NAFTA in Mexico: The Impact of the International Agreement on Farming Next Door

by Clare Collins

Since the beginning of his campaign, President Trump has been vocal about his views on international trade. He wants to decrease imports, withdraw from the Trans Pacific Partnership, and withdraw from the North American Free Trade Agreement (NAFTA). As he exclaimed on June 28, 2016, “today I’m going to talk about how to make America wealthy again.” At his campaign speech in Kenansville, N.C., President Trump remarked that NAFTA helped other countries rip “us like you’ve never seen before.” Similarly, a tweet he sent out in January of 2017 read, “The U.S. has a 60 billion dollar trade deficit with Mexico. It has been a one-sided deal from the beginning of NAFTA with massive numbers…” Trump’s remarks imply that Mexico and Canada gained from NAFTA economically. Yet a look into the communities and people impacted by NAFTA in Mexico may show a different story.

Trump Meets Enrique Pena Nieto at G20
President Trump met Mexican President Enrique Peña Nieto at the 2017 G20 summit in Hamburg, Germany.

As a college student currently studying abroad in Mexico, I got the chance to talk with some locals and explore how some Mexicans view NAFTA. In a small, rural, farming town I visited, located in the state of Morelos, Mexico, NAFTA has changed many aspects of farming and the local economy. Before NAFTA, according to Raziel Valiño, a graduate student at Columbia University who is currently doing her dissertation work in the town, the state of Morelos attracted farm workers from across Mexico because of the availability of farming jobs. The Mexican government subsidized farming so that small rural communities such as this one could make ends meet. Farmers would buy Mexican seeds that had not been genetically modified using the Mexican peso price.

However, after NAFTA, Valiño says, “the Mexican economy became destabilized,” mostly due to changes enacted by the Mexican government in preparation for NAFTA. The government depreciated the peso, removed farming subsidies, and changed the constitution to allow the sale of farmer-owned property called “ejido” land. These changes made it easier for larger corporations to take over the market, thereby displacing small farmers. As Valiño notes, “the campo couldn’t compete with the US.”  Competition from US industrialized agriculture forced small farming communities in rural Mexico to begin exporting to the US. according to the wishes of the companies interested in doing business.

Companies did so because, thanks to a few laws changed by the Mexican government before NAFTA, many farmers could no longer live off of their farming alone.

Lisanne Morgan, a consultant for the Center for Global Education and Experience at Augsburg University in Mexico and another professor on my study abroad explained to me that in preparation for NAFTA, “neoliberal policies went into effect, such as the devaluing of currency, and freezing of wages.” These policy changes were what made the economic system under NAFTA possible, forcing farmers to work for companies at low wages. A report by Robert A Blecker from the Economic Policy Institute asserts that the rise of the peso caused labor costs in Mexico to rise from 1991 to 1994, making “Mexico a less attractive investment location for multinational corporations seeking sites for low-wage, labor-intensive assembly operations.” Without the devaluation of the peso, he says, “none of the tariff reductions in NAFTA could have made much of a difference.” Therefore, it was necessary to devalue to the peso in order to implement NAFTA.

Mexico also underwent a constitutional change in order to adopt NAFTA. President Carlos Salinas proposed amending Article 27. As Ignacio Torres Ramirez, Former Secretary of Land Council in a small rural town in Morelos explained to me, Article 27 previously allotted a section of land, called ejido land, to indigenous farmers. This system of portioning land originally came out of the Mexican Revolution. Before the revolution, indigenous land was regularly confiscated by the government, often illegally, and given to those who supported the regime of Porfirio Diaz. This was part of the reason Emiliano Zapata led the revolution against the government in 1910. The ejido program was put into place in order to protect against this type of confiscation in the future, and to keep individuals and groups from monopolizing land. Ejido land could not be sold or leased, but only passed down family lines, making the plots of land smaller and smaller with each generation. The farmers would communally own this ejido land and make decisions as a group. However, the amendment Salinas proposed made it possible to sell ejido land, and also made it possible for corporations to buy the land.

The policy change forced many farmers either to change work sectors, or to work for companies that exported abroad.

Generally, Valiño explained to me, a person from a company would come into town and give the community what was needed to grow their crop. The companies that entered would vary, since many are Mexican companies that serve as middle-men to larger US corporations. They would supply them with a genetically modified seed, the information about how to grow the crop in the standardized way, and leave the community of farmers to grow the seed. The community would grow the seeds in a greenhouse system, an arrangement that increases production by three times, yet substantially limits the number of workers paid compared to farming prior to NAFTA. Then, the company would come back to pick up the crop at the end of the growing season and deduct from the workers’ pay the cost of all the equipment and seed given to the community for production. Valiño points out that “the company deducts what they gave them in US prices, but pays them in pesos,” making the system inherently unfair because a disproportionate amount is taken out of the pay when using dollars. Under this system, workers in the town generally make around 160 pesos (the equivalent of $8.55 US dollars) a day and work from Monday to Saturday.

