Voluntary Report - public distribution

**Date:** 7/23/2003

**GAIN Report Number:** MX3097

MX3097

**Mexico**

**Agricultural Situation**

**Weekly Highlights & Hot Bites, Issue #36**

**2003**

**Approved by:**

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

#### U.S. Embassy

**Prepared by:**

David Williams, Benjamin Juarez, Dulce Flores, Salvador Trejo and
Gabriel Hernandez

**Report Highlights:**

Members of Mexican Congress Seek to Declare State of Emergency for Rural
Areas\*Mexico and the United States Are Negotiating a Poultry
Safeguard\*GOM Guarantees Sanitary Revisions for Imported Meat\*The GOM
Decentralizes Commercialization Supports\*The Agreement on Agriculture,
Milestone of the Agricultural Policy\*Unfair U.S. Phytosanitary
Practices\*Red Numbers in the United States Reduce Economic
Projections\*Profits On Grain Production Will Increase\*Specialist Says
Transgenic Seeds Could Contaminate Native Seeds\*Cargill Operates
Veracruz Grains Terminal\*Mexico, An Active Actor in the WTO Complaints
on Illegal Trade\*Insufficient Funds for Agriculture\*Michoacan Provides
the World With Mexican Guacamole\*Jungle Law is to Regulate Genetically
Modified Organisms?\*Better Support for President Fox\*The Sugar
Industry Recovers in 2002/03\*The Gulf of Mexico At Risk Of Economic
Disaster Due to Pollution\*Prospects for Another Free Trade Agreement

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.

MEMBERS OF MEXICAN CONGRESS SEEK TO DECLARE STATE OF EMERGENCY FOR RURAL
AREAS

A reported 62 newly-elected members of Mexico's Lower Chamber of
Congress representing rural areas met recently with the National
Campesino Confederation (CNC) to discuss legislative objectives for the
upcoming (September 1 -- December 15, 2003) session of Congress. The
group noted that the benefits of the North American Free Trade Agreement
(NAFTA) have failed to reach the estimated 3.5 million Mexican
subsistence farmers and proposed declaring a state of emergency in rural
areas. Other recommendations included the revision of the agriculture
chapter of the NAFTA, an initiative to protect and improve the
competitiveness of certain agricultural sectors, and a number of
initiatives to improve the quality of life in rural areas, all of which
are similar to the provisions of the April 28, 2003, National
Agriculture Agreement. (Source: *El Universal*, 7/20/03)

# MEXICO AND THE UNITED STATES ARE NEGOTIATING A POULTRY SAFEGUARD 

The governments of Mexico and the United States are negotiating details
on market access and the enforcement of sanitary measures, in order to
finish the definitive special safeguard on chicken legs and quarters
imported from the United States. When market access to the U.S. market
is available, Mexico would be able to export US\$60 million dollars
annually in chicken meat and US\$24 million dollars in fresh eggs.
(Source: *El Financiero and* *Reforma,* 7/16/03)

# GOM GUARANTEES SANITARY REVISIONS FOR IMPORTED MEAT 

The GOM, through the National Service of Sanitary, Innocuousness and
Agricultural Quality (SENASICA), affirmed that they are not putting
Mexicans' health at risk and discarded the idea that there are apathetic
attitudes in that department regarding the inspection of imported meat.
This declaration is in response to repeated complaints by Mexican
cattlemen, feeders and pork producers who have said that imports of U.S.
meat arrive in Mexico with serious quality deficiencies and are a risk
for the public health. (Source: *EL Financiero*, 7/16/03)

# THE GOM DECENTRALIZES COMMERCIALIZATION SUPPORTS 

The supports to commercialize grains will have a more equal distribution
which will favor all the states in Mexico, said Rodolfo Farias, head of
ASERCA, a decentralized administrative body within SAGARPA providing
commercial support to farmers. Farias acknowledged that approximately
600,000 producers would obtain these subsidies in 2003 compared to
300,000 that received it previously. The distribution will extend to all
farmers who market their crops of corn, wheat, sorghum and other seven
basic grains in the country. (Source: *El Financiero*, 7/18/03)

