A History of Mexico and It's Corn in the Globalized Economy

By Miguel Contreras

Introduction

White corn, or maize, is Mexico’s staple crop, and an essential part of the country’s culture and identity. Corn production and consumption in Mexico are undergoing pronounced changes due to the ratification of the North American Free Trade Agreement in 1994 and a recent demand for biofuels like ethanol.

U.S. & Mexico Corn Trade

The recent history of Mexican maize begins with the country’s economic deterioration following the 1973 and 1979 oil crises. Mexico became the world.s largest foreign debtor and was forced to seek aid from the International Monetary Fund to refinance its debt to the tune of $4 billion. As a result, former President Miguel de la Madrid began denationalizing government industries and banks in 1992, leading his successor, President Carlos Salina de Gortari, to negotiate NAFTA with the United States and Canada.

As part of NAFTA, de Gortari passed the 1992 Agrarian Law. The legislation was intended to reduce limitations of private ownership and dismantle ejidos, a program of collective farms designed after the Mexican Revolution to prevent the re-emergence of large private rural estates.

In 1992, the Federal Reserve Bank of San Francisco reported that nearly half of Mexico.s total land mass was held in 28,000 ejidos, employing some 2.5 million farmers. Ejidos have been criticized as uneconomically small, undercapitalized farms, but they did allow predominantly poor maize farmers the ability to compete in Mexico.s domestic market.

Coupled with a policy to dismantle ejidos, agriculture trade liberalization linked to NAFTA has increased U.S. corn exports to Mexico. In 2003, the U.S. exported 7.7 million metric tons of corn, a 240 percent increase compared to the annual level from 1984 - 1993, according to the U.S. Department of Agriculture. The USDA says this trend will continue, projecting Mexican corn imports to increase to 14 million metric tons per year by 2013.

Most of the U.S. corn exported to Mexico, however, is yellow corn and not in direct competition with white corn. Yellow corn is primarily used as animal feed and to manufacture ethanol while white corn is used for human consumption because of its nutritional superiority.

Amanda Gálvez, a nutrition expert at the National Autonomous University of Mexico, told The Washington Post in January 2007 that tortillas made from white corn provide poor Mexicans with more than 40 percent of their protein. Corn-based tortillas also help explain why few Mexican children have rickets, a bone disease caused from malnutrition that is common in developing
countries.

Corn & Ethanol

Following the 1973 oil embargo by the Organization of Petroleum Exporting Countries, U.S. Congress began promoting corn-based ethanol as an alternative fuel. In 2005, global ethanol production was 9.66 billion gallons, with 44.5 percