April 18, 2000
MEXICO CITY -- Mexico is often viewed in the United States as the land of cheap imports. But in the eyes of Mexican dairy and grain farmers, the cheap imports are from the United States, and that is a problem.
Mexican dairy farmers have grown increasingly angry over powdered milk imports from the United States that they say are filling supermarket shelves and damaging local production.
Their recent street demonstrations in Mexico City, notably a mass dumping of rancid milk they could not sell, have highlighted a broader problem for many Mexican dairy and grain producers who feel threatened by price competition from abroad because of Mexico's increasingly open trade policies.
Some farmers blame Mexico's trade ministry for allowing these imports to flood into the country.
The milk dispute has arisen partly over a wrinkle in the North American Free Trade Agreement that allows Mexican dairy bottlers to import subsidized powdered milk as "food preparations" to avoid the higher tariff on powdered milk, said Felipe Zedillo Vega, a spokesman for the dairy farmers.
In addition to the 150,000 tons of powdered milk that legitimately enter Mexico annually, a further 50,000 tons of what Zedillo called "technical" contraband in the form of milk powder described as food preparations enter the market each year.
Mexico is now the No. 1 importer of semi-skimmed milk powder in the world, according to ministry of agrarian reform data.
The milk powder -- which comes principally from the United States, as well as Canada and Germany -- is mixed with water, sugar and vegetable oil and sold as Mexican milk in supermarkets.
"If something isn't done about this soon," said Maria Teresa Berisain, a street protester whose family has been producing milk for four generations, "in three to four years no domestic milk producers will be left."
Although dairy farmers have been the most outspoken about imports in recent weeks, grain farmers feel they too have been victims of Mexico's increasingly open trade policies.
The incomes of many grain farmers have fallen since the government ended price guarantees on domestic corn and beans in spring 1999.
The trade ministry has allowed corn imports to exceed quotas set by NAFTA almost continuously since 1994, according to a Mexican farming association report.
The reason for the growing imports, according to a U.S. Department of Agriculture report on grain export opportunities in Mexico, is that while Mexican corn production has increased since 1994, consumption has grown at a faster rate. But the report notes that the Mexican government's policy of letting corn prices fall to international levels will put some farmers out of business, and Mexico's import needs should therefore rise.
In mid-March bean and corn growers took over the trade ministry building, accusing the ministry of authorizing basic grain imports above those set out by NAFTA, without charging the necessary tariffs.
But Jose Luis Perdigon, director of supply at the trade ministry, said the ministry had permitted imports to exceed NAFTA quotas only in extreme circumstances, as occurred when bean production in the state of Zacatecas fell by 50 percent in 1997 because of drought. Record national bean production in 1999, combined with the abolition of the government agency that used to buy 20 to 30 percent of national production at a fixed price, is the main cause of bean oversupply, Perdigon said.
Rafael Cienfuegos, spokesman for an umbrella group representing 27 Mexican farming sectors, explained the problems facing basic grain farmers since domestic price controls were ended. The prices for their products, he said, are now set by international grain markets and therefore bear little relation to the costs of production in Mexico, which are relatively high. What Mexican producers want, in addition to greater control on imports, is for the government to subsidize farmers so they can compete with international prices, Cienfuegos said.
The farmer protests are surfacing before the presidential elections, set for July. The top three candidates have already pledged to increase farm assistance in recognition of the crucial rural vote. Even the present government appears willing to negotiate.
The trade ministry has set up commissions with the agriculture ministry in the main dairy states to monitor milk surpluses and find more buyers. And the government has pledged to charge tariffs on milk powder imports that exceed NAFTA quotas and to revise product labeling, said Manuel Nunez Acosta, a spokesman at the agriculture ministry.
Corn farmers are seeking higher prices in talks with major tortilla producers, while bean and other farming groups are in talks with state and federal authorities to secure higher prices and better distribution channels, Cienfuegos said.:
