Calderón, NAFTA, and Mexico’s Campesinos in 2008

This is the second in a series of analyses of NAFTA and the U.S. Presidential Primaries.

• U.S. Presidential Primary and Republican Debate over NAFTA

On January 1 2008, the final provisions of the North American Free Trade Agreement (NAFTA) was implemented, abolishing all agricultural tariffs that were in effect. The free trade agreement, which was signed by U.S., Mexico, and Canada, took effect at the beginning of 1994. In spite of the driven proselytizing of Mexican President Carlos Salinas Gotari, NAFTA was not beloved by all. In that country, the biggest opposition to NAFTA has come from the peasant farmers, who most recently expressed their indignation in Mexico City, when over 100,000 campesinos, condemned the trade pact at El Zocalo (the city’s central square), on January 31, 2008.

Subsidized U.S. Agro-Industry Poses Mortal Threat to Mexico’s Poor Farmers
Throughout NAFTA’s brief history, Mexico’s peasant farmers have arguably suffered the most adverse consequences from the free trade agreement. Despite the massive protests, current Mexican President Felipe Calderón has made it clear that he will not even consider re-negotiating NAFTA. However, he may soon have to face the question as a result of pressure from either Barack Obama or Hillary Clinton, if either one of them wins the presidency.

Regardless, Calderón insists that he can begin to address the campesino cause in his country by implementing policies aimed at alleviating the negative economic impact of having to compete with below-market priced agricultural imports from the U.S. He also plans to eradicate tariffs that apparently will seem to mainly hurt the already struggling subsidence farmers throughout the country, mainly in the south.

Over the past 14 years, U.S agricultural exports to Mexico have grown by 156 percent, with U.S agro-industries being responsible for the majority of agricultural commodities shipped into Mexico. As a result, a number of Mexican economists have accused U.S. agricultural interests of “dumping” below market price products in their countries. Washington’s agricultural subsidies have encouraged overproduction of these commodities. The United States gives approximately $150 per hectare of corn in indirect and direct subsidies to U.S. agricultural enterprises, while Mexico awards only $45 a hectare. The inequality gap that has arisen from U.S. overproduction and the resulting fall in prices may not be easily halted. The gap has made it difficult for small Mexican cultivators, whose produce is not market-priced; to effectively compete with U.S. subsidized agriculture imports.

The Ejido Could Become an Extinct Species
Article 27 of the Mexican Constitution awarded communal land called ejidos to subsistence farmers:

Centers of population which lack communal lands (ejidos) or which are unable to have them restored to them due to lack of titles, impossibility of identification, or because they had been legally transferred, shall be granted sufficient lands and waters to constitute them, in accordance with the needs of the population

The ejidos would be communal lands awarded to indigenous peasants who lacked land for cultivation. Campesinos would use the land for cultivation of maize, corn, or other agriculture commodities, for subsistence and then sell excess crops to the government. The ejido was a social concept meant to preserve largely local domestic agricultural markets in order for them to become independent from competing against imported commodities. This would be similar to policies which France and Japan have implemented. Also, the ejido was seen as a spiritual symbol of the revolution, a symbol of Mexico’s professed commitment to the livelihood of the campesinos.

As NAFTA was being negotiated in 1993, the ejido was being seen as a complication towards modernizing Mexico after a decade of stagnation and fitful growth had been witnessed. By this time, the ejido was seen by its advocates as allowing people to stay committed to a traditional economy even though it now could no longer contribute to the yield, but as a heavy weigh by its detractors. According to Mexico’s former ambassador to the U.S, Jesus Silva Herzog, “In Mexico we still have approximately 25 percent of the labor force in agriculture, although its contribution to Gross Domestic Product is less than 10 percent.”

The negative differential regarding labor’s productivity in the agricultural sector made the ejido a liability to the Mexican economy. Under NAFTA, in order for any free trade agreement to be in conformance, Mexico had to abolish its state-run programs that allowed any non-competitive sector of the economy to effectively compete on an equal footing with domestic producers. The ejido has not been protected by Mexico’s constitution since the 1992 amendment to make that country compliant with NAFTA stipulations. According to Laura Randall’s book entitled Reforming Mexico’s Agrarian Reform, the reforms to Article 27 “have turned into a long nightmare full of mortgages, seizures, and overdue debts.”

Campesinos after NAFTA
One negative impact of the existing unfair competition that Mexico now tolerates with subsidized U.S. agriculture, and the steady abolishment of the ejido, are the increasing rates of poverty in rural parts of Mexico. Consequently, this has led to a rise in immigration to the United States. According to a study conducted by a Woodrow Wilson Center researcher, Jon Burstein, 60 percent of those who live in extreme poverty in Mexico can be found in rural areas. Southern states, which are the most dependent on agriculture, have the greatest degree of impoverishment, with 47 percent of those classified as suffering from extreme poverty, whereas the northern states have only 12 percent. In terms of migration to the U.S, Mexico’s rural areas comprise a quarter of its population, but accounts for 44 percent of migration (usually illegal) into the United States.

