Following its accession to the General Agreement on Tariffs and Trade (GATT) in 1986, Mexico lowered its tariff protection and converted most import quotas to tariffs.22 While Mexico maintained import quotas on some staple food products, notably corn, beans, and dry milk, it reduced subsi- dies for corn and wheat millers and eliminated most retail food price con- trols by 1991.23 The government also revised Mexican land-tenure laws to permit greater flexibility in owning, selling, and renting land.
The Mexican government continues, however, to support its domestic sugar industry. In recent years, Mexico’s public development bank, Finan- ciera Nacional Azucarera SA (FINASA), is estimated to have provided over $1.3 billion of loans on very easy terms to the Mexican sugar industry.24
In anticipation of joining NAFTA, Mexico established in 1993 its Pro- gram of Direct Support for the Countryside (Programa de Apoyos Direc- tos para el Campo, or Procampo). Procampo provided income support to farmers, over a 15-year transitional period, through hectare-based direct payments to producers.25 Partly due to budget austerity following the peso crisis, government expenditure on Procampo steadily declined from $1.4 billion in 1994 to just over $1 billion in 1998. The number of agricul- tural producers who benefited from Procampo also declined by 14 percent, from 3.29 million in 1994 to 2.95 million in 1998.26 To complement Pro-
22. After eliminating import licenses in 1988, Mexico imposed tariffs on 67 agricultural products, including milk powder, sugar, beans, wheat, barley, corn, coffee, animal fats, meat, and edible offal. See WTO (1997, 2003).
23. Although Mexico’s market price support for agricultural staples such as corn declined slightly, output payments as a share of total producer support increased from zero to 5 percent during 1985–2001. During 1998–99 alone, the market price support was equivalent to 18 per- cent of total production value of barley, corn, rice, sorghum, soybeans, and wheat. Prices Mex- ican farmers received were on average 17 percent higher than the world market, though well below the OECD average. See OECD’s Agricultural Policies in OECD Countries, 1998–2002.
24. The government of Mexico maintains other programs, including a 1997 sugar policy that penalized producers who sold sugar in the domestic market, encouraging Mexican produc- ers to export sugar abroad. See Haley and Suarez (1999).
25. To increase support for small farmers, the minimum Procampo rate was paid on one hectare for all farmers, including those who farm less than one hectare. In 2000, Procampo payments accounted for more than 75 percent of payments under publicly funded policies that are regarded as minimally trade-distorting. Procampo was a decoupled program that substituted for previous direct price supports for farmers growing barley, beans, corn, cot- ton, rice, sorghum, soy, sunflower, and wheat. In 2002, expenditure on Procampo accounted for only 1.2 percent of public spending. See OECD’s Agricultural Policies in OECD Countries, 1998–2002.
26. If inflation is taken into account, Procampo government payments declined in real terms from about $100 per hectare to less than $62 per hectare. Some critics argue that 85 percent of Procampo funding benefits large-scale farmers in the north. See Taylor (2003). See also Hugh Dellios, “10 Years Later: NAFTA Harvests a Stunted Crop,” Chicago Tribune, Decem- ber 14, 2003, A1.