Focus on International Trade

Corn is at the heart of Mexico’s food crisis. Tortillas are crucial for calories and even protein in the traditional Mexican diet. Therefore, it was serious when the price of corn skyrocketed earlier this year, due in part to increased U.S. demand for ethanol. The price of tortillas shot up by between 40% and 100% in a single week. According to Víctor Quintana, a former lawmaker and leader of the Frente Democrático Campesino a peasant organization in the Mexican northern state of Chihuahua, the fallout will continue in the form of higher, prices of other basic foods like eggs, milk and meat.

Corn, the classic Mexican staple, is imbued with symbolic significance. In Indigenous religious traditions, it is quite literally the equivalent of God-given manna. Today, Mexicans depend on tortillas made from ground corn as they did before the Spanish Conquest. Wheat in the form of bread may have made heavy inroads into the diet of Mexico’s urban middle class. But at the very least half of Mexico’s 100 million not just eats tortillas, but relies on corn, together with beans, for up to half of their protein intake. This is particularly true with children. It is hard to exaggerate the importance of a drastic increase in the price of tortillas. It has already provoked massive protest marches, and not surprisingly, a fervor akin to bread riots.

Calderón had only recently assumed the presidency, amid enormous popular dissent over the fraud/legitimacy of his electoral win, when the corn crisis broke. He was slow to act, never committed to defending the regulated price of the staple, and eventually resorted to no policy at all, just jawbone-style negotiating with wholesalers and tortilla-sellers, urging them not to gouge. The gentleman’s agreement that resulted capped the tortilla prices at 8.5 pesos per kilogram and was only signed by some 5,000 out of Mexico’s more than 100,000 tortilla sellers. Calderón´s head is still attached to his body but the political furor is far from past. Indeed, in mid-February milk and meat prices began to spike, because Mexican cows are fed corn.

The wave of rising prices of staple foods is indicative of deep-running currents in the economy and society. First, there is an abyss dividing the productive and commercial sectors. This is not the United States, an all but entirely urbanized and suburbanized nation, where farming is mechanized and largely centralized in the hands of big agribusiness corporations, at the same time that its production is subsidized by the government to the tune of $30 billion annually. In Mexico, over 20% of the population still works in agriculture. But unlike the U.S., here government technical assistance, credit and all manner of economic involvement in the primary sector were slashed more than a decade ago. It was as though the sector were subjected to a line-item veto. Indeed, this watershed change occurred through an executive decision, taken by former President Carlos Salinas (1988-1994), still possible in the days before Mexico threw out the long-standing official party, Partido Revolucionario Institutional (PRI), in 2000.

The initiative to de-regulate agriculture went hand-in-hand with the abandonment of the country’s commitment to agrarian reform. It came as NAFTA took effect, mostly subordinating, the Mexican to the North American economies. True, the peasant – many also indigenous persons – population dedicated to farming was supposedly protected by a 15-year transition period during which the workers deemed not globally competitive were to be drawn from the countryside into modern maquiladoras and other industry and services. Was 15 years too short to uproot and replant millions of households? We’ll never know, because, in draconian fashion, the Mexican government abandoned the plan and lifted early some tariffs on basic grains. And needless to say, the exodus from the countryside actually did not stop at the border. Many uprooted Mexican farmers entered U.S. territory as well as the U.S. economy -- unwillingly in both cases.

There is a scandal involved in this hurried invasion of the domestic multi-variety corn market by “cheaper” – industrialized, subsidized and largely bio-technologized – grain from the Midwest in the United States. The wholesale distribution system was privatized and sold to MASECA, MINSA, Cargill and other corporations in a bid-shy rush masterminded by Raul Salinas (the former president’s brother, who was recently released from prison). The industrialization of the industry followed quickly and inevitably. “Mom and Pop” tortillerías closed, or left off using fresh corn -- masa, nixtamal -- to take up dried-powdered stuff, named after the brand of its owner, “Maseca,” a name now as commonplace in Mexico as “Kleenex” is in U.S. parlance.

Thus the variety and quality of tortillas has been transformed to a pseudo-tortilla, reduced to the lowest common denominator. Predictably then, the real revenue/yield ratio to corn farmers fell, then fell further due to the corn market being flooded by the U.S. product of rough equivalence. Profits are concentrated in the industrial firms now in control of processing corn and much of the marketing, which occurs increasingly through supermarket chains. Such is the way that modern capitalism works.

Now with the prospect of rising corn prices, there should, in theory, be chance for Mexican corn farmers to improve profits. Unfortunately the market is now structured in such a way that that improvement will be minimal, at best. How is that possible? After all, the small farmers produce white corn while the U.S. grain is mostly of the yellow variety, preferred for animal feed. Consequently white corn has drawn a 10-15% premium, because it is relatively scarce. But now in the Maseca-tortilla yellow corn can substitute for some of the white, since the difference is hardly noticed once the staple comes from industrialized flour.