The Rise of “Illicit” Farming
The rise in poverty amongst peasant farmers also has led to an increase in a phenomenon known as illicit farming. Simon David Avila Pacheco, a researcher at Mexico’s Universidad Nacional Autonomo (UNAM), found in a recent study that growing numbers of farmers who cannot survive by growing maize or corn, have turned to “illicit” farming. Farms that once grew crops shipped to other parts of Mexico as well as for subsistence living have been displaced, and now must turn to producing illegal agricultural goods, such as marijuana and opium, in order to survive. Pacheco mentions in his study, “the earnings by those engaged in the illegal planting are higher… a day devoted to cutting sugar cane for a day [which can] earn more than twice the minimum wage.” When citing revenue for the illicit crops, “the other crops earn between 150 and 300 pesos per day.” With Colombian cocaine trafficking; increase of illicit farming; and NAFTA’s free movement of goods, the Mexican government will see much more difficulty curbing drug cartel influence.

The tensions between the U.S. and Mexico have become more visible in the 2008 U.S presidential elections. Not only immigration, but the perception that NAFTA has hurt blue collar workers in the United States, has become an issue that has made its way into the presidential debates and thereafter to be the predominant issue, especially amongst Democrats.

2008 U.S. Presidential Election: Democratic Primary
President Calderón has made it overtly evident that he will not be calling for any re-negotiation of NAFTA during his six-year presidential term. “The free trade agreement, negotiated almost 15 years ago, has its pros and cons, but overall it has benefited the country,” a is point that Calderón repeatedly stresses. But, Calderón may face a challenge to his stance if a Democratic nominee is elected. At a recent debate in Ohio, Barack Obama and Hillary Clinton have expressed an interest in pursuing the amendment of key NAFTA provisions and threatened to pull the United States out of the trade agreement altogether, if either Mexico or Canada refuses to renegotiate. Clinton has emphasized in the debate, “we will opt out of NAFTA unless we renegotiate it, and we renegotiate on terms that are favorable to all of America.” Obama added, “I think we should use the hammer of a potential opt-out as leverage to ensure that we actually get labor and environmental standards that are enforced.” Both have advocated stricter labor and environmental laws, but are vague in specifics.

For Calderón, who recently has visited this country, his relations with the United States may be further undermined if a Democrat takes office. He may be pressured to change his position on renegotiating NAFTA, a stance that would go against the creedal beliefs of his party, the Partido Acción Nacional, or PAN. The PAN believes in further privatization of certain industries that are still controlled by the government; it also promotes further pursuing free trade agreements.

In fact, the PAN may privately feel more comfortable with John McCain, who has said he will not renegotiate NAFTA, claiming that security and trade “are interconnected with each other”. Opting out for McCain would jeopardize U.S. relations with Canada, which is important to keep stable because of Canada’s commitment to maintain troops in Afghanistan and the fact that it is Washington’s largest trading partner.

The shift to a new U.S. president and Mexico’s probable willingness to allow for further trade liberalization has characteristics similar to 1994, when Carlos Salinas was president. Salinas ended his term with an enormous domestic brawl over the implementation of NAFTA. He was accused of pursuing the free trade agreement in order to benefit insiders (including Salinas himself) rather than actually attempting to modernize Mexico. Calderón may face similar accusations from the opposition parties and from the people regarding his readiness to ignore demands by peasant farmers to renegotiate NAFTA.

Calderón and Salinas
President Felipe Calderón won what many in the southern region of Mexico still regard as the fraudulent election in 2006. Andres Manuel Lopez Obrador, Calderón’s rival in the election and the candidate of the left-leaning Partido de la Revolución Democrática (PRD), archly questioned the legitimacy of his opponent’s victory. Lopez Obrador contends that he was the true victor and what could be the majority of impoverished Mexicans tend to see it the same way. Lopez Obrador led massive protests after the July 2 elections in Mexico City’s, El Zocalo (central square), where he passionately condemned the results, calling them rigged. Over 500,000 Mexicans protested for weeks against Calderón ’s victory and supported Lopez Obrador’s claim to the presidency.

Salinas de Gotari (1988-1994) also became president in the midst of an election that many viewed, and most rightly so, as fraudulent. His opponent, Cuahtémoc Cárdenas, founder of the PRD, is believed by many Mexicans to have been the likely winner in the balloting, but the PRI controlled the electoral machinery and decided differently. Beginning with his inaugural address, Salinas’ professed victory was denounced by crowds surrounding the legislative palace and chanting “El pueblo votó y Cárdenas ganó (The people voted and Cárdenas won).” According to Philip Russell’s “Mexico under Salinas,” the new president tried to disavow these charges of illegitimacy by promoting the theme of “modernization” in his speeches, in which he pledged that he would begin his dream of pursuing NAFTA, which would bring prosperity to the country.

