20. Mexico

Mexico’s producer support estimate (PSE) for 2019-21 was equivalent to 9% of gross farm receipts, about half the OECD average. Around half of total transfers to producers were in the form of market price support (MPS) through price regulations and border measures. MPS, together with payments based on output quantities and on the unconstrained use of variable inputs, have the greatest potential to distort production and trade, and represent 62% of producer support. While trade liberalisation and domestic policy reforms in the 1990s reduced these forms of support, MPS increased again after 2016.

Input payments mainly support electricity use. Direct payments based on area and payments for afforestation and agroforestry also represents a sizable share of producer support: payments for afforestation and agroforestry accounted for 22% of budgetary transfers to producers.

General services expenditures (GSSE) represented just under 1% of agriculture’s value of production, and 9% of agriculture’s total support estimate (TSE), lower than the OECD average on both counts. Most of those expenditures are directed to agricultural innovation, extension and training (65%, predominantly technical institutes and vocational schools), and inspection and control activities (12%). Total support to agriculture in Mexico was 0.6% of GDP in 2019-21, close to the OECD average. About a third of this is paid by consumers through higher prices, while the remainder is tax-payer financed.

The fertiliser programme provides fertiliser directly to farmers to deal with imperfect input markets and expanded by 160% in 2022 from 2021 levels, and reached beneficiaries from the states of Chiapas, Guerrero, Morelos, Puebla and Tlaxcala – some of the poorest in the country. Support to in-kind loans to livestock producers, a main programme introduced by the new administration in 2019, was defunded in 2020.

Mexico started phasing out glyphosate and genetically modified corn for human consumption and announced a strategy for reducing burning of agriculture land. In 2022, the Mexican Government developed soil maps with carbon sequestration potential, and launched the National Soil Strategy for Sustainable Agriculture that looks to conserving, restoring and promoting sustainable soil management. In December 2021, Mexico adopted new organic certification requirements for imports of both raw and processed organic products.

The institutional changes to the agriculture ministry (SADER) were formalised in May 2021. SADER is now made up of one undersecretary of food self-sufficiency, one unit of administration and finance, and eight general coordination units.

  • Mexico’s Nationally Determined Contributions (NDC) commits to unconditionally lower greenhouse gas (GHG) emissions 22% and black carbon emissions 51% relative to business-as-usual (BAU) by 2030. These targets cover all sectors. In agriculture, with a target of -8% from projected BAU, actions directed at achieving the NDCs need to be widely spread. For example, support and financing to increase use of bio-digesters in livestock farms and conserve and restore grasslands are limited or non-existent in some regions, so these measures could be scaled up.

  • While Mexico’s support to agriculture is relatively low, most of the support is considered to be potentially most-distorting; such as MPS and payments based on outputs or the unconstrained use of variable inputs that together represented 6% of gross farm receipts in 2019-21. Despite reforms in the 1990s and 2000s to decrease these forms of support, they increased after 2016. Mexico should consider gradually phasing out price regulations for sugarcane and payments based on electricity consumption, and continue efforts to re-orient payments to schemes targeting poor smallholders.

  • Mexico’s efforts to reorient its payment schemes to focus on those in need and to provide public goods are commendable. Since 2020, area-based payments (Production for Wellbeing) target producers with fewer than 20 hectares and those in marginalised indigenous communities in the south-eastern states. The Sowing Life programme, implemented in 2019, supports agroforestry projects by small farmers (with 2.5 hectares of available land) in poor municipalities. The Fertiliser Programme was expanded, and targets poor farmers in marginalised areas.

  • Despite these efforts, improvements are needed to ensure programmes deliver on their objectives. The Sowing Life programme needs to assure that it does not incentivise farmers to deforest their parcels to become beneficiaries. This programme could consider parallel subsidies for environmental services, which could work as incentives to preserve forests. The Fertiliser Program should only tackle market imperfections that limit poor farmers’ access to fertiliser, inputs or credit.

  • Most strategic programmes introduced by the current government in 2019 target poor farmers (in-kind loans to livestock producers, guaranteed minimum prices for small-scale producers and transfers to fertiliser consumption). To improve implementation, the programmes should consider soil characteristics and nutrient needs when distributing fertilisers. In addition, the efficiency of these programmes could improve through parallel development of a zoning system that identifies land use based on agri-climates and soil fertility.

