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 Business News | August 2006 
Calderon Faces Pressure to Roll Back NAFTA
 Kevin G. Hall, Janet Schwartz & Jay Root - McClatchy Newspapers
| | Carlos Leonardo Gaspar Calderon, 13, and his grandfather Juan Calderon, 82, take care of their avocado plants in a breeding ground in the outskirts of Uruapan. (Diego Giudice, MCT) |
Uruapan, Mexico - Felipe Calderon's contested, razor-thin victory in Mexico's presidential election last month is likely to force his attention toward the underdeveloped south, where poor farmers want to renegotiate the North American Free Trade Agreement.
The treaty with the United States and Canada took effect in 1994, but delayed complete free trade in the most politically sensitive farm products until 2007 and 2008. These include sugar and orange juice imports into the U.S. market and corn and beans into Mexico.
Leftist presidential candidate Andres Manuel Lopez Obrador, who's mounted a legal challenge to overturn the July 2 election results, promised on the campaign trail to renegotiate NAFTA's agricultural provisions with an eye toward protecting homegrown corn and beans. That helped him carry most of Mexico's south.
Mexico's industrialized north, which has benefited greatly from the trade deal, voted overwhelmingly for Calderon, a pro-business conservative. Over the 12 years of NAFTA's existence, Mexico's north has attracted billions of dollars in investment, much of it from the U.S. auto industry.
General Motors recently broke ground on a $650 million plant in San Luis Potosi, and a document leaked to the news media earlier this year shows that Ford Motor Co. is considering an investment of $9.2 billion in Mexico over the next six years. Foreign auto companies that manufacture in Mexico expect to produce more than 2 million vehicles this year, a record. Many of them are exported to the United States.
There's nothing comparable in Mexico's poorer south, which lacks the highways, ports, flush banks and geographic ties to the United States enjoyed by Mexico's north.
NAFTA has brought a flood of cheap corn imports for livestock. When coupled with falling human corn consumption in Mexico by its growing middle class, that's sunk prices for corn grown in the south.
Rightly or wrongly, many southerners blame NAFTA, as does Lopez Obrador.
"I think this is demagoguery," said Jaime Zabludovsky, a top NAFTA negotiator for Mexico. "The NAFTA cannot resolve all of Mexico's problems and it wasn't supposed to." But even Zabludovsky acknowledges that the south hasn't shared equally in NAFTA's benefits.
That's not to say that NAFTA has been all bad for Mexican farmers.
Times have never been better for Juan Calderon Garcia, a 62-year-old nursery owner who sells just one product: avocado saplings. NAFTA has fostered a boom for his city of Uruapan, whose entrance sign boasts in Spanish, "The World's Avocado Capital."
NAFTA opened the U.S. market, and initial restrictions were eased in January 2005, allowing Mexico to export to 47 U.S. states. Calderon Garcia, who's no relation to the president-elect, is selling twice as many saplings as a year ago, and expects to sell 40,000 to 50,000 this year.
Mexico's avocado exports to the United States rose 115 percent last year. They're expected to grow well beyond that in 2007, when Florida, California and Hawaii also are opened to Mexican avocados. Mexico has surpassed Chile and Israel to become the top avocado exporter to the U.S. market.
It's a different story for Miguel Santiago, a farmer in Santa Maria El Tule, a village in Mexico's southern state of Oaxaca. For him, NAFTA might as well have been negotiated with Jupiter. Cheap imported corn from the United States has driven down prices in Mexico, he and others allege.
"Good times are when we have enough to eat," complained Santiago, 66, taking a break from cutting and cleaning maguey, the cactus from which mescal is made, the potent alcohol that's famously sold with a dead worm in the bottle.
Ten years ago, Oaxacan marketplaces brimmed with locally produced corn. Now Mexicans buy sacks of U.S.-grown corn for a fraction of what it used to cost, said Chuck Collins, a scholar with the liberal Institute for Policy Studies in Washington.
"They can't really compete with the price of U.S. corn. The land is going fallow and some rural towns are more like ghost towns," he said. "If you own a restaurant (in Mexico) or you are just making tortillas, your corn isn't grown in Oaxaca anymore. It's grown in Nebraska."
As a result, farmers leave to seek work in sprawling urban centers such as Mexico City or cross illegally into the United States.
According to the U.S. Department of Agriculture, U.S. farmers exported 8 million tons of corn to Mexico in the 2004-05 growing year - a 22 percent increase over 1995. Mexico is the second-largest export market for U.S. corn, trailing only Japan.
These statistics sting in southern Mexico, home to most of the country's indigenous populations. Corn is thought to have originated in Mexico and is central to native mythology. Ancient Aztecs and Maya believed that humans were created from corn, and that corn has a soul.
In a news conference after his apparent election, Calderon acknowledged that he must show real results in Mexico's impoverished south, but stressed that he won't seek a NAFTA renegotiation to help corn farmers.
Given rising protectionist sentiment in the U.S. Congress, he said, it was doubtful that Mexico would be an "easy winner" in any renegotiation.
Besides, some powerful U.S. lobbies are flexing their muscles.
"We will oppose very strongly any renegotiation of NAFTA. This is a trade agreement that's worked for the U.S. and it's worked well for Mexico," said Jon Doggett, the vice president of public policy for the National Corn Growers Association of St. Louis.
Calderon's top foreign-policy adviser, Arturo Sarukan, told McClatchy Newspapers that NAFTA's safeguard provisions offer a way for Mexico to pursue delaying complete free trade in corn and beans beyond 2008. U.S. tomato growers sought and received similar protections against cheap Mexican-grown tomatoes, he noted.
The Bush administration also has ruled out reopening NAFTA. But some veteran businessmen think that Calderon will find a sympathetic ear for some plan to delay the full opening to corn imports.
"I think they'll work it out. Maybe they'll put it off a year to let Calderon have some time to get his feet on the ground," said Al Zapanta, the president of the Washington-based U.S.-Mexico Chamber of Commerce. "My sense is there will be an accommodation."
That doesn't please the corn lobby.
"If they start doing that, they're going to ruin the livestock industry, which has been a shining example," Doggett warned, pointing to Mexican cattlemen, who now depend on imported U.S. corn feed.
Statistics from Mexico's Ministry of Economy show that the livestock industry used 54 percent of the U.S. corn imported this year. Another 36 percent went to companies who use it for manufactured items such as cornstarch or corn oil. Only 6 percent went to companies that crush it into meal to make tortillas or other food products.
The Ministry of Economy proposed in July to double the quota limit for corn imports because there's so much unmet demand for corn.
In essence, policymakers concluded there are greater benefits to consumers and cattlemen from cheap U.S. imports than from protecting Mexican-grown corn, which isn't produced efficiently and lacks a distribution network.
That leaves Calderon with a dilemma. Election results necessitate help for the south, but there's no easy answer for corn farmers.
"Mexico could have postponed the opening of its market to U.S. corn but chose not to," said Walter F. Morris Jr., an author and anthropologist who lives in the poor southern state of Chiapas. "Clearly there was more concern over factories in the north than farmers in the south."
Hall reported from the state of Michoacan, Schwartz - a McClatchy Newspapers special correspondent - from the state of Oaxaca, and Root - of the Fort Worth Star-Telegram - from Mexico City. |
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