Voluntary Report - public distribution

**Date:** 4/20/2004

**GAIN Report Number:** MX4051

MX0000

**Mexico**

**Agricultural Situation**

**Weekly Highlights and Hot Bites, Issue #16**

**2004**

**Approved by:**

![](media/image1.wmf)William L. Brant

U.S. Embassy Mexico City

**Prepared by:**

Bruce Zanin, Dan Martinez, Kate Snipes, Benjamín Juárez, Sal Trejo,
Dulce Flores and Gabriel Hernández

**Report Highlights:**

\*U.S. EXPORTS OF AGRICULTURAL, FISH AND FORESTRY PRODUCTS TO MEXICO
GREW 9 PERCENT TO OVER US\$8 BILLION IN 2003

\*GOVERNMENT OFFICIALS WOULD SUPPORT A SWEETENER DEAL

\*THERE IS NO AGREEMENT YET: THE U.S. SWEETENER INDUSTRY

\*BIO-TERROR LAW RAISES TRUCKING COSTS UP TO 30 PERCENT

\*SOME U.S. MEAT EXPORTERS attempting to SIDESTEP MEXICAN REGULATIONS

\*PEAR IMPORTS GROW

\*INIQUITY IN SUBSIDIES ARE CAUSES OF THE IMPOVERISHMENT IN THE
COUNTRYSIDE

\*EVALUATION OF NAFTA\'S AGRICULTURAL CHAPTER DISAPPROVED

**\***AGRICULTURAL DEPENDENCY INCREASED

\*NATIONAL AGREEMENT FOR AGRICULTURE SHOWS MIXED ADVANCES

\*THE JOINT PUBLIC ADVISORY COMMITTEE RECOMMENDS A MORATORIUM ON IMPORTS
OF TRANSGENIC CORN TO MEXICO

\*AMCHAM PUTS 2004 INFLATION AT 4.7 PERCENT

\*MEXICAN TOURISM SECTOR ON THE REBOUND

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Mexico \[MX1\]

\[MX\]

# 

Welcome to Hot Bites from Mexico, a weekly review of issues of interest
to the U.S. agricultural community. The topics covered in this report
reflect developments in Mexico that have been garnered during travel
around the country, reported in the media, or offered by host country
officials and agricultural analysts. Readers should understand that
press articles are included in this report to provide insights into the
Mexican \"mood\" facing U.S. agricultural exporters. Significant issues
will be expanded upon in subsequent reports from this office.

DISCLAIMER: Any press summary contained herein does NOT reflect USDA's,
the U.S. Embassy's, or any other U.S. Government agency's point of view
or official policy.

# 

**U.S. EXPORTS OF AGRICULTURAL, FISH AND FORESTRY PRODUCTS TO MEXICO
GREW 9 PERCENT TO OVER US\$8 BILLION IN 2003**

U.S. exports of agricultural, fish and forestry products reached an all
time high of US\$8.4 billion in 2003, growing 9 percent from 2002. There
was growth across all product categories: bulk, 11 percent;
intermediate, 3 percent; consumer ready, 12 percent; forestry 4 percent;
and fish and seafood products, 16 percent. The fish and seafood was the
fastest growing sector with sales of US\$77 million. In addition, record
sales were registered for both intermediate and bulk products. Leading
the growth in bulk and intermediate products with record sales were
rice, wheat and wheat flour, soybeans and soybean meal. Consumer ready
product sales recovered from the dip in 2002, increasing 12 percent,
with record sales in meats, dairy and eggs, processed fruit and
vegetables, fruit and vegetable juices, and wine and beer. Snack food
sales grew 22 percent. (Source: ATO Mexico City, 4/15/04)

**GOVERNMENT OFFICIALS WOULD SUPPORT A SWEETENER DEAL**

The Secretary of Economy, Fernando Canales, indicated that the Mexican
government would support a proposal from the private sector to open the
market for sugar and fructose, but the country had to be self-sufficient
first since some sugar had to be imported last year. He added that he
would wait for the proposed agreement between Mexico and the United
States and then make a decision. Furthermore, Hugo Perez from the area
of trade negotiations of the same Secretariat pointed out that once an
agreement is reached between the governments, producers and officials
would request that the Mexican Congress eliminate the special tax on
fructose use on beverages. (Source: *Reforma*, 4/1/04)

**THERE IS NO AGREEMENT YET: THE U.S. SWEETENER INDUSTRY**

The U.S. sweetener industry declared that there is no agreement yet that
would allow the regulation of trade for fructose and sugar between
Mexico and the United States, only a proposal that is being discussed
between members of the private sector of both countries to be submitted
for consideration by both governments. They also discarded the idea that
such a proposal would include an opening of trade of sugar and fructose
between both countries, or that the process jumps head of what was
contemplated in NAFTA. The U.S. industry indicated that what is being
discussed is a negotiated commercial solution that ties the fructose and
sugar volumes that can be commercialized in both countries,
respectively. (Source: *Universal*, 4/1/04)