THE AGREEMENT ON AGRICULTURE, MILESTONE OF THE AGRICULTURAL POLICY

According to Secretaries of Economy, Fernando Canales-Clariond, and
Agriculture, Javier Usabiaga, the agricultural policy is dynamic, able
to generate good results and compete successfully in the globalize
world. Secretary Canales-Clariond emphasized that the National Agreement
on Agriculture (ANC) represents the central element of change in this
sector. The ANC has the potential to increase public and private
investment in agricultural production, he said. Secretary Usabiaga said
that in spite of the difficult international economic environment,
Mexico registered a surplus in the agricultural trade balance with the
United States. Statistics quoted are: US\$58.8 million dollars in the
first four months of 2003 versus a deficit of US\$139 million dollars in
same period the previous year. Canales-Clariond, however, admitted that
during the period from 1993 to 2002 bank credit to the agricultural
sector decreased 76.9 percent, with credit to the livestock sector
specifically decreasing 86.6 percent. (Source: *El Financiero*, *La
Jornada*, *Excelsior*, and *El Economist,* 7/16/03)

# UNFAIR U.S. PHYTOSANITARY PRACTICES

The Director of the National Service of Sanity, Safety and Quality of
Agricultural Foodstuffs (SENASICA), Javier Trujillo, recognized that
even though Mexico has responded in a timely manner to U.S. requests to
open Mexican markets \-- which are closed due to sanitary constraints
\-- the United States has taken several years to make similar decisions
in response to Mexico's requests. Trujillo added, "The United States,
through the Office of Management and Budget at the White House,
implemented a mechanism to assess the socio-economic impact before
authorizing market openings to specific Mexican commodities and, with
this process it could take years to define a position." He said that
Mexico has claimed the illegality of these procedures before the WTO,
based on what is established in the sanitary and phytosanitary (SPS)
measures chapter of NAFTA. In Mexico, the administrative authority at
the Secretariat of Agriculture, Livestock, Rural Development, Fisheries
and Foodstuff (SAGARPA) makes the SPS decisions, but, he added, "there
is an absence of a legal process like in the United States; perhaps the
idea of drafting a law is something that deputies in the Mexican Lower
House should be thinking of." (Source: *El Financiero*, 7/22/03)

# FED NUMBERS IN THE UNITED STATES REDUCE ECONOMIC PROJECTIONS 

The U.S. Federal Reserve (FED) estimated that the U.S. economy would
grow between 2.50 and 2.75 percent this year. The FED also stated that
the administration of President George W. Bush generated a historical
deficit of US\$455 billion dollars. This information underscored the
difficulty that Mexico has in achieving its growth goal of 3.0 percent
in its Gross Domestic Product in 2003. Francisco Gil Diaz, Treasury
Secretary, recognized that his ministry will have to evaluate the new
conditions, while the governor of the Bank of Mexico, Guillermo Ortiz,
stated that "the Bank of Mexico will adjust\" its projection of economic
growth, which currently is around 2.4 percent. (Source: *EL Financiero
and* *La Jornada*, 7/16/03)

# PROFITS ON GRAIN PRODUCTION WILL INCREASE

Due to the new support called "ingreso objetivo" (target price), the
income per hectare or ton that Mexican commercial growers will receive
this year will be higher than their U.S. competitors. For example, a
Sinaloa corn grower will receive a target price of 1,759.12 pesos per
metric ton (roughly US\$176/MT), which is 37 percent higher than the
price that a U.S. corn grower will receive (1,285.2 pesos/MT or
US\$24/MT). Juan Carlos Anaya, director of the private consulting firm
Agricultural Markets, elaborated on a comparative analysis of income in
corn, wheat and sorghum between U.S. and Mexican growers. With only a
few exceptions, the income of Mexican growers of these grains will be
higher than their counterparts in the United States. Anaya recognized
that Mexican farmers face deficiencies on transporting their crops, but
their higher income should compensate for these deficiencies. (Source:
*El Financiero*, 7/15/03)