  • Transitioning to schemes that promote agrobiodiversity using local plant genetic resources (a main ecosystem services that small-scale farmers in poor areas provide) could be more cost-effective in helping poor farmers and increase the resilience of agricultural systems and the genetic diversity of plants. More broadly, conditioning payments on the implementation of sustainable farming could reduce the sector’s environmental impact. Support to promote producer organisations, and output and input market access for small-scale and poor farmers, could also help overcome barriers related to scale.

  • Investments in general services, mainly related to infrastructure, fell to less than 1% of value of agricultural production. These are crucial to improve the sector’s performance and create an enabling environment. In particular, the sector would benefit from greater investments in extension and technical assistance services, price and weather information systems, better agricultural knowledge, innovation systems, and agricultural research and development.

Significant reforms to price support began in the late 1980s and continue to the present day. In 1988-89, guaranteed prices for wheat, sorghum, barley, rice and oilseeds were eliminated.

After the enactment of NAFTA in 1994, guaranteed prices for maize and beans were phased out and replaced by a new system of direct income support payments (PROCAMPO) based on historic cultivated crop area. The government withdrew from procurement and marketing except for beans and maize (although the government sharply reduced its involvement in these crops). Input subsidies for seeds, fertiliser, pesticides, machinery and diesel fuel were reduced, but the input subsidy for electricity to pump groundwater still remains. During trade liberalisation, subsidies for financial instruments to reduce financial risks (price hedge instruments) were also put in place.

Another shift took place in 2018 to re-direct most payments to small- and medium-scale farmers located in poor rural areas. Some programmes that operated before the 1990s were reinstated, such as minimum guaranteed prices for staple crops. However, their operation differs substantially from the way it operated in the 1990s. In its current version, the government buys crops from a limited number of farmers, mainly smallholders, at a minimum price and distributes the crops at subsidised prices to poor households in both rural and urban areas. The PROCAMPO programme was renamed “Production for Wellbeing” and reformed to provide support only to small- and medium-scale farmers with particular focus on those located in poor communities. Furthermore, price hedge subsidies for large farms and food processors were dismantled.

Until the early 2000s, producer support comprised mostly market price support. The share of market price support then declined while that of budgetary support grew, until 2016 when market price support and input-based support again became the largest components of producer support.

Agricultural support policies in Mexico are guided by the Sectoral Programme for Agriculture and Rural Development 2019-2024. The current Sectoral Programme focuses on three objectives: (1) improve agricultural productivity for food self-sufficiency; (2) bring down poverty rates in rural areas; and (3) increase small-scale agricultural producers’ incomes.

Farmers’ support policies in Mexico are articulated in three main programmes: (1) guaranteed prices for small-scale farmers; (2) payments based on area; and (3) fertiliser programme. Other relevant support policies include those directed to consumers in vulnerable areas via the distribution of agricultural commodities and sanitary and phytosanitary measures for early detection of pests and diseases.

Guaranteed minimum prices are granted to maize, beans, wheat, milk and rice small and middle size producers (5-30 rain-fed hectares or up to 5 irrigated hectares). Guaranteed prices are set at levels above market prices. LICONSA and DICONSA, are state enterprises that support food actions for vulnerable poor populations. DICONSA sells beans, rice, and corn, among other basic products at subsidised prices in its stores located in vulnerable and poor rural and urban populations. DICONSA procures some of its products directly from smallholders. LICONSA, is another state company that buys milk from small-scale producers then processes and distributes the milk in established stores in limited quantities at subsidised prices for low-income consumers included in social programs.

For wheat and rice producers, SEGALMEX (Mexican Food Security) pays the difference between the reference and guaranteed prices, while for medium-scale maize producers (those with more than 5 hectares and with a maximum of 50 hectares), support is provided for the purchase of risk management instruments. The reference price is calculated as the sum of the average future price of maize published in the Chicago Board of Trade, converted to Mexican pesos using Banco de Mexico’s published average exchange rate, and a commercialisation fee based on transportation costs determined by SEGALMEX. In all cases, there are limits based on volume to the support a single farmer can receive. Lastly, under SEGALMEX, small-scale maize producers are eligible for a transportation subsidy.

The Production for Wellbeing programme focuses on area-based payments that target small and medium producers, including from indigenous communities. Payment rates decrease with farm size and differ by product (Table 20.3).