**BIO-TERROR LAW RAISES TRUCKING COSTS UP TO 30 PERCENT**

According to Leon Flores, President of the Mexican Trucking Industry
Association (CANACAR), the application of the Bio-Terrorism Act by the
United States has increased operational costs for Mexican truck
operators between 20-30 percent. He added that a truck moving product
that falls within the provisions of the Bio-Terror law implemented by
FDA, may be held up between 4-5 hours due to the various inspections of
drivers' licenses, permits, product documentation, physical condition of
the truck, among others. This implies increased costs in fuel and
overtime pay to the drivers since the truck must wait between
inspections at one point to another before it can deliver the
merchandise. Flores claimed that 175,000 crossings occur each month
along the U.S./Mexican border. (Source: Various Mexican Newspapers,
4/06/04)

# 

# SOME U.S. MEAT EXPORTERS ATTEMPTING TO SIDESTEP MEXICAN REGULATIONS

According to a local newspaper, meat exporters from the United States
tried to export products to Mexico that did not comply with the import
requirements that the Mexican authorities have established on health
matters. Raymundo Trejo, Chief of SAGARPA's Plant and Animal Health
Inspection Office in Nuevo Laredo, explained that while reviewing import
documents, they discovered that some beef meat shipments did not comply
with the requirement that the meat must come from animals slaughtered on
or after March 5, 2004, as per Mexican regulations. He further stated
that the majority of slaughter dates on shipments destined for Mexico
were from March 3-5, 2004, March 4-5, 2004, and March 4-7, 2004, thus
entry of these products to Mexico were refused. Mexico's regulations
(SAGARPA) establish that only boneless meat coming from animals that
were slaughtered on March 5, 2004, or after, and from animals whose age
is less than 30 months at time of slaughter. (Source: *Reforma*,
4/12/04)

###### PEAR IMPORTS GROW

The lack of investment, coupled with the strong demand of the Mexican
consumer have resulted in pear imports totaling 73 percent of the
market, which are displacing domestic pear producers. Pear imports from
the United States, Chile and Argentina have displaced domestic
production, as the lack of support and investment in technology makes
Mexican pears uncompetitive. (Source: *Reforma*, 4/13/04)

# INEQUITY IN SUBSIDIES ARE CAUSES OF THE IMPOVERISHMENT IN THE COUNTRYSIDE

The study on the evaluation of the NAFTA Agricultural Chapter and its
effect on Mexico's rural sector, issued by the Secretary of Economy,
states that the application of Mexican agricultural subsidies during the
trade agreement has been inequitable. \"It compensated some growers with
the opening, but it has not benefited the great majority.\" The
evaluation partly explains the impoverishment and the lack of
opportunities in the countryside. (Source: *El Financiero*, 4/12/04)

# EVALUATION OF NAFTA\'S AGRICULTURAL CHAPTER DISAPPROVED 

The Permanent Agrarian Council (CAP) disapproved the recently issued
evaluation of NAFTA\'s Agricultural Chapter and corroborated the
long-established opinion that negotiations done prior to the signing of
the commercial agreement were unfortunate for Mexico. Regarding the
study presented by Mexico's College before the Secretariat of Economy,
Federico Ovalle, CAP representative, declared that some conclusions are
consistent indeed, "but not as we expected, the divergences are
significant." Moreover, Ovalle said, "CAP organizations consider that
the demand for a consistent and impartial analysis, as established in
the National Agreement on Agriculture, was not accomplished." Exports of
fruits and horticultural products increased benefiting a reduced number
of producers while the majority, estimated at 3 million, waits for such
benefits since prices of basic grains are subject to fluctuation in the
international market. (Source: *La Jornada*, 4/13/04)

# AGRICULTURAL DEPENDENCY INCREASED

The Colegio de Mexico's study, "Evaluation of NAFTA\'s Agricultural
Chapter" prepared by Jose Romero and Alicia Puyana, establishes that
from the NAFTA implementation in 1994, Mexico's food dependency on U.S.
products increased specifically in basic grains and agri-food products.
The analysis, that evaluated the market share in the domestic
consumption of 15 group products imported from the United States, shows
a significant increase in the basic grains group. From 1990 to 1994,
previous to the NAFTA period, 47.1 percent of the rice domestic
consumption was covered by imports, while for the 1994-2003 period the
share increased to 61.4 percent. Also, the dependency on corn imports
increased from 10 to 19.7 percent during the same periods. Moreover, the
report explains that the increased domestic consumption of agri-food
products has been covered through imports, which registered larger
increments than the volumes produced domestically. Dependency on imports
of livestock products increased as well. Imports of beef increased to
15.5 percent in 1994-2003 compared to 10.3 percent in 1990-1994, while
pork meat increased from 21.7 percent to 23.9 during the same periods.
(Source: *Reforma*, 4/15/04)

