""

Voluntary Report - public distribution

**Date:** 4/16/2003

**GAIN Report Number:** MX3042

MX3042

**Mexico**

**Agricultural Situation**

**Weekly Highlights & Hot Bites, Issue #18**

**NAFTA Update Edition**

**2003**

**Approved by:**

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

#### U.S. Embassy Mexico City

**Prepared by:**

Jorge Sánchez

**Report Highlights:**

LATIN AMERICA SHOWS PROTECTIONIST TREND\*"MEXICO LOST ITS COMPARATIVE
ADVANTAGE"\*NEW CRITERIA FOR HIGH FRUCTOSE CORN SYRUP IMPORT
PERMITS\*MEXICO'S TOBACCO PRODUCTION IS EXPECTED TO INCREASE\*NEW
SALMONELLA TESTING ON IMPORTED MEATS\*NEW LISTERIA TESTING
PROCEDURE\*APPLE ANTI-DUMPING\*PRODUCERS DEMAND FOOD
SOVEREIGNTY\*NATIONAL AGRICULTURAL PACT NEGOTIATIONS\*CAP READY TO SIGN
THE NATIONAL AGRICULTURAL PACT\*NATIONAL AGRICULTURAL PACT COULD BE
SIGNED BY APRIL 10\*MEXICAN BORDERS HAVE NOT IMPEDED COMMERCIAL
TRADE\*SELF-CONSUMPTION FARMING IS A THREAT TO FREE TRADE\*IDIOSYNCRATIC
WATER PROBLEMS\*FINANCE SECRETARY SCRAMBLES FOR CONSENSUS\*ECONOMY
SECRETARY SCRAMBLES FOR CONSENSUS\*BORDER INSPECTIONS RAISE
TRANSPORTATION COSTS\*DRY BEANS AND WHITE CORN WILL NOT BE TAKEN OUT OF
NAFTA\*CANALES, BRIEFS CONGRESS\*MEXICO PROTESTS U.S. CONFLICT IN
IRAQ\*SENATE COMMITTEE REVIEWS GMO-LEGISLATION\*NAFTA RENEGOTIATIONS NOT
VIABLE IN CONFLICT SCENARIO\*MAJOR DROUGHT HITS TABASCO\*EXPORTERS
GRAVITATE TOWARDS SUPPLIER'S CREDIT

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.

## LATIN AMERICA SHOWS PROTECTIONIST TREND

On April 1, 2003, U.S. Trade Representative Robert B. Zoellick,
reportedly denounced all Latin-American countries, except Ecuador and
Uruguay, for using non-scientifically-based barriers to trade.
Ambassador Zoellick pointed out that among the many protectionist
barriers imposed by Latin American countries were tedious inspection
procedures, non-scientific phytosanitary standards, opaque regulations
and state-owned monopolies. (Source: *El Financiero*, 4/2/03)

## 

## "MEXICO LOST ITS COMPARATIVE ADVANTAGE"

On April 3, 2003, former Finance Secretary Jaime Serra Puche stated that
Mexico had lost much of its competitive advantage that it obtained
through the signing of NAFTA when the United States decided to sign
other free trade agreements with other Latin-American countries and
China's ascension into the World Trade Organization (WTO). (Source:
*Reforma, El Financiero, Milenio Diario*, 4/3/03)

# 

## NEW CRITERIA FOR HIGH FRUCTOSE CORN SYRUP IMPORT PERMITS

On March 20, 2003, the Secretariat of Economy (SE) published, in the
*Diario Oficial* (Federal Register), an announcement establishing the
criteria for issuing import permits for final imports of high fructose
corn syrup (HFCS) from the United States. (For further information
please refer to GAINS report MX3034 in the FAS web page.) (Source: FAS
Mexico, 3/25/03)

**MEXICO'S TOBACCO PRODUCTION IS EXPECTED TO INCREASE**

Mexico's production of tobacco leaf, mostly burley, is forecast to
increase as a result of lower stocks. Production of tobacco for domestic
consumption in MY 2003 is expected to increase slightly from the
previous two years due to improved cultural practices. (For further
information please refer to GAINS report MX3034 in the FAS web page.)
(Source: FAS Mexico, 3/26/03)