The Fertiliser Programme grants support to producers of maize, beans, rice or any other crop with cultural and economic impact at the state or regional level holding no more than three hectares located in highly marginalised localities in the states of Chiapas, Guerrero, Morelos, Puebla and Tlaxcala, some of the poorest states in the country. Up to 600 kg of fertiliser per hectare can be granted per producer each year. As part of the expenditures in general services, SENASICA, the agency in charge of implementing sanitary measures in the agri-food chain, implements sanitary and phytosanitary campaigns and measures for early detection of pests and diseases. This programme supports inspection and monitoring projects of sanitary risks, control and prevention of pests and diseases, inspection of goods that are transported in the country, implementation of systems for reducing contamination risks in production units and promotion of good sanitary practices.

The Secretariat of Wellbeing (Social Development Ministry) operates the Sowing Life programme, which supports agroforestry projects implemented by small-scale farmers (having 2.5 hectares of available land) located in poor municipalities. The programme provides direct payments, in-kind support (e.g. plants, seeds, sowing tools and nurseries) and technical support for afforestation and agroforestry projects. Additional support is provided for on-farm consumption of electricity for water pumping via reduced electricity tariffs. Consumer food subsidies are an important poverty alleviation instrument in Mexico.

Agriculture contributes around 13% of GHG emissions in Mexico. Mexico’s pledge to the Paris Climate Conference in December 2015 includes unconditional and conditional targets. Under the 2020 update of its NDC, Mexico committed to unconditionally lower GHG emissions 22% and black carbon emissions1 51% relative to BAU by 2030. Agriculture GHG emissions reduction targets are -8%. Depending on international support, this could increase to 36% of total emissions and to 70% of black carbon emissions.

At COP26 of the UN Framework Convention on Climate Change in November 2021, Mexico joined the Global Methane Pledge and the Glasgow leaders’ declaration on forests and land use. The Global Methane Pledge calls for voluntary action to reduce global methane emissions 30% from 2020 levels by 2030. The Glasgow leaders’ declaration on forests and land use calls for efforts to halt and reverse forest loss and land degradation by 2030.

To achieve these targets, the agricultural sector strategy promotes agricultural practices adapted to climatic and environmental conditions such as soil conservation and reduced burning of residues, considering community and scientific knowledge; and adopting agroforestry, agroecology and biodigesters on livestock farms.

The budget allocated to the fertiliser programme was expanded by 160% in 2022 from the levels in 2021. With this increase, beneficiaries from the states of Chiapas, Guerrero, Morelos, Puebla and Tlaxcala, some of the poorest states in the country, were added into the programme. The objective of the programme in 2022 is to cover 620 000 hectares and 400 000 small scale producers, of which 35% will be women. Production for Wellbeing is also aiming to reach 30% women’s participation in the programme in 2022. The in-kind loans to livestock producers programme on the insignia programmes started by the current government, was unfunded in 2020 due to high administrative costs.

Following the publication of a decree in December 2020, Mexico has started phasing out the use of glyphosate and genetically modified corn for human consumption. According to the decree, both products will be replaced by other alternatives that are more sustainable and culturally appropriate such as organic and biological products, agro-ecological practices and labour intensive practices.

Mexico has announced a new strategy for reducing burning of agriculture land, a widespread practice that not only causes direct emissions but also is responsible for nearly 40% of forest fires. By 2024, the government aims to reduce the frequency of burning on 28 000 hectares. The main mechanisms employed to achieve this goal will be: (1) elaborating a protocol for controlling burning in agro-forestry transition areas; (2) the elaboration of a mobile phone app to notify producers of agriculture burning areas; (3) improving the regulation on the use of prescribed burning on agricultural lands; and (4) training sessions with producers to promote the use of alternative practices.

In 2022, the Mexican Government developed soil maps with carbon sequestration potential, and at the same time, the National Soil Strategy for Sustainable Agriculture was launched. The main objectives of the National Soil Strategy are to conserve soils, restore deteriorated soils, and promote sustainable soil management for agricultural productivity, food security, nutrition, and the overall wellbeing of people, particularly those living in rural areas. In addition, the Strategy also seeks the generation and integration of traditional and scientific knowledge in order to promote technological innovations adapted to different socio-ecological contexts that meet the specific needs of the territories and populations in the country.