Because the wages are low and good employment opportunities are scarce, many young adults and teenagers make the dangerous trek across the border to earn higher wages and send remittances back to their home community. Many parents now say goodbye to their kids as teenagers and may not see them for decades, or even for the rest of their lives. But the problem does not just exist in this small community in Morelos. In fact, a study conducted by Mark Weisbrot from the Center for Economic and Policy Research estimates that NAFTA contributed to the unemployment of two-million small-size farmers across Mexico.

Crops at the farm in Morelos.jpg
Crops at a small farm in Morelos, Mexico.

As part of my study abroad program, we visited this small farming community in the state of Morelos. Mario Martinez, who co-owns a farm, explained that before NAFTA, farmers would only farm during the rainy season under open sky. They would save the seeds they used each year so that they wouldn’t have to buy new ones. After NAFTA was implemented, farmers were forced to use greenhouses, which substantially increased the output of crops but eliminated many jobs. Martinez explained that the genetically modified (GMO) seeds sold to them are patented and do not produce seeds. Because GMO seeds produce stronger and more marketable plants, farmers cannot use their old seeds, which do not have these features, and are forced to buy the expensive seeds each harvest. “The prices of these seeds vary according to the dollar. If the dollar goes up, seeds go up,” Martinez said. Additionally, because the dollar is worth more than the peso, farmers often must pay for each individual seed at a much higher price than seeds sold in peso prices. Each genetically modified cucumber seed costs $1.46 in US dollars. In addition, all of the other products used to grow the food are sold to the farmers in dollars, including herbicides, pesticides, and treatment for different plant diseases.

Price volatility can make farming unprofitable.

For instance, Pedro Gómez, who co-owns the same farm as Martinez, explained that they are usually paid around 85 pesos ($4.59 in US dollars) for a box of cucumbers weighing 23 kilos (about 51 pounds). However, the price can vary from 250 pesos ($13.50) a box, the highest they’ve ever gotten, to not even being able to sell for 40 pesos ($2.16). Gómez says that 100 pesos ($5.40) a box is a sufficient price for them to make a profit. This is because in order to produce 23 kilos of cucumber, they must invest 57-69 pesos ($3.08-$3.73), which makes any box of cucumber sold below 100 pesos insufficient. Because of all these expenses, many farmers are left with little extra profit with which to live.

However, some studies have more mixed results in terms of the economic impact of NAFTA. Some economists believe that the more industrial north and more agrarian south were impacted differently by NAFTA. A report from the McKinsey Global Institute indicates that NAFTA may have had a positive impact in the north, where manufacturing and wages have increased. In contrast, McKinsey finds that in the south, many farmers have been put out of work and forced to subsist on remittances from family in the US and sparse jobs. However, some argue that although there may be more jobs available in the manufacturing sector, much of this employment is unstable and therefore puts more strain on workers.

As Soila Luna, General Coordinator for the human rights organization Fundación don Sergio Méndez Arceo asserts, in the manufacturing sector, before NAFTA, a worker could take up a disagreement directly with his or her boss. Now, she says, “it has become much harder to negotiate a work disagreement because there are so many layers to the corporate hierarchy.” Additionally, job security is less certain. As Luna says, “it is much easier to fire workers because of the increase in informal employment.” Whereas before NAFTA you might know your boss and be able to negotiate more directly, now within the corporate hierarchy it can often be more difficult for workers to express their needs and get a response.

Today, with threats from Trump of ending NAFTA, Mexico ironically may face even more struggle in getting rid of NAFTA, the agreement that put them into this predicament.

As Luna, remarks, “since 1994 we’ve become dependent on the US so much that if NAFTA ends, it will have a huge impact on our economy.” In fact, many believe that terminating NAFTA would damage both the US and Mexico economically. Now that NAFTA is in place, goods are often manufactured in a complex manner, with goods moving from factories in the US to Mexico and back during the production process. This means that a large number of US and Mexican workers would lose their jobs were Trump to end NAFTA. Perhaps this is why President Trump has been more hesitant lately than he was during his campaign to end NAFTA. More recently, he told reporters that doing away with NAFTA would be a “shock to the system.” It’s difficult to know at this point which actions would yield a positive impact on both Mexican and US workers.

Within the United States, many economists differ in their outlooks toward the economic impact of NAFTA. Some believe that although some jobs were lost, others were gained, and the goods provided to consumers were greatly improved as a result. Others contend that the movement of many industries to Mexico took away jobs from US workers. Regardless, the way many Mexicans see NAFTA and other international agreements with countries such as the US often differs considerably from the way those such as Trump discuss it. As Luna articulates, the “looting of the US and Canada” conducted through NAFTA was “even stronger than conquest.” According to Luna, many believe that if Mexico had strengthened its alliances with other Latin American countries instead of participating in NAFTA, many Mexicans would be in a better place today.

Clare Collins is a junior at St. Olaf College with majors in Social Work and Political Science. She is studying abroad in Mexico during Spring 2018.

The views expressed in this article are those of the writer. The Contemporary takes no position on matters of policy or opinion.

The photo above was taken by Alex Proimos and is under a Creative Commons Attribution 2.0 Generic license.

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