**NEW SALMONELLA TESTING ON IMPORTED MEATS**

The Government of Mexico has recently implemented sampling and testing
procedures for Salmonella on imported meats. The action appears to be in
response to perceived concerns about the quality and safety of imported
meats. Currently, the Secretariat of Agriculture (SAGARPA) is testing
cooked poultry meat, while the Secretariat of Health is testing all
types of meat. (For further information please refer to GAINS report
MX3035 in the FAS web page.) (Source: FAS Mexico, 3/26/03)

**NEW LISTERIA TESTING PROCEDURE**

The Office of Agricultural Affairs report MX3036 updates report MX2168
with some of the recent changes to the Secretariat of Agriculture's
(SAGARPA) Listeria testing procedure. SAGARPA indicates that it is in
the process of re-writing its Listeria testing procedure and will
consult with the Food Safety Inspection Service (CENASICA) before
implementing the revised procedure. (For further information please
refer to GAINS report MX3036 in the FAS web page.) (Source: FAS Mexico,
3/31/03)

## APPLE ANTI-DUMPING 

On March 26, 27, and 31, 2003, the Secretariat of Economy (SE) released
three decrees related to the apple antidumping final resolution and the
suspension of the apple reference price agreement. The SE published in
the *Diario Oficial* (Federal Register), three different announcements
rejecting administrative petitions related to the final resolution of
the antidumping investigation on U.S. apples and the suspension of an
apple reference price agreement. (For further information please refer
to GAINS report MX3039 in the FAS web page.) (Source: FAS Mexico,
4/3/03)

**PRODUCERS DEMAND FOOD SOVEREIGNTY**

A group of producers representing the southern states question the
federal government's delay of the National Agricultural Pact's final
version. Farming group leaders said the only way to guarantee their crop
will reach the market is if the government declares food sovereignty.
(Source: *La Jornada*, 3/26/03)

## 

## NATIONAL AGRICULTURAL PACT NEGOTIATIONS

On March 30, 2003, the Commission on Organizations and Treaties, which
is the committee comprised of farming group leaders and the Secretaries
of Government Affairs, Agriculture, and Economy, met to discuss the
future of the National Agricultural Pact. Rafael Galindo, coordinator
for the Permanent Agrarian Council (CAP) said that the farming group
coalition has a number of alternatives in case the federal government
does not agree to include the renegotiation of NAFTA's agricultural
chapter in the Pact. (Source: *El Universal*, 3/30/03)

## CAP READY TO SIGN THE NATIONAL AGRICULTURAL PACT

Alvaro Lopez, spokesperson for the Permanent Agrarian Council (CAP),
said that farming groups would be willing to accept side agreements on
NAFTA-related trade, and not demand the renegotiation of NAFTA's
agricultural chapters.  A conflicting report indicates that the signing
of the agreement could be postponed until July.  PAPSA, a food producing
company, will join agricultural producers in Tamaulipas to create a
rural finance fund to support farm development in northeastern Mexico.
(Source: *Reforma, El Universal, El Financiero, La Jornada, Milenio
Diario, El Economista*, 3/31/03)

## NATIONAL AGRICULTURAL PACT COULD BE SIGNED BY APRIL 10 

On March 31, 2003, farming groups and the federal government supported
the idea for the creation of an Institute of Rural Countryside Citizens.
Víctor Suárez, spokesperson for the farming group "The Farmland Can't
Stand Anymore," stated that negotiations were headed in a positive
direction and added that the Pact could be signed by April 10. The
signing of the Pact would come as a national day of celebration, since
April 10^th^ commemorates the anniversary of Mexican revolutionary
Emiliano Zapata's death. (Source: *El Universal*, 3/31/03)

