NAFTA: Two Mexicos, Two Outcomes

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Many have given up on farming, instead sending their sons on desperate treks across the border to toil as construction workers or gardeners in the U.S. The $24 billion those migrants send home annually keeps several million families afloat.

Epifanio González farms 25 acres near Tepetlazingo, in Guerrero state, planting corn, beans, chilies, and peanuts. After feeding his nine children, he sells what's left over, netting just $1,000 a year. He receives around $200 annually from Procampo, a government farm subsidy program, but says it doesn't even cover the cost of fertilizer and seeds. "NAFTA has been bad for us—only the big producers benefit and we small farmers are left out in the cold. The government has done nothing for us," grumbles González, 54, who marched in the protest.

Two of González's nine brothers live in New York, where one works as a restaurant cook and the other does odd jobs at a shipping port. They send home $500 a month, the only way the extended family makes ends meet. "Migrating was their only option," he says, hoisting a poster depicting Emiliano Zapata, the peasant hero of the 1910-1920 Mexican Revolution, who demanded expropriation of large landholdings for distribution to the poor. That redistribution is at the root of Mexico's agricultural dilemma today, as small, unproductive plots of land are increasingly subdivided among large families.

Subsidies Favor Large Farms

Many farm subsidies are distributed through politically connected agriculture confederations—which organized the protest march—and much of the money never finds its way into farmers' pockets. "Poor rural farmers have marched every year asking for help, and the subsidies always go to the union organizers or to large farmers," says Luis de la Calle, Mexico's former undersecretary for international trade negotiations.

When Mexico's government eliminated crop price supports under NAFTA, it promised to help small farmers become more efficient, but it has done little beyond handing out small cash subsidies equal to around 15% of a farmer's income. It hasn't helped farmers install irrigation or switch to labor-intensive vegetable crops more appropriate for Mexico's soil and climate; 80% of farmers work on non-irrigated fields of 25 acres or less in size, producing just one crop a year—when enough rain falls. Only 6% of Mexican farms are currently capable of exporting, the Agriculture Ministry says. "The government had 15 years to come up with incentives to convince farmers to plant broccoli and asparagus, but they didn't do that," says Serra Puche.

Instead, it opted for survival of the fittest, handing the lion's share of federal farm subsidies—which will total $22 billion this year—to large farms that can produce corn more efficiently, and that can invest in irrigation systems, packing houses, and refrigerated trucks to become big exporters of vegetables and fruits.

Such aid has helped Mexico become the second-largest exporter of agricultural products to the U.S., with such exports growing from $2.9 billion in 1993 to $11.5 billion last year. Thanks to imports of U.S.-grown feed corn, production of poultry, pork, and beef has tripled, cutting prices by 40% and boosting per capita meat consumption from 86 pounds to 132 pounds in 15 years. Now, says De la Calle, Mexico "should go from exporting lettuce and tomatoes and start exporting salads, turning the countryside into North America's kitchen."

That may be where Mexico's competitive advantage lies. But unless policymakers start coming up with ways of helping 6 million small farmers modernize their operations, more farmers' sons will seek a better life on the other side of the Rio Grande, and more protest marches are sure to occur.

Smith is BusinessWeek's Mexico bureau chief.