PAN Politics
Salinas had to face ferocious criticism both following the elections and then throughout his term in office, after which he was disgracefully forced into exile. Much of the criticism directed against him was based on his inability to stand up to both the United States and to its domineering policies of agro-industry, as well as to big domestic state-owned companies, such as Telmex. Telmex was to be sold off to wealthy interests personally close to Salinas, and not, as the evidence indicates, without some small consideration for the Chief Executive himself. This stained Salinas and his immediate family with a lasting image of unabashed venality and his fixed habit of deferring to the super rich while all but ignoring the lower middle class and the poorer sectors of the population.

Though Calderón currently may not be caught up by the image of cronyism, he is surely pursued by the appearance of chronically prioritizing the interests of the wealthy over those of the poor. His party, the PAN, is a stalwart apostle of further privatization of the public enterprise sector, but since 40 percent of the population lives in some degree of poverty, it ultimately may be impossible to ignore the campesinos’ plight.

Win and then Return to Your Corner
President Felipe Calderón might be making a fatal mistake if he ends up ignoring the protests of the campesinos, as was the case with Salinas. Calderón has the ability to sanction public policies similar to the ejido, but he insists upon dragging his feet regarding government intervention in the nation’s economy. The Economist has detailed protests in Mexico by subsistence farmers against monopolist tortilla companies. It quotes Victor Suárez as saying, “We are not against markets, we are against monopolies.” The article also reveals that Alberto Cárdenas, the minister of agriculture, mentioned that he wanted to see subsidies that go to big tortilla companies to be redistributed to poorer farmers, which would enable them to improve their farms’ productivity (Tariffs and Tortillas 01/26/08).

There have been proposed programs that would at least partially substitute the type of land tenure system previously performed by the ejido before Article 27 was amended in 1992. According to Hufbauer and Scott, La Programa de Apoyos Directos para el Campo (Program of Direct Support for the Countryside) or Procampo, was meant to support small-scale farmers based on maximizing the yield of their tiny parcels. The goal was to help farmers during the transitional period between the implementation of NAFTA in 1994, and its full integration in 2008. But, in fact, the program’s plan did not envisage such support nor did it have the ability to sustain itself during the transition period. The number of agricultural producers helped by Procampo declined 14 percent from 1994 to 1998. Additionally, the program was unable to adequately compete with the United States, whose farmers were subsidized at twice the rate of Mexican agriculture.

The inability of the Procampo to adequately protect campesinos against U.S. imports should not deter Mexican authorities from following policies that help their small-scale and peasant farmers. Policies such as redirecting subsidies currently supporting big Mexican tortilla companies to assisting peasant farmers instead, would allow the latter to accumulate the capital necessary to grow crops other than maize and corn, and do so on an economically visible basis. The cultivation of a non-traditional range of fruits by peasant farmers could lead to new markets and expand jobs involved in both tilling and processing the crops. According to Kirsten Appendini, “the expansion of fruit and vegetable production requires substantial investment in cropping, storing, packing, processing, and marketing facilities. It also requires research and environmental regulations in order to attain a substantial level of activity.” If the Mexican government can guarantee that subsidies that now go to large agricultural companies could be directly diverted to campesinos, their fierce opposition to Calderón may somewhat abate, and provide them with a reason to avoid pressing him to renegotiate NAFTA’s terms.

NAFTA Not Going Away
Reopening NAFTA to renegotiations could be a can of worms for Calderón even if it would allow him to avoid a sinner’s fate similar to that of Carlos Salinas. It could also improve the PAN’s damaged reputation, which came about as a result of the presidency of Vicente Fox. Calderón’s predecessor was seen as unable to work with the Mexican Congress, which led him to accomplish very little during his administration. By implementing policies that would re-direct subsidies now to small-scale farmers, it would allow Calderón to possibly win some day-to-day support on an ad hoc basis from the left-leaning PRD, whose primary focus ostensibly is on the plight of the poor and the lower middle class, as well as to win over the support of some alienated members of the PRI.

Calderón may face a challenge on NAFTA that would be out of his control to do very much about, irrespective of which Democrat takes office. This would almost certainly force him to renegotiate NAFTA, which he is known to adamantly oppose. But it can be a chance to work with the new president to facilitate additional aid to come from the United States, which would at least match the $1.4 billion Plan Merida program scheduled to be used in that country’s war on drugs. This could subsidize low-end programs that could be similar to Procampo. But if McCain wins and NAFTA is not renegotiated, the issue could continue to be a burr under the saddle for any prospective constructive engagement between the two neighbors.