**SPECIALIST SAYS TRANSGENIC SEEDS COULD CONTAMINATE NATIVE SEEDS**

According to Patricia de la Rosa-Peñaloza, professor at the Agricultural
Popular Autonomous University of Puebla, in spite of the benefits that
transgenic seeds can generate by increasing the level of proteins or
controlling pest damage in some cultivations, genetic modification is
harmful if it is made in the center of origin of the seeds. In
biotechnology there are two positions: those who argue that the best
solution is to reduce world hunger; and those who consider that this
technology would create more problems than solutions. According to a
report published in United States by the International Service for the
Acquisition of Agri-biotech Applications (ISAAA), during 2002, 58
million hectares were cultivated with transgenic seeds. This represents
an increase of 12 percent compared to 2001. The preliminary document of
ISAAA shows that countries like the United States, Argentina, Canada and
China, lead this trend as farmers of those countries, which are major
world grain producers, show their preference of using genetically
modified seeds. (Source: *El Financiero*, 7/17/03)

# CARGILL OPERATES VERACRUZ GRAINS TERMINAL 

Cargill, the transnational company, has operated the grain terminal in
Veracruz (TGV) since January 2003. Approximately 55 percent of Mexico's
grain imports pass through this facility. Producers of wheat, corn flour
and oil, however, are not happy with the presence of Cargill and their
operation of the TGV. Producers consider that Cargill is creating a
monopoly, because, in addition to operating the TGV, it imports and
exports grains and purchases domestic crops. They said Cargill can give
preferences to its own ships, instead of those of other trade companies,
and can bring shipments in at lower prices, which is an unfair advantage
over its competitors. They also pointed out that obtaining the
concession of TGV was done through an obscure process but was validated
by the Federal Commission of Economic Competition. (Source: *El
Financiero*, 7/17/03)

## MEXICO, AN ACTIVE ACTOR IN THE WTO COMPLAINTS ON ILLEGAL TRADE 

The WTO has seven complaints from Mexico regarding antidumping measures
and countervailing duties that adversely affect Mexican trade. There are
currently six cases pending against Mexico in which they are accused of
establishing tariff measures that affect bovine meat, live pigs, rice,
Nicaraguan black beans, and other non-agricultural items. Meanwhile,
there is an active panel, which is revising a complaint that the United
States filed against Mexico in the telecommunications sector. The origin
of this legal suit is by a U.S. company that accuses "Telefonos de
Mexico," the main Mexican telephone company, of being a monopoly.
(Source: *El Financiero*, 7/17/03)

# INSUFFICIENT FUNDS FOR AGRICULTURE

Mariano Ruiz-Fuentes, from Grupo GEA, a private economic group,
confirmed that resources destined for agriculture have not been
sufficient due to the lack of support from the commercial banks, which
consider agriculture to be a high-risk activity, and to insufficient
funding from development banks. In 2000, approximately \$3.56 pesos
(US\$0.34) for every \$100 were destined for credit; now, in May 2003,
resources have decreased to \$2.50 pesos (US \$0.24). The only
possibility of having commercial banks earmark resources for agriculture
is through links or joint ventures with limited object financial
agricultural associations, like SOFOLES -- a linkage which is being
incorporated into the design of Financiera Rural, the rural countryside
bank. (Source: *Economista*, 7/17/03)

# MICHOACAN PROVIDING THE WORLD WITH MEXICAN GUACAMOLE

Despite the economic recession the United States has been through,
Simplot, a U.S. funded company based in Michoacan, is forecast to
maintain last year's export levels of Mexican Hass avocado paste or
"guacamole" to its main foreign market. Last year, exports reached 16
million pounds of processed product, which represents a profit of more
than US\$12 million dollars. Official data from the Secretariat of
Development of Michoacan state reveals that the annual production of
"guacamole" is around 60,000 MT and the main export markets are the
United States, European Union, Asia and Latin America. (Source: *El
Financiero*, 7/17/03)

# JUNGLE LAW IS TO REGULATE GENETICALLY MODIFIED ORGANISMS?

Despite the imminent publication of a proposal of a Mexican Official
Norma (NOM) to regulate the importation and release to the environment
of genetically modified organisms (GMO) for commercial purposes, the
lack of a Biosecurity Law is notorious. Currently, the Federal
Commission for Regulatory Improvement (COFEMER) is waiting for input
from the Secretariat of Environment and Natural Resources (SEMARNAT) and
from the Secretariat of Agriculture (SAGARPA), regarding the comments on
specific chapters of the original proposal so it may proceed with its
publication in the Diario Oficial (Mexican Federal Register). While
approval of the proposed NOM, which would allow the use of transgenics
in Mexico, is the final stages, the biosecurity bill is "frozen" in the
Mexican Lower House even though the Mexican Senate approved it recently.
(Source: *La Jornada*, 7/16/03)

# BETTER SUPPORT FOR PRESIDENT FOX

After a series of high-level meetings held in Los Pinos, national
counselors from the political party PAN, said that President Fox
admitted that important structural changes within his cabinet would take
place soon. The counselors admitted that internal disputes within the
presidential teamwork are occurring and that they would demand the
dismissal of certain public servants prior to the next message to the
nation by President Fox. Among the candidates included on the list are:
Javier Usabiaga, Secretary of Agriculture, and Victor Lichtinger,
Secretary of Environment. Moreover, the counselors said, "the time to
support President Fox with politically experienced people, not marketing
and administrative experts or image creators, is here." (Source: *El
Financiero*, 7/22/03)

# THE SUGAR INDUSTRY RECOVERS IN 2002/03

The General Secretary of the Sugarcane Workers Association, Francisco
Castro, indicated that there was good sugar production for MY 2002/03.
The industry had a strong recovery because high fructose corn syrup
imports decreased from 350,000 MT in 2001 to 10,000 MT in 2003 due to
the 20 percent tax on beverages using sweeteners other than sugar. This
situation helped the industry to increase sugar prices in the domestic
market from \$240 pesos/50 kg to \$280 pesos/50 kg (US \$22.96/50 kg to
\$26.80/50 kg). Despite this good news, Mr. Castro deplored the fact
that the \$400 million pesos (US\$38,277,511 dollars) approved by the
GOM to finance producers to increase and renew sugarcane production, and
buy necessary inputs for next production cycle, have not been released
yet. (Source: *Financiero* and *Reforma*, 7/21/03)

THE GULF OF MEXICO AT RISK OF ECONOMIC DISASTER DUE TO POLLUTION

According to a local newspaper article, the contamination of the Gulf of
Mexico is being caused by a large quantity of toxic substances that it
receives from the United States' hydrological basins, mainly the
Mississippi River. The river discharge totals 1.6 million metric tons of
nitrogen and approximately 88,000 tons of dangerous industrial compound
annually. This pollution has become a serious risk that could cause an
economic disaster. (Source: *El Financiero*, 7/18/03)

# PROSPECTS FOR ANOTHER FREE TRADE AGREEMENT

Under a proposed trade agreement between Mexico and Japan, the Mexican
livestock sector will request the Japanese to double their pork meat
purchases, said Moises Ceja, Vice President for Foreign Trade at the
National Farming Council (CNA). "It's impossible to sign a Free Trade
Agreement within the next three months, because of time constraints for
negotiations and, because we don't know the priority list of the
Japanese yet," he said. Consequently, both countries have agreed to sign
a temporary agreement or a "letter of intent" to be enforced until a
Free Trade Agreement is implemented. Meanwhile, the Japanese farming and
livestock sectors proposed three tariff schemes for products to be
negotiated. Those products with tariff rates above 90 percent would be
assigned a 60-percent maximum and 45-percent minimum; those products
with rates under 90 percent will be given a 50-percent maximum and
30-percent minimum; and, those items less or equal to 15 percent would
be 40-percent maximum and 25-percent minimum. (Source: *El Universal*,
7/15/03)

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

+-------------+--------------------------------------------+----------+
| ##          | ###### Title                               | **Date** |
| #### Number |                                            |          |
+-------------+--------------------------------------------+----------+
| MX3095      | Hot Bites Issue #35                        | 7/15/03  |
+-------------+--------------------------------------------+----------+
| MX3096      | Unilateral TRQ for Ducks, Geese and Guinea | 7/17/03  |
|             | Fowl for 2003                              |          |
+-------------+--------------------------------------------+----------+

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selection of FAS\' worldwide agricultural reporting.

**FAS/MEXICO EMAIL**

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