1. IMPACTS OF NAFTA ON AGRI-FOOD TRADE FLOWS: A MEXICAN PERSPECTIVE ASERCA-SAGARPA August, 2001

2. ASERCA AGRICULTURAL PRODUCTION AND TRADE OUTLOOK  Mexican agrifood sector has successfully integrated to world markets.  During the period 1993-1999, agrifood exports showed an annual rate of growth of 11.6%, while agrifood imports of 6.1%. MEXICAN AGRIFOOD TRADE BALANCE 1993 - 1999 -4000 -2000 0.0 2000 4000 6000 8000 10000 1993199419951996199719981999 Millions dollars ExportsImportsTrade Balance AGR % 93/99 SECTORS AGRIFOOD EXPORTS11.6 AGRIFOOD IMPORTS 6.1 AGRICULTURAL EXPORTS 8.3 AGRICULTURAL IMPORTS 7.5 PROCESSED FOOD EXPORTS19.1 PROCESSED FOOD IMPORTS 6.1

3. ASERCA FOOD CONSUMPTION COSTS OUTLOOK  Opening of Mexican economy to international competition has influenced the evolution of most consumer prices, including food.  No single food price in Mexico is under control by the government.  The consumer price index for food grew 6.1% in 2000, 2.9 percentage points below general inflation. PRODUCTS WITH INCREASES IN PRICESPRODUCTS WTIH DECREASES IN PRICES  Tomatoes61.5%  Peppers88.6%  Avocados17.5%  Guavas19.2%  Rice2.8%  Dry edible beans7.8%  Oranges15.4%  Apples9.1%

4. Agricultural exports have gained importance in agricultural GDP:  21.1 per cent of agricultural GDP is generated by exports.  15.9 per cent of agri – food GDP is generated by exports. AGRICULTURAL EXPORTS / AGRICULTURAL GDP RATIO 21.1% 20.6% 20.4% 29.4% 13.0% 20.3% 0 5,000 10,000 15,000 20,000 25,000 199419951996199719981999 Million dollars 0 5 10 15 20 25 30 35 (%) Agricultural Exports México-World Agricultural GDP Agricultural Exports / Agricultural GDP (%)

5. MEXICAN AGRICULTURAL EXPORTS FIGURES AGRIFOOD EXPORTS/TOTAL EXPORTS RATIO, MEXICO – WORLD Million dollars Concept 199419951996199719981999 AGR 99/94 Total exports of Mexico 60,817.279,540.696,003.7110,236.8117,459.6136,391.117.53 Agri – food exports Mexico - World4,031.75,786.25,724.76,337.56,746.06,985.911.62 Agri – food exports / Total Exports of Mexico (%) 6.67.36.05.7 5.1(5.03) The rate of agri-food exports to total exports has been diminishing, even though agri- food exports have increased at an average growth rate (AGR) of 11.6 per cent. Data shows no trade diversion on the side of exports due to NAFTA. Trade remains concentrated with NAFTA Partners. - 1,000 2,000 3,000 4,000 5,000 6,000 7,000 (Million dollars) 199419951996199719981999 (Years) PERFORMANCE OF MEXICAN AGRIFOOD EXPORTS WITH NAFTA AND REST OF THE WORLD Rest of the WorldMexico - NAFTA AGR 10.9% AGR 15.8% Source: SAGARPA and Secretary of Economics.

6. MEXICAN AGRICULTURAL IMPORTS FIGURES Food imports vs total exports measures vulnerability according to FAO. This index is decreasing for Mexico, due to the performance of the economy as a whole. Data shows trade diversion on the import side due to the NAFTA. AGRIFOOD IMPORTS/TOTAL EXPORTS RATIO, MEXICO – WORLD Million dollars Concept 199419951996199719981999 AGR 99/94 Total exports of Mexico 60,817.279,540.696,003.7110,236.8117,459.6136,391.117.53 Agri – food imports Mexico - World7,343.25,252.97,678.38,610.18,546.76,985.911.62 Agri - food imports / Total Exports of Mexico (%) 12.16.68.06.97.36.3(12.2) - 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 (Million dollars) 199419951996199719981999 (Years) PERFORMANCE OF MEXICAN AGRIFOOD IMPORTS WITH NAFTA AND REST OF THE WORLD Rest of the World Mexico-NAFTA ARG 4.4% ARG (2.2%) Source: SAGARPA and Secretary of Economics.

