is like trying to cram a square peg into a round hole. When Mexican farmers demand new rural policies and a new pact between the state and rural society, they are demanding that the non-market contributions of the campesino economy be recognized as essential to national sovereignty, cultural diversity, and rural employment.

3. The Myth of Free Trade as a Development Model

   Since the "lost decade" of the eighties and the polarization of wealth in the nineties, the "trickle-down" theory has fallen into disrepute. Even so, today's neoliberals still insist that the poor will eventually benefit from the model, and all that's needed is for the laggards to catch up, convert, modernize, integrate, etc. As NAFTA enters its 10th year and after nearly two decades of trade liberalization under GATT, Mexican agriculture has steadily lost ground: statistics show 1,750,000 people displaced, as well as increases in poverty, malnutrition, and school desertion. While President Fox and his cabinet boast of six billion pesos in agro-export earnings, farmers point out that that money went into the pockets of fewer than 7% of Mexico's farmers.

   A major premise of both NAFTA and the proposed Free Trade Agreement of the Americas (FTAA) is that if a nation stays on the "yellow brick road" of IMF prescriptions and economic integration, it will reach the "Emerald City" of U.S. prosperity. These trade pacts offer no alternative routes, no other destinations. Today, Mexican farmers are saying not only that they can't compete with the U.S. agricultural model but also that they don't want to. And they present a long list of reasons why.

   One objection encompasses social and environmental concerns about the U.S. agricultural model. The U.S. model is not environmentally sustainable due to the large amount of chemical pesticides, herbicides, and fertilizers applied and the monocropping techniques; it destroys biological, agricultural, and cultural diversity; it decimates rural employment (2% of the U.S population make a living farming compared to 25% of the Mexican population); and it increases social inequities by concentrating land holdings.

   The second objection cites national sovereignty and dependency issues. The free-trade model creates food dependency through imports (Mexico now obtains 40% of its food from abroad); links the rural sector to the whims of transnational capital instead of to the nation's consumers and producers; strangles local and regional markets, and encourages dependency on transnational seed and chemical conglomerates.

   Farmers have also begun to recognize consumer issues: the U.S. model erodes food quality to the consumer by encouraging junk-food imports and chemical use, and it inhibits culinary diversity and ethnic-based food traditions that have high cultural and health value.

   The Mexican farmers' movement is not asking for a little time and money to attain U.S. stature. When these farmers highlight asymmetries and call for compensatory funds, they don't aim merely to correct macroeconomic gaps and promote structural reforms (in fact, an important source of support from labor and civil society is shared opposition to privatization of land, oil, and the electrical sector) but rather to develop a sensible and sensitive national development program. They recognize that the United States is well-advanced along paths that Mexico dare not tread if the goal is sustainable development, social equity, and a decent quality of living for all. The new "state-urban society-rural society" pact that Mexican farmers seek would incorporate a basic principle: a nation's first moral and political obligation is to assure a decent standard of living to its inhabitants by developing national policies that respond to national needs. This includes ensuring the long-term viability of small farmers rather than negotiating their demise; recognizing the environmental, cultural, and social contributions of agriculture; and actively defending food security and quality.

4. The Myth of the Fail-Proof Policy

   Faced with debacle in Argentina and rising criticisms worldwide, neoliberal planners have systematically refused to acknowledge any responsibility for their model's failures. This denial of accountability, vital to the ideological defense of free trade, is being challenged directly by farmers' demands to revise parts of NAFTA. In response, government leaders from all three NAFTA countries have ascribed to the text a moral authority tantamount to the Bible's and have refused to discuss modifications, although the law clearly allows it.

   Confronted by the negative impacts of NAFTA on Mexican agriculture, the Fox administration has waffled even more than usual. While Mexican farmers press to renegotiate the agricultural chapter of NAFTA, the Mexican government insists that free trade is not the source of farmers' woes. Defenders of rural policy caution against "throwing the baby out with the bath water" and insist on the need to surge forward with structural reforms arguing that the problem is not too much free trade, but too little.

   The U.S. embassy has played an unusually active role, prodding the Mexican Congress and issuing several press releases and official statements urging Mexico to tow the line. On December 12, embassy staff came out in force to personally lobby senators, narrowly averting a Senate vote to freeze tariffs at 2002 levels. One embassy report attempting to justify the poor results of NAFTA refers to the "Big-Events-Little-Time" problem. The authors argue that intervening events (mainly the Zapatista uprising and the December 1994 devaluation) and NAFTA's short nine-year span make it difficult to ascertain cause and effect. On closer examination, this theory and similar dodges serve to mask a far larger problem that has vexed free trade architects for years: the "Data-Contradicts-the-Model" problem. Luis Tellez, who participated in NAFTA negotiations as subsecretary of agriculture under President Salinas, expressed this problem succinctly in a January forum: "It's not that NAFTA failed, it's just that reality didn't turn out the way we planned it."

5. Conclusion: Policies Based on People, Not Myths

   If the free market doesn't exist, and if the model is impoverishing the vast majority of rural producers, should it continue to be considered the foremost and exclusive organizing principle for Mexican agriculture? The farmers' movement is saying that it's time to discard the myths and permit more human values to play a role in agricultural policy.

   Mexican farmers not only reject an asymmetrical trade agreement that destroys their livelihoods and their communities, they also reject being railroaded onto a one-way street. To compete with the U.S. means to adopt the U.S. transnational-dominated model of agriculture. Competing on these terms-the only ones understood by a market driven solely by prices-could unravel Mexican society. Buying into this corporate myth could jettison nine thousand years of culture, domesticated agriculture, and biological and agricultural diversity.

   The month of January 1994 opened with the NAFTA paradigm of a neoliberal future and closed with an armed Zapatista rebellion that galvanized national and international support for a "world of many worlds." January of 2003 opened with NAFTA tariff eliminations to enforce the free trade model, and the month closed with 100,000 people in the streets calling for immediate renegotiation of NAFTA, food sovereignty, and a national rural development pact. These two Januarys are the bookends of a period of disputed definitions in Mexico. Recently, U.S. congressional members recognized that failure to resolve the Mexican agricultural crisis would increase migration and complicate relations between the two nations. But the problem goes beyond migration. The United States will face serious risks in all aspects of the binational relationship if it insists on imposing a unilateral future on Mexico. In the not-so-distant future, Indians and farmers could be joined by thousands from other walks of life demanding national development that responds to their needs and not to a myth-ridden model.

Laura Carlsen <tortuga@laneta.apc.org> is an associate of the IRC's Americas Program and co-editor of Community Control in a Global Economy (Kumarian 2003) and Enfrentando la Globalización: Integración Económica y Respuestas Sociales en México (Miguel Angel Porrua 2003)

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