Corn-Producing Sector in Mexico and Sustainability Alejandro Nadal Centre for Economic Studies El Colegio de México OSISA – CCS-UKZN Winter School on Rethinking Sustainability, Development and Economic Justice South Africa, Durban, July 2013

OVERVIEW - Main Features Importance of small scale producers, both small commercial farmers or subsistence producers 3 million direct producers 15 million persons depend directly on corn Approximately 8 more million depend indirectly (commerce, transportation) on corn production Large employment generator Crucial staple – Nixtamal process: only used in Mexico & Guatemala – Converts bound niacin into free niacin

Zea mays: Mexico is centre of origin of corn Vavilov in Mexico (1930, 1932): Mexico is the centre of origin of corn (Zea mays) Mexico is the centre of domestication of corn from teosinte (Zea mays parviglumis) around 7,000 years BPT Mexico is the centre of greatest genetic variability of corn Mexican corn germplasm: 51 racial complexes and more than 9,000 varieties (38% of accessions at CIMMYT) plus 388 varieties of wild relatives (teosinte and tripsacum) Today: high risk of genetic erosion – Degradation of milpa systems – Migration induced by economic warfare – Large scale agri-business model (including for ethanol) – GMOs: moratorium, contamination (Oaxaca), authorization

Corn small scale producers and genetic variability Mexican producers using traditional methods on rain-fed land rely heavily on genetic diversity as a strategy for survival Genetic variability of corn = most important technological asset of small scale corn producers in Mexico Sowing different varieties, with different abilities to withstand a range of environmental conditions, offers insurance for an adequate harvest: this requires sophisticated handling of a complex set of inter-relations between seed characteristics, soil quality, surrounding topographic features, weather and climate, etc. Milpa: complex intercropping system (its core is made of three crops: corn (Zea mays), beans (Phaseolus vulgaris) and squash (Cucurbitacea spp.)

Genetic variability of corn in Mexico Global importance: Mexican germplasm has been used to improve more than 45 varieties of corn used worldwide Critical in context of climate change In situ conservation performed by three million small scale producers in Mexico: curators of germplasm Ex situ in germplasm banks not enough in the long haul – Static conservation (in situ is dynamic) – Lack of adequate information in accessions passports

In situ Conservation of Genetic Resources Maize in Mexico: well adapted to complex tapestry of agro- ecosystems. Due to strong genetic X environment interaction, maize is well adapted to the harsh and varied conditions of Mexicos lanscapes Mexican corn germplasm is the single most important technological asset of poor (small-scale) producers HYVs unable to compete with landraces. GMOs may be in the same situation (Berthaud, Goodman, García Barrios, etc.),

Justifying Corn in NAFTA Governments justification for including corn in NAFTA: it would be cheaper to import than to produce domestically These three million producers were defined by GOM as inefficient and too costly (subsidies and price floor support mechanisms) In addition, the GOM argued that these subsidies were distorting prices of corn and affected consumers of final maize products (tortillas)

Corn in NAFTA Tariff rate quota system over 15 year period Tariff-free quota to expand at 3% p.a. Initial tariff at 206% ad valorem (phase out) Price floor support and import quotas to be eliminated immediately and… Replaced by income deficiency systems (à la Dunkel) Support for producers during this period would be maintained constant in real terms

The NAFTA Project: expected results 1. Increments in corn imports 2. Reductions in domestic prices 3. Diminished output Reallocation of productive resources: land, capital and labor

The Implementation of Corn in NAFTA Tariff for over quota not implemented: de facto total liberalization took place on January 1, 1994 Transition period truncated to 36 months (domestic and international prices alligned) Producers prices dropped 50% first years of NAFTA PROCAMPOs real value dropped 45% Investments in hydro infrastructure collapsed Credit for agriculture at all-time low TODAY: international prices have increased (food crisis) due to biofuel production in the USA and to a lesser extent financial speculation in futures markets

International Corn Prices

Evolution of international prices of corn World demand (China)? What about market power concentration? – Archer Daniels Midland, Cargill, Bunge, Louis Dreyfus (ABCD) control more than 40% of world trade in grains Ethanol and biofuel production, especially in the US Financial speculation in Chicago Mercantile Exchange – US CTC continues to deregulate commodities futures markets – Big players in energy trading entering commodities trade: Vitol (largest independent oil trader) has hired team from Viterra (Toronto). Viterra was bought by Glencore, largest global commodity speculator

Financial speculation and commodity markets Source: UNCTADs Policy Brief No. 25 Calculated with data from Bloomberg

Financial speculation and commodity markets Source: UNCTADs Policy Brief No. 25 Calculated with data from Bloomberg

Trends in Mexican Agriculture Declining government credit Declining commercial credit

Trends in Mexican Agriculture: Declining Investment

Declining Subsidies for Maize (Amber Box)