Jose Luis Fuente
Executive President
CANIMOLT
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View from the Top

Subsidies Do Not Solve Market Problems

By Jan Hogewoning | Tue, 03/31/2020 - 09:19

Q: What role does the chamber play in the grains sector?

A: Our chamber was formed in 2005 as a result of a merger between five regional chambers and two associations. The idea was to combine our strengths to confront issues at every stage of the productive chain. We also wanted to provide a strong voice before the public sector. We do not have a political ideology, and adapt to each new government.

For a long time, it was government policy to hand out subsidies to producers of flour wheat, bread and wheat. That did help boost wheat production but it also disrupted the market. Our chamber is 100 percent against subsidies to industries and believes the market should rule. Our goal is to continue working to create the ideal conditions for healthy competition and functioning of the sector. We also are unique in that we give each of our members, whether big or small, a veto right at our Board of Directors so that everyone has a say in our strategy. 

Q: What is an example of the chamber’s day-to-day activities?

A: The challenges we deal with from day to day always have an antecedent. Something is happening to one or multiple members, and we try to reach a solution. For example, a member told me three trucks loaded with flour wheat were stolen in Puebla. Another told me nine of his trucks were stolen in the Morelia area. Our reaction to this situation is to evaluate what is causing it.

Are they trying to steal your merchandise to sell it on the black market, or are they simply trying to hurt your business? Then we come up with a plan of action. If they suspect people inside the company, we propose an investigation into each member of the staff. If the problem has to do with regional security issues, you can place GPS chips in the merchandise, and establish secure routes together with the local authorities.

Our work is not just geared to solving individual situations like these, but also to improve the logistical coordination of transport and to elevate the quality of wheat and flour wheat produced.  We work with different actors in the supply chain to ensure that available wheat arrives where it is needed. To elevate the product, we have been working together with the Latin American Association for Industrial Millers (ALIM) to implement enrichment of wheat with various supplements, such as iron, folic acid, vitamin B complex or zinc. This helps battle public health problems. We also provide millers with information on how they can implement better industrial processes, offer training courses and help millers find new personnel. These kinds of services are open to all members.

Q: What is your perspective on the subsidy program that is being implemented by SEGALMEX?

A: We see this primarily as a strategy to increase production volume for bread wheat, but not necessarily for commercial ends. The subsidies are for smaller producers of wheat. This program will not help counter the logistical and commercial challenges we have in the market, such as security or lack of infrastructure. We think that increasing national production is a good thing, as long as we continue to price according to the market. We can help SEGALMEX in ways that can prevent the misappropriation of public funds. For example, some producers take advantage of subsidies by splitting their land in two to fit the criteria of a small producer. Getting familiar with these schemes is important. The proposed solutions include geolocators to allow verification before approving a subsidy.

Q: What was the impact of Trump’s tariff threats on Mexico’s wheat industry?

A: We believe in a treaty that makes the playing field even. In both the USMCA and the European trade agreement, there is no mention of tariffs. I have had meetings with representatives of the US government and reminded them that if the US threatens us with tariffs, our government will respond in kind. The US is a major exporter of wheat to our country, so a tariff conflict would not make much sense. If our government were to place a tariff on US wheat, importing wheat from other countries would become more attractive. To demonstrate that we are serious, I visited Russia and Argentina to talk about wheat exports to Mexico. After this visit, the Americans reached out to us and expressed their concern. Thankfully, I don’t believe tariffs will happen. Instead, our US counterparts in the industry have pushed for more cooperation. Together, we are working to achieve a better logistical strategy between our two countries. For example, inspections of wheat can take place at the final destination instead of the border. It is important that the Americans maintain high sanitation standards in wheat.  Mexico is one of the countries with the strictest microbiological standards for flour. We are very advanced in this respect.

Q: What are CANIMOLT priorities for the next two years?

A: Our goal is to continue creating healthy market conditions. We have worked with the government to ensure that regulatory action is taken against the formation of monopolies. Another issue is security: more action must be taken to ensure that supply chains function smoothly. My personal wish is to see increased production in the south and southeast of the country. In this respect, the president is right: we have to do something for the poor people of Mexico. We need to bring technical assistance and resources to producers in the southern states. Chiapas and Oaxaca have a great deal of potential to become producers. Also, we have initiated cooperation with the Confederation of Industrial Chambers (CONCAMIN) to develop a better infrastructure strategy.

 

The Cámara Nacional de La Industria Molinera de Trigo (CANIMOLT) is a chamber that represents over 80 percent of the industrial wheat millers in Mexico. By addressing problems in the industry, it strives to create a more efficient and productive national supply chain

Photo by:   MBP
Jan Hogewoning Jan Hogewoning Journalist and Industry Analyst