Technology Needed, Not SubsidiesBy Jan Hogewoning | Tue, 09/10/2019 - 16:02
Despite the political landscape, the agricultural sector will remain on a growth path, although it does require an innovation makeover, according to Juan Anaya, Director General of Grupo Consultor de Mercados Agrícolas (GCMA). “The sector is very strong and will continue to grow its exports. However, there is a need for technology and innovation to further strengthen Mexican producers,” he says.
The federal administration has significant plans for the agricultural sector. President López Obrador wants to provide subsidies to millions of farmers with plots of up to 5ha. Anaya suggest, however, that this will not impact the growth of the agricultural output of the sector because government programs focus on small farmers who grow crops for subsistence and not on markets. “Oaxaca is a good example, where the average production is 1.5-2 tons per hectare. This is hardly enough to bring produce to the market,” he says. “The programs may provide subsidies but it does not offer technical assistance to farmers to increase their productivity.”
The government has also announced its intention to implement new support prices for basic crops like maize, wheat, bean and rice. Anaya is concerned because small, medium and large farmers of basic grains and oilseeds are not the priority of the Mexican government. The federal government forgot that farmers produce 70 percent of the market’s requirements.
Technological advances have been particularly strong in the fruit and horticultural business. In 1994, Mexico produced 17 million tons of fruits and vegetables and now produces 41 million tons. The country has 2 million hectares dedicated to fruits and horticulture, growing new varieties to meet customer demand. The most suitable area for this subsector is the Bajio region and the northwestern part of the country, where fruits and vegetables can be grown for eight months of the year, or even year-round, in greenhouses.
Regarding exports, Mexico’s main destination remains the US with 78 percent out of allagri-food exports. “American consumers have gotten used to having fruits and vegetables all year round and Mexico’s geographic proximity to the US allows us to truck produce to destinations within 48 hours,” says Anaya. While Mexico exports a vast amount of fruits and vegetables, it also imports grains, a strategic reserve, from the US. “10,000 tons of produce can be brought into Mexico in 15 days by train and boats,” he says.
Anaya also laments the tensions surrounding USMCA negotiations, although he says the media is making these appear bigger than they really are. “Ultimately, there is no substitute for Mexico for American consumers. The two countries benefit greatly from their trade relationship and if tariffs increase, the consumer would have to pay the difference,” he says.
Anaya is also adamant about the importance of open markets and says Mexico can still diversify its export destinations. “Being open to the world reduces unfair trade conditions. It also allows you to get your product to where you can get the best price,” he says. Logistics is an important part of this and there has been great progress in transport and storage, although this has mostly been concentrated in northern and central Mexico, which also has a strong network of roads and ports. The areas that require the greatest improvement are the south and southeast, where “a lack of infrastructure and organization between farmers is holding back agricultural investment.”
Overall, the Mexican market has the logistics and the technology to be highly competitive. However, with further investment in innovation and infrastructure from both the public and private sectors, the country could see great improvement in the coming years. “If there were appropriate policies to incentivize productivity, the country could reach its full potential,” Anaya says.