Mexico & Nafta - 15 July 2003

Mexican farmers' fears that the local market would be overwhelmed by imports from the US seem to have been overdone. In the first quarter of the year, Mexico actually managed to increase its trade surplus with the US in agricultural products. The economy ministry was also quick to point out that the steps it took to protect sensitive Mexican crops, such as beans and maize, from imports have paid off.  

The widespread fear that Mexico would be overwhelmed by cheap agricultural products from the US, seems to have been overdone. In the first quarter of 2003 Mexico ran a surplus of US$427m on agricultural trade with the US. This was US$258m more than it managed in the first quarter of 2002.  

The growing surplus sits oddly with the protests made by farmers at the beginning of the year over the lowering of Mexican agricultural tariffs. Then, they said that inefficient Mexican farmers would be wiped out by more efficient and better capitalised US competitors. These fears have yet to be realised.  

The main reason for the increase in the Mexican surplus was a surge in exports of tomatoes, chillies, peppers and shellfish to the US.  

Tomato exports to the US in the first quarter were up by 72% year-on-year; chilli exports were up by 51%; pepper exports by 30%, and shrimp exports by 20%.  

To be fair, the economy ministry did note that there was also an 11.4% increase in imports of agricultural products in the first four months of the year. The main reason for this was an increase in maize and soya imports. These products will have gone to provide chicken feed; the chicken industry was one of those to enjoy heftier protection after the protests at the beginning of the year. Total agricultural imports in the first four months of the year were US$1.77bn  

Protection. The economy ministry claimed that its policy of targeted protection for particularly vulnerable products was paying off. It said that imports of some products, notably beans, had fallen substantially. Bean imports were down by 78% in the first four months.  

The other big falls in agricultural imports were in fruit and sorghum. There were also significant falls in livestock and fish imports. The biggest single fall was in beef imports, down by two-thirds.  

Unlike beans, the other Mexican staple, maize, has seen a nasty surge in imports. These were up by 50% in both cash and volume terms, totalling US$315m.  

Other so-called sensitive products showed an equally patchy performance. But Mexican farmers' fears about egg imports also seem to have been borne out. They were up by 8% in the first four months of the year.  

The biggest increase, however was in soya imports. These were up from US$260m to US$331m.  

Exports. The economy ministry noted that agricultural exports to North America were up by 22.7%, to US$2.225bn. The main increases (in percentage terms) were in brussel sprouts, raspberries, blackberries and mulberries, avocadoes, papayas and tomatoes.  

There were also significant increases in shipments from Mexico of fish and shellfish (up 132%) and honey (up 22%).The big increase in shellfish was in shrimp exports.  

Better to come? Gerardo López Noriega, the Coordinador General de Promoción Comercial y Fomento a las Exportaciones at the agricultural trade promotion agency, Aserca, said that the challenge was now to broaden the range of exports.  

He pointed out that almost 80% of the country's exports to the US fell into only four categories: fruit and vegetables, drinks, vinegar and live animals.  

López Noriega said that the immediate problem was to broaden the scope of avocado exports. He said that the goal was to ensure that Mexican avocadoes could be sold right across the country for the whole year. Currently, sales are restricted by season and state. López Noriega also wants to see fewer barriers to the export of Mexican melons.  

According to López Noriega, Mexican agricultural and food exports to the US came to US$2bn in the first quarter. This was 11.5% up on the same period of 2002.  

He also claimed that Mexico's imports of food from the US fell from US$1.64bn in the first quarter of 2002 to US$1.58bn in the same period of 2003.  

Canada. López Noriega noted that Mexico's food exports to Canada are also rising. They were up by 22%, at Can$199m, in the first quarter. The rise was led by vegetables and tomatoes, which increased from Can$108m to Can$132m. Fruit exports were virtually unchanged.  

Drink exports were up by 81%, from Can$12m to Can$23m. Coffee exports were also up substantially in percentage terms (by 20%), at Can$2.5m.