7. MEXICAN AGRICULTURAL AND AGRI-FOOD TRADE BALANCES AGRICULTURAL TRADE BALANCE / AGRICULTURAL GDP RATIO Million dollars Concept199419951996199719981999 Agricultural Trade Balance Mexico - World (1,332.3)1,176.6(1,433.0)(730.7)(1,134.4)(977.6) Agricultural GDP22,216.414,348.318,393.420,109.520,080.220,488.5 Agricultural Balance / Agricultural GDP (%) (6.0)8.2(7.8)(3.6)(5.6)(4.8) Source: SAGARPA with Secretary of Economics data. AGRICULTURAL TRADE BALANCE / AGRI-FOOD GDP RATIO Million dollars Concept199419951996199719981999 Agri-food Trade Balance Mexico - World (3,311.5)533.3(1,953.6)(1,311.6)(1,864.0)(1,560.9) Agri-food GDP41,968.128,546.435,023.539,168.439,785.843,845.6 Agri-food Balance / Agri-food GDP (%) (7.9)1.9(5.6)(3.3)(4.7)(3.6) Source: SAGARPA with Secretary of Economics data. The deficit in agri – food products is equal to 3.6 per cent of agri – food GDP.

8. Country/Block Before AgreementAfter Agreement % Growth Fuente: SAGAR with SECOFI data 1/ Before agreement = 1990-1993 average; after agreement = 1994-1998 average 2/ Before agreement= 1990-1994 average; after agreement = 1995-1998 average 3/ Before agreement = 1990-1991 average; after agreement = 1992-1998 average 4/ Before agreement = 1990-1997 average; after agreement = 1998 NAFTA 1/6,499,468.3110,544,640.3662.24 Costa Rica 2/15,262.9450,327.45229.74 Bolivia 2/91.62615.62571.92 G3 2/16,916.4558,393.59245.19 Chile 3/12,027.0975,845.81530.62 Nicaragua 4/16,787.3625,411.7151.37 MEXICAN AGRIFOOD TRADE FLOWS WITH COUNTRIES THAT HAVE SIGNED A FTA BEFORE 1999 (U.S. Dlls.) ASERCA

9. 74.6 % 12.6 % 3.4 % 9.4 % 82.5 % 6 %6 % 1.3 % 10.2 %  Mexican Agrifood trade is highly concentrated in NAFTA.  In 1990, Mexico’s agrifood trade with NAFTA countries was 74.6% of total agrifood trade, and in 1999 it grew to 82.5%.  Agrifood trade with Europe fell from 12.6% to 6% during the same period. Source: SAGAR with SECOFI data. 1/ Include: agriculture livestock and agrifood TLCANEUROPEMERCOSURRest of the World 19901999 MEXICAN AGRIFOOD TRADE WITH DIFFERENT BLOCKS ASERCA

10.  From 1988 to 1993, agrifood trade between Mexico and NAFTA countries grew 43.2%, while from 1993 to 1999 it grew 66.8%.  Agrifood trade deficit was 2.2 billion dollars, while in 1999 was 1.3 billion dollars, a decrease of 40.3%. NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA) ASERCA

11.  In the last 6 years, an average 66% of our agrifood imports are agriculture and livestock products, and 34% are processed products.  During 1993–1999, Mexican agrifood imports increased in average 7.8%, 2.3 points less than agrifood exports. FOOD EXPORTS AGRIC. EXPORTS AGRIFOOD EXPORTS CONCEPT 17.9 7.1 10.1 % AGR 93/99 4.9 9.4 7.8 % AGR 93/99 2,347 1,759 FOOD IMPORTS. 4,698 2,734 AGRIC. IMPORTS 7,045 4,492 AGRIFOOD IMPORTS 19991993CONCEPT AGRIFOOD IMPORTS OF MEXICO FROM NAFTA COUNTRIES (millons of US dlls.) Source: SAGAR with SICM data MEXICAN AGRIFOOD IMPORTS FROM U.S.A. AND CANADA ASERCA

12. 3,211 3,437 4,790 4,555 4,933 5,382 5,696 0 1,000 2,000 3,000 4,000 5,000 6,000 1993199419951996199719981999 NAFTA Mexican agrifood exports to U.S.A. Growth 1993 – 1999: 77.4% Million dollars 34.12 28.98 42.88 43.80 61.09 68.96 77.07 0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00 80.00 199319941995199619971998 1999 NAFTA Million dollars Mexican agrifood exports to Canada Growth 1993 – 1999: 126%  From 1993 to 1999, the Mexican agrifood exports to U.S.A.. grew 77.4%, while to Canada 125.8%  Mexico has consolidated its position as the second supplier of U.S.A. markets.  The share of Mexican agrifood products in total U.S. Imports grew from 9.1% in 1993, to 11.5% in 1999, only second to Canada. MEXICAN AGRIFOOD EXPORTS TO U.S.A. AND CANADA ASERCA

13.  Total agrifood exports show an annual rate of growth of 10.1% during 1999-2000, while total agrifood imports of 13.7%.  Agrifood deficit increased from 1,569.4 million dollars in 1999 to 2,035.6 million dollars in 2000. EXPORT PRODUCTS WITH SIGNIFICANT INCREASE 1999 - 2000 Peppers 40.9% Onions 17.5% Chickpeas 22.2% Avocados 25.7% Bananas 36.3% Bovine live cattle 41.4% Pork meat 28.8% Honey 37.3% AGRICULTURAL PRODUCTION AND TRADE OUTLOOK IMPORT PRODUCTS WITH SIGNIFICANT INCREASE 1999 - 2000 Bovine meat 30.2% Poultry meat 29.4% Raw cotton 41.5% Milk powder 26.8% Fresh apples 36.2%

14.  The Mexican produce exports to the United States, have increased 72.9%, from 1.4 billion dollars in 1993 to 2.4 billion dollars in 1999.  Exports to Canada increased 70.9% in the same period, from 15.2 to 25.9 million dollars.  Mexico has increased its participation in U.S. Imports, in some cases in more than 50.0% 71 72 70 96 86 0 10 20 30 40 50 60 70 80 90 100 % TomatoeOnionAsparragusEggplant and cabbage Cucunber MEXICAN VEGETABLES SHARE IN U.S. IMPORTS (1999) 91 69 75 52 76 0 10 20 30 40 50 60 70 80 90 100 % Watermelon Mango and guava PapayaMelón Strawberry, blueberry and raspberry MEXICAN FRUITS SHARE IN U.S. IMPORTS (1999) PRODUCE EXPORTS FROM MEXICO TO NAFTA COUNTRIES ASERCA

15.  In many products, Mexico has consolidated its position as the most important supplier of United States markets.  In 1999, Mexico was the supplier of 221 products of the 2,070 that conformed the agriculture and livestock United States tariff. This represents 53.5% more products than in 1993. 1171VEGETABLES 12106OILSEEDS 34313CANDIES 22193COCKIES 22233BEER 20-------AVOCADO 12169GRAPE 1171LEMON 1136TOMATOE 1169CUCUMBER 1166PEPPER 12127GARLIC 11709ASPARAGUS Exports growth 1993 – 1999 (%) PRODUCT Importance as a U.S.A. supplier 1993 1999 Source: SAGAR with USDOC data THE MAIN MEXICAN AGRIFOOD EXPORTS TO U.S.A. AND CANADA ASERCA