# NATIONAL AGREEMENT FOR AGRICULTURE SHOWS MIXED ADVANCES 

According to Jaime Rodriguez Lopez, Director of Federalism in the
Agriculture Secretariat, the National Agreement for Agriculture shows
\"mixed\" advances." There are certain provisions, for example the tax
exemption for agricultural diesel that has wide implementation and is
benefiting more than 350,000 growers. (Source: *El Financiero*, 4/16/04)

# THE JOINT PUBLIC ADVISORY COMMITTEE RECOMMENDS A MORATORIUM ON IMPORTS OF TRANSGENIC CORN TO MEXICO

The Joint Public Advisory Committee (JPAC) recommended that a moratorium
on imports of transgenic corn to Mexico should be put in place until the
risks to human health, cultural integrity of maize producers in Mexico
and the environment generally are better understood and an appropriate
long-term course of action can be decided. The JPAC is part of the North
America Commission for Environmental Cooperation\'s (CEC). On March 11,
2004, CEC had a symposium on maize and biodiversity. Following this
symposium, the JPAC provided its initial recommendations to the CEC
Council, the three North American environment ministers, on the issue of
transgenic maize in Mexico. In a letter sent by Donna Tingley, JPAC's
President to the CEC Council, pointed out that there is an obvious
imbalance in the composition of the Maize Advisory Group where
indigenous people are a minor component of the committee. Moreover,
several thoughts and observations are expressed in the JPAC letter of
advice to the CEC Council: The first is that the emphasis on 'scientific
method' and 'science based' conclusions can work to exclude indigenous
peoples. The scientific method is based on a western worldview that is
predominantly limited to the physical world that sees its objects of
study as inanimate things. Since most of the western world is based on
the scientific method, its institutions of government, industry,
business and academia are, for most part, limited to this worldview.
Although scientists often claim that their study is objective, they
express their values through their work. Unfortunately, when western
scientific methods interact with indigenous worldviews, its own
institutional biases and ethnocentric values become apparent. The
indigenous worldview, as we were told, includes the spiritual, the
emotional, the intellectual and, of course, the physical. The arguments
expressed by participants at the symposium clearly articulated how
traditional food production and consumption are expressions of cultures
that have been sustained by a respect for nature rather than a desire to
control it. It was also quite apparent at the symposium that the authors
of the various chapters were unable to respond to the many indigenous
presenters who attempted to discuss and articulate their relationship
with maize as sacred, the center of life, their brother and part of
their dignity and identity. We must also not underestimate the
intellectual capability of the indigenous people in the region. Their
understanding of maize biodiversity is based on 6,000 years of practice,
observation and spiritual insight. Their opinions on the effects of
transgenic maize should be carefully considered and evaluated. (Source:
*La Jornada*, 4/14/04)

# AMCHAM PUTS 2004 INFLATION AT 4.7 PERCENT

The Chief Economist at the American Chamber of Commerce (AmCham) in
Mexico, predicted that inflation in 2004 will be 4.7 percent,
significantly higher than the Central Bank\'s projection of 3.0 percent.
The AmCham economist pointed out that Mexico\'s biggest challenge is to
create jobs, which requires sustained and vigorous economic growth. The
outlook for 2004 is generally good, particularly given high oil prices.
The principal sources for investment this year will come from oil
exports and from remittances from Mexicans working in the United States.
Like last year, remittances will be a more important source of hard
capital than foreign direct investment. (Source: *El Financiero*,
4/14/04)

**MEXICAN TOURISM SECTOR ON THE REBOUND**

Results from the first quarter of 2004 are very positive for Mexico\'s
tourism sector. Airline travel is up to almost all destinations both
domestically and internationally. Ten percent more passengers flew
domestically as compared to the same period in 2003, and passenger
traffic between the United States and Mexico was up 14 percent, and up 9
percent between Europe and Mexico. In addition, beach resorts reported a
9 to 10 percent increase in hotel occupancy for the same period. (*El
Financiero*, 4/19/04)

REPORTS RECENTLY SUBMITTED BY FAS/MEXICO CITY

+-----------+---------------------------------------+------------------+
| ####      | ###### Title                          | **Date**         |
| ## Number |                                       |                  |
+-----------+---------------------------------------+------------------+
| MX4049    | Weekly Highlights & Hot Bites, Issue  | 4/13/04          |
|           | #15                                   |                  |
+-----------+---------------------------------------+------------------+
| MX4050    | Dried Fruit Annual Report             | 4/15/04          |
+-----------+---------------------------------------+------------------+

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headquarters' home page at **http://www.fas.usda.gov** for a complete
selection of FAS\' worldwide agricultural reporting.

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To reach us at FAS/Mexico City:

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