Draft Paper – Not to be cited without author’s permission
Appendix 3. Mexico After NAFTA
Mexico, thanks to its ten years of NAFTA, which came on the heels of a previous decade of liberalization under SAPs, is widely considered to be the quintessential example of the impacts of trade liberalization, the “laboratory” if you will. Mexico: Maize and Small Farmers
For Mexico, the signing of NAFTA meant “locking in” trade liberalization in agricultural products (tariff lowering, quota eliminating, etc.) that had begun during the previous decade as conditionality for debt relief under SAPs, and had continued as unilateral liberalization by the Mexican government in preparation for NAFTA.
On the surface it might seem that liberalization has been a resounding success for Mexico. Direct foreign investment rose from US $42 billion to 62 billion in 1994 (under SAPs), and jumped once again to 167 billion by 2000 (under NAFTA). Exports earnings increased similarly, from US $2.9 billion in 1980, to 11 billion in 1994 and 21.8 billion in 2001, though they fell off after that.74 On the other hand, these rather spectacular figures failed to make a dent in poverty, which actually grew over the same time periods. 75
With regard to agriculture, the process was broad in its reach over policies important to farmers, including reductions in import tariffs and quotas, steep cuts in agricultural
76 subsidies and price supports, the privatization of government sponsored marketing mechanisms, and the disappearance of affordable and accessible credit for peasant and family farmers.
Figure 3. Mexico’s real domestic maize prices. After de Ita, 2003.
While market opening by the U.S. and Canada allowed Mexico to boost its farm exports, the opening of her own markets led to a surge of imports. After NAFTA came into effect in 1994, Mexico’s modest farm trade surplus rapidly became a trade deficit. By 2003, Mexico’s food trade deficit had reached 2.7 billion US dollars.77
Part of the influx of imports was made up of cheap maize from the US. For most of Mexico’s family farmers, indigenous people and peasants, maize is the crop of choice and excellence. This is logical as it has formed the basis of the Mexican diet for millennia, and indeed Mexico is where indigenous people domesticated maize from its wild ancestors some 9,000 years ago. But the influx of US maize made maize cultivation less and less profitable for them.