Transitions to Free Trade: Local Impacts of Changes in Mexican Agrarian Policy

Since 1988, Mexico has shifted agrarian policy to support foreign and national private capital investment in its agricultural sector. The government's withdrawal of political support for peasant organizations has already had an impact on local agricultural industries. In the case of Michoacan's export cantaloupe industry, US companies now no longer offer financial credit to peasant organizations and work only with wealthy commercial producers. From 1987-90, the local agricultural industry declined overall, and the market structure became more concentrated. A statistical measure of market structure for three seasons (1987-88, 1988-89, and 1989-90) shows an increasing concentration of the local industry in the hands of private commercial firms. The local economy's restructuring enables a few commercial investors to earn profits. They gain, however, at the expense of the region's economic growth, as they expand their oligopoly in a retracting local industry. These firms are unlikely to defend Michoacan's traditional position in Mexico's export sector under the projected North American Free Trade Agreement (NAFTA). This case study demonstrates the need for local-level studies that examine the linkages between macro-level policy changes and local economies. The impact of Mexico's capitalization of the agricultural sector and the projected NAFTA will vary across different regions and different commodity systems.