Distortions to agricultural incentives in Mexico (Vol. 2) : National spreadsheet for agricultural distortions

This chapter estimates indicators of direct and indirect intervention by the Mexican government in agriculture over the period 1979 to 2005. To put the estimates in context, authors describe the main characteristics of Mexican agriculture and the main economic policy developments that affected the sector over the last 25 years. The authors present estimates of the Nominal Rate of Assistance (NRA) for crops and animal products that comprise about 70 percent of the total value of Mexican agricultural production. Mexico is in the final stages of a demographic transition: in the past 5 years the rate of population growth was 1.2 percent per year, almost one third of the 3.1 percent annual growth rate of the 1950s and a half of that of 1990-95. Migrations to the US, to urban areas, and within urban centers are powerful forces in Mexican labor markets. Economic policy developments in Mexican agriculture since the late 1980s, and in particular since the late 1990s, marked a clear departure from the earlier closed economy and interventionist schemes. Until 1990 Mexican agricultural policies were characterized by direct market interventions, with domestic prices in general kept above world prices by means of tariffs and import quotas. Beginning in 1991, the policy regime changed. Although some price support schemes remained in place, payments are being made on the basis of land owned or inputs used, which is more supportive of markets. North American Free Trade Agreement (NAFTA) contributed to Mexcio's trade liberalization: in the context of NAFTA almost all trade barriers with the United States were eliminated by 2005. The main Mexican agricultural policy now in place is direct income payments to farmers.