**MEXICAN BORDERS HAVE NOT IMPEDED COMMERCIAL TRADE**

According to the Finance Secretariat, the 19 international crossing
points in the northern border region are on maximum alert and were
instructed to report any unusual occurrences. The Finance Secretariat's
press release comes after many complaints, made by importers, in regards
to longer wait-periods and higher scrutiny at international border
points. (Source: *Reforma*, 3/26/03)

**SELF-CONSUMPTION FARMING IS A THREAT TO FREE TRADE**

Mexican, United States, and Canadian expert environmentalists agreed
that NAFTA was a real threat to corn self-consumption farming in
addition to have encouraged multinational corporations (MNC) to violate
environmental norms. They added, that the inclusion of GMO grains has
diminished the profit margin for most of Mexico's producers, while
foreign MNCs in Mexico have substantially benefited. (Source: *La
Jornada*, 3/26/03)

## 

## IDIOSYNCRATIC WATER PROBLEMS 

On March 30, 2003, Raúl Rodríguez Barocio, director of the North
American Development Bank (BDAN), stated that it would be impossible for
Mexico to reduce the developmental gap with the United States in term of
infrastructure for water use. Amidst treaties and mechanisms in place to
facilitate the management of large-scale watersheds shared by Mexico and
the United States, the President of the Northern Border Affairs
Commission, Ernesto Ruffo, said that irreconcilable cultural differences
between Mexico and the United States make projects insuperable. (Source:
*El Universal*, 3/30/03)

## FINANCE SECRETARY SCRAMBLES FOR CONSENSUS

Finance Secretary Gil Díaz's recent proposal to include 500 billion
pesos (US\$47 million) for restructuring and refinancing overdue farm
loans may be leverage to entice some of the radical farming groups to
sign the National Agricultural Pact, which is now several weeks overdue.
Secretary Gil Díaz also promised rural groups a preferential pricing
plan for electric energy to increase the use of wells and generate
better irrigation. Additionally, Secretary Gil Díaz offered the farming
groups a loan forgiveness program for debts owed to the Federal
Electricity Commission (CFE). (Source: *El Financiero*, 4/2/03)

## ECONOMY SECRETARY SCRAMBLES FOR CONSENSUS

On April 2, 2003, a document from Secretary of the Economy Fernando
Canales was sent to farming groups on the GOM's recent position, which
is "in defense of white corn and dry beans, as they are considered
essential to the Mexican diet." Secretary Canales reportedly said he
would authorize white corn imports, but would implement safeguards when
needed. Secretary Canales failed to clarify whether the negotiations
would be within the NAFTA charter. (Source: *La Jornada, El Financiero*,
4/2/03)

## BORDER INSPECTIONS RAISE TRANSPORTATION COSTS

The United States' new inspection strategy in international border
points, since the conflict with Iraq, has severely impacted
transportation costs for Mexican exporters. Stricter inspections meant
more than US\$95 million in losses to Mexican transporters according to
the Confederation of Industrial Chambers (CONCAMIN) and the National
Cargo Chamber (CANACAR). (Source: *Reforma, El Universal,* 4/2/03)

## 

## DRY BEANS AND WHITE CORN WILL NOT BE TAKEN OUT OF NAFTA

On April 3, 2003, only a day after Secretary of the Economy (SE)
Fernando Canales had released a document that would consider excluding
white corn and dry beans, Secretary of Agriculture Javier Usabiaga said
the GOM categorically rejected the possibility that this would ever
happen. However, Secretary Usabiaga promised to do the next best thing,
initiate safeguard investigations. (Source: *El Financiero*, 4/3/03)

## CANALES BRIEFS CONGRESS

On April 2, 2003, Secretary of the Economy Fernando Canales in his
quarterly congressional report was received with a thrashing from the
lower house representatives. Congressional leadership accused Secretary
Canales of succumbing to the will of the United States and not informing
them of important issues like the current status of the National
Agricultural Pact. (Source: *El Financiero*, 4/3/03)