Institutional changes were formalised in May 2021 when the decree that establishes the new structure of SADER was published. The SADER is now made up of one undersecretary of food self-sufficiency, one unit of administration and finance and by eight general co-ordination units. The Marketing Support Program of the Agency for Marketing Services and Market Development (ASERCA), which provided support for the purchase of financial instruments for price volatility and contractual agricultural schemes, was dismantled. The Agri-food Markets Intelligence General Coordination will be in charge of promoting policies for improving market functioning of agri-food products.

Climate change adaptation strategies includes promoting sustainable production and consumption practices, incorporating climate risks into value chains, prevention and control of phytosanitary and zoosanitary risks, protection of native crops and promotion of financing mechanisms for confronting the negative impacts brought by climate change. It promotes sustainable production and consumption practices, incorporating climate risk into value chains and investment plans, preventing and controlling pests and animal diseases, strengthening environmental policy instruments to protect native crops from climate change, and financing mechanisms in the primary sector to cope with adverse climate change impacts. In addition, the government aims to strengthen the adaptive capacity of at least 50% of municipalities most vulnerable to climate change, establish early warning and risk management systems at every level of government, and reach a 0% net deforestation rate by 2030.

The government expanded the number of beneficiaries of the Sowing Life programme by 200 000 in 2021. The programme distributes payments, plants and inputs for agroforestry projects to producers with incomes below the poverty line. SADER increased communication with the members of productive chains to ensure food supply, inventories and distribution were not disrupted. Digitalisation services were expanded to speed up food imports. Up to 60% of administrative imports paperwork is now done digitally by the Centre for Documentation and Judgement (CDD) of the National Service for Health, Safety and Agri-food Quality (SENASICA). The government reinforced hygiene inspection systems in food production units and encouraged consumers to follow hygiene practices when handling and preparing food.

In December 2021, Mexico adopted new organic certification requirements for imports of organic products including both raw and processed products. The complete list of products that are subject to these regulation was published in December 2021. Between October and December 2021, Mexico established a tariff rate quota (TRQ) for a volume of 500 000 metric tonnes of soybean imports at zero import duty to reduce inflationary pressures.

On April 2022, the WTO panel issued its final report on the dispute of avocados halt imports from Mexico into Costa Rica arguing sanitary and phyto-sanitary problems (SPS). The WTO panel determined that Costa Rica acted inconsistently with Article 1.1 of the SPS Agreement.

The government signed a declaration with the governments of Argentina, Brazil, Canada and the United States to keep agro-food commercial flows uninterrupted during the sanitary emergency that started in 2020.

Mexico has a population of 127 million, ranks as the 15th largest world economy and has a per capita GDP just below the average of all countries covered in this report. Agriculture’s contribution to GDP has increased slightly since 2000 to just under 4%. Despite the decline over the past two decades, however, agriculture’s share of total employment remains comparatively high at more than 12% in 2020, indicating that labour productivity in the sector is well below that of other sectors. Trade is an important driver of Mexico’s economy: it represents 37% of GDP and has grown 13 percentage points since 2000. Agro-food trade is an important fraction of total trade, both in terms of exports and imports, representing 8.5% and 6.3% of each, respectively. Since 2015, Mexico has registered a positive and growing net agro-food balance. Whereas most agro-food exports are primary and processed for final consumption, more than half of agro-food imports are intermediate products for further processing.

Economic growth has been slowing since 2010 and stalled in 2019. As a result of the COVID-19 pandemic and related restrictions, economic output fell by 8% in 2020, one of the strongest contractions in the country’s history. In 2021, the economic growth rebounded but inflation also registered high levels. In 2021, the unemployment rate was at 4%.

Agricultural output in Mexico has been increasing predominantly due to Total Factor Productivity (TFP) growth, and to a limited extent to growth in primary factors and more use of intermediate inputs (fertiliser and feed). TFP growth between 2010 and 2019 is estimated to be higher than the world average. In contrast to the average trend observed in the OECD area, nutrient balances in Mexico have increased in the last decade, potentially affecting water and air quality. Agricultural GHG emissions represent 15% of the country’s total, which is higher than the OECD average and is also above its relative contribution to the country’s economy. Water stress is well above the OECD average, and agriculture is partly responsible for this pressure due to its high share of total water abstractions.

Note

← 1. Black carbon is particular matter formed by the incomplete combustion of fossil, biofuels and biomass; it is a short-lived but powerful climate warming pollutant.

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