In sum, by “efficiently” adopting an economy of scale in tortilla production, without a level playing field, the result was inevitably oligopoly and loss of quality, loss of consumer choice. The significant profits, as usual, accrued to the post-production phases of transformation of the primary product and the marketing. Now that the industry is vertically integrated – from flour to packaged tortilla – small farmers have been left out of the corn market, and in desperation often have left their communities to become undocumented workers in the United States.

This transformation of corn, tortillas and farmers has seeded widespread resentment. The basis of the country’s social pact, going back to the 1910 Mexican revolution, was a guarantee of land on the part of the State, through an ambitious agrarian reform program, to those wanting to farm. Additionally the terms of trade between country and city were made more tolerable thanks to the oil profits monopolized in the 1930s for the benefit of the nation. Today this deal would be called “food sovereignty.” Thus it is to add political insult to economic injury that the decision to sacrifice food sovereignty to market efficiency has predominantly rewarded a small number of highly capitalized corporations. The Mexican minimum wage, not even six dollars a day, rose slightly less than four per cent in early 2007, while staple food costs may well double this year.

Given the country’s political precariousness, the practices of hoarding and speculation by agro-business are audacious. The run on corn and the price hike on tortillas began in January, a month after Calderón assumed office. A hair-breadth difference in the much-disputed, much-delayed, much-questioned final tally of the 2006 presidential election led the leftist candidate of the Revolutionary Democratic Party (PRD), Andrés Manuel López Obrador, to call fraud and assume independently the title of “Legitimate-President.” Now Bertha Luján, who serves in his alternative cabinet as Labor secretary, has forecast a serious depression in domestic demand. Indeed, with wages long having been indexed to inflation, workers’ share of profits has fallen far behind the rise in labor productivity.

Surely, the surging price of staple foods puts the lie to Calderón’s inaugural commitment to implement a social policy of reconciliation in the country and with the second-largest delegation in Congress, the Partido de la Revolución Democrática, PRD.

The domestic economy should be stimulated, instead of further squeezed. However, urgently needed fiscal reform is even less likely now than it was during the six-year administration of Vicente Fox, Calderón’s predecessor. Finally, it is an open question whether the U.S. economy will continue growing at rates sufficient to maintain growth in demand for a desperate Mexican labor force. Many signs point to a national security-couched anti-immigrant retrenchment in the United States.

What then might the newly minted U.S.-Mexican “study group” ideally recommend? A serious, integrated and coordinated policy reform. The domestic Mexican market for staple foods should be protected to make up for the time stolen from the Mexican farmers in the early NAFTA years and take corn and beans, and other basic grains out of the discussion. Meanwhile the United States should eliminate subsidies to its already competitive industrial farm sector, now rewarded with increased demand for ethanol production. Some part of the savings should be invested in Mexican rural development, and some part for legal integration of the 10-million-plus undocumented Mexican workers in the country. Mexico should adjust the minimum wage and make the fiscal reforms necessary to channel higher revenues to labor, both as urban wages and as returns to small-scale agriculture. The United States and Mexico must coordinate their policymaking in the inter-related areas of trade, immigration and agriculture.

In sum, when mass-produced at low price, a traditional food lost its high quality. Small producers also lost their traditional market. Now, with the price of that food rising, low-income non-agricultural workers are hit the hardest and agribusiness is reaping huge profits. The Mexican tortilla crisis makes us wonder how many times we will have to see the same movie about agricultural globalization.

Manuel Pérez Rocha has worked for many years with Mexican and international civil society organizations, including the Mexican Action Network on Free Trade (RMALC) and currently lives in Washington DC. John Burstein is President of FORO para el Desarrollo Sustentable, A.C., an organization working on behalf of indigenous peoples in Chiapas, Mexico.

Also see:

A Mike Curtis Classic -- Three Views of Immigration
http://www.progress.org/2006/immi02.htm

Poverty is Not Natural
http://www.progress.org/2006/hunger02.htm

Two Mexican Presidents -- Which Is Legitimate?
http://www.progress.org/2006/fpif75.htm

Page One	Page Two	Archive
Discussion Room	Letters	What's Geoism?

Focus on International Trade

Mexico: Importing Corn, Importing Disaster

by John Burstein and Manuel Pérez Rocha

Focus on International Trade Mexico: Importing Corn, Importing Disaster

by John Burstein and Manuel Pérez Rocha

Focus on International Trade

Mexico: Importing Corn, Importing Disaster