Subsidizing Inequality: Mexican Corn Policy Since NAFTA

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NAFTA’s trade opening was widely expected to lead to increased, low-cost corn imports, shifting Mexican agriculture away from corn and displacing many hundreds of thousands of small-scale corn producers. This prediction framed Mexico’s agricultural subsidy programs for the next 15 years; trade compensation and adjustment programs spent at least $20 billion dollars on direct transfer payments to farmers between 1994 and 2009. As expected, corn imports increased substantially, but corn is still Mexico’s most important crop, in terms of the volume of production, the numbers of producers and the area under cultivation. Yet at the same time, many farmers have left agriculture. What happened? This report focuses on how Mexico’s post-NAFTA agricultural trade compensation policies actually worked in practice, with a focus on corn.

To understand these policies, this report brings together economic, institutional and political analyses of these compensatory farm policies, over the long term. The diverse studies that follow address three main sets of questions: how were farm subsidies distributed? How did agricultural policies and institutions actually work in practice? How well did the programs reach different kinds of farmers? To what degree were the subsidy programs transparent and accountable? To focus on these questions in detail, this report does not do justice to key related issues, such as the extraordinary diversity of Mexico’s corn producers and markets, corn’s cultural and nutritional significance, the specific implications of the recent spike in international corn prices, changes in patterns of peasant organization, or the environmental challenges involved in protecting the biodiversity of Mexican maize. Because of this study’s focus on corn and compensatory subsidy policies, analysis of agricultural trade patterns in general or government policies toward agro-exports are also beyond its scope. Yet interested readers will find many references to diverse studies that do address these issues.

Now that NAFTA’s implementation phase is over, the future direction of Mexican agricultural policy is the subject of increasing public debate. The goal of this report is to inform this discussion – including the role of US farm policy. The studies that follow reflect the individual view of each independent analyst, and they draw on official data, program evaluations, interviews with policy-makers, relevant scholarly work, and field research with producers. The authors have diverse policy perspectives, and therefore we did not seek consensus regarding specific policy recommendations to draw from the analyses. The report begins with a short synthesis of the main findings, followed by in-depth reports on the policy research.

This study was made possible thanks to a grant from the Global Development Program of the William and Flora Hewlett Foundation, and reflects collaboration between the Woodrow Wilson International Center for Scholars’ Mexico Institute, the University of California, Santa Cruz and researchers from CIDE, the Centro de Investigación y Docencia Económicas.