**MEXICO PROTESTS U.S. CONFLICT IN IRAQ**

Protestors continued to demonstrate outside the U.S. Embassy.  Emeritus
Bishop Samuel Ruiz blessed those who were fasting for peace.  Students
boycotted a Wal-Mart in Buenavista.  Former Michoacan Governor Lazaro
Cardenas said that Michoacan farmers were facing obstacles in shipping
their products to the United States, due to increased security on the
border. (Source: *Reforma*, 3/31/03)

## SENATE COMMITTEE REVIEWS GMO-LEGISLATION

After three months of wear and tear, the Senate Committee on Science and
Technology finally decided it would recommend a study to experiment on
the use of GMO food and "resuscitate" the Inter-secretarial Committee on
Biosecurity of Genetically Modified Organisms, formerly know as
CIBIOGEM. The Senate Committee discussed in depth the possibility of
implementing laws requiring special labeling for GMO food. However, the
study that will be conducted by the Mexican Science Academy will
determine whether such recommendation is necessary, stated Carlos
Bermúdez, an independent consultant to the Senate Committee. (Source:
*Milenio Diario*, 3/27/03)

## NAFTA RENEGOTIATIONS NOT VIABLE IN CONFLICT SCENARIO

On March 28, 2003, Armando Paredes, President of the National
Agricultural Council (CNA), stated that demands made by many of the
radical farming groups to renegotiate NAFTA are not viable during the
U.S.'s conflict with Iraq. Mr. Paredes added that the renegotiation
would only hurt the agricultural trade surplus Mexico holds with the
United States. However, Mr. Paredes did add that a greater impulse
should be given to increase cooperation and level out the developmental
difference between the three NAFTA-member countries. (Source: *El
Economista*, 3/28/03)

## MAJOR DROUGHT HITS TABASCO

For the southern state of Tabasco, this year's scanty rainfall means
that 15,000 hectares of rice, sugarcane, and pasture used for feed are
in dire risk of being lost. According to a spokesperson for Tabasco
producers, Alamilla Guzmán, over 63,000 hectares of Tabasco's farmland
could be lost due to unfavorable weather conditions and lack of support
from the State Department of Agriculture (SEDAFOP). (Source: *El
Financiero*, 3/31/03)

# EXPORTERS GRAVITATE TOWARDS SUPPLIER'S CREDIT 

Through March 21, 2003, exporter registrations for the Supplier\'s
Credit Guarantee Program (SCGP) have out-paced those for GSM-102 by
almost US\$68 million (SCGP - US\$191 million; GSM-102 - US\$123
million). In addition, GSM-102 has only been used for 5 products, with
cotton and feed grains most prevalent; while SCGP has been used to
export 21 products, with feed grains (again), oilseeds and wheat most
prevalent. It is no surprise that SCGP utilization has surpassed that of
GSM-102, as that trend has been obvious for some time. Reasons for the
shift to SCGP are: 1) it is more user friendly for importer and
exporter, requiring no letter of credit and no involvement of banks; 2)
it serves the short term credit needs of Mexican buyers who are
concerned with exchange rate fluxuations; 3) it is less expensive for
importers (letters of credit are relatively expensive); and, finally, 4)
it is more accessible than GSM-102 as Mexican banks still are not
lending to most small and medium sized commercial customers. (Source:
FAS Mexico, 4/1/03)

**REPORTS SUBMITTED RECENTLY BY FAS/MEXICO CITY**

+-------------+--------------------------------------------+----------+
| ##          | ###### Title                               | **Date** |
| #### Number |                                            |          |
+-------------+--------------------------------------------+----------+
| MX3039      | U.S. Apple Antidumping Issues              | 4/2/03   |
+-------------+--------------------------------------------+----------+
| MX3040      | Finance & Economy Secretaries Scramble For | 4/3/03   |
|             | Consensus                                  |          |
+-------------+--------------------------------------------+----------+
| MX3041      | Dry Beans and White Corn Will Not Be       | 4/3/03   |
|             | Excluded From NAFTA                        |          |
+-------------+--------------------------------------------+----------+

# 

We are available at **http://www.atomexico.gob.mx** or visit our
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selection of FAS\' worldwide agricultural reporting.

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