Mexico's farmers, struggling in free trade market, fear worst from NAFTA

September 12, 1993|By Ginger Thompson | Ginger Thompson,Mexico City Bureau

MEXICO CITY -- While government officials here almost unanimously boast that the North American Free Trade Agreement will spur rapid growth in all sectors of the economy, farmers throughout Mexico feel doomed.

For the past two years, Mexican President Carlos Salinas de Gortari has opened agriculture to private investment for the first time in decades and has lowered import barriers to many agricultural products. So farmers here have experienced the effects of free trade. And almost all of them are suffering.

"From the border of the United States to the border of Guatemala, we are all the same," said Salvador Hernandez, a corn farmer from Michoacan. "We are desperate."

Over the past few weeks, Mr. Hernandez and thousands of other farmers have camped out in the central plazas here and in Guadalajara to demand relief from crippling interest rates, soaring production costs and sinking subsidies.

The farmers' demonstrations have grown dramatically. Main avenues into and out of the center of Guadalajara, northwest of Mexico City, have been blocked by angry farmers in tractors and farm trucks. Last week, in what has been called the largest demonstration ever in Mexico City, tens of thousands marched to the main plaza. Traffic was halted for hours.

Hundreds of "campesinos," a word roughly translated as peasant farmers, also held a rally in front of Mr. Salinas' offices.

'Changes forced on us'

"The government forced changes on us, but they never gave us the help we need to survive the changes," said Maximiliano Barbosa, a leader in the farmers' movement. "If we sink, we will sink because of their errors.

"And if we don't get help now, we will be destroyed by [NAFTA]."

Officials at the Mexican Department of Agriculture say that the farmers are experiencing a painful yet necessary transition caused by a surge in foreign investment and competition. But over time, these officials contend, Mexico's sluggish industrial and agricultural sectors have to become more efficient.

"A reform of this kind takes time to take root," said Claudio Gonzalez Guajardo, an adviser to the undersecretary of agriculture. "This is almost a cultural change."

The Constitution of 1917, created after the Mexican Revolution, called for large landholdings to be expropriated by the government and then distributed in small parcels -- called "ejidos" -- to the poor. But the campesino was not allowed to rent the land, sell it or use it for collateral. Loans to farmers, by banks that were all operated by the government, often went unpaid.

Reliance on credit

"There was a marked reliance on credit because no private capital was flowing into the sector," said Mr. Gonzalez.

Two years ago, Mr. Salinas amended the constitution to allow "ejidatarios" to sell their land, rent it or use it as collateral. He hoped farmers would form cooperatives or develop partnerships with private companies to finance modernization.

However, only a few investors have taken advantage of the reforms.

Meanwhile, most farmers -- from those with large export operations to those that produce only enough to feed a family -- say they have been left on their own to survive the surge in competition from U.S. farmers.

"Investors have not rushed to any sector of the economy, so why would the government expect there to be a rush into agriculture?" said Kenneth Shwedel, director of the American Soybean Association for Mexico, Central America and the Caribbean.

He said agricultural investments are especially unattractive because Mexican farms have become inefficient, with little funding for research and development or infrastructural improvements. Today, public spending on such projects remains low.

"Why invest in Mexico when you basically have to start from scratch?" Mr. Shwedel said. "And on top of that, you have no government support."

Meanwhile, Mexican farmers struggle against production costs that are at least five times higher than those in the United States, while world prices for their goods increase at a crawl. Corn, a staple of the Mexican diet, is grown by about 2.5 million Mexican farmers, but it is produced at a lower price by U.S. farmers.

Agricultural interest rates -- which range between 25 percent and 30 percent -- scare many farmers away from borrowing money to modernize. In the United States, interest rates range between 9 percent and 11 percent.

And a large number of the Mexican farmers who have borrowed money have defaulted and now face losing all they own. Government officials estimate that about 30,000 farmers are in default on loans totaling $3 billion.

Even the country's wealthiest export farmers in the northwest state of Sinaloa are demanding relief. The state encompasses some of Mexico's richest land, and farmers there have seen production grow 8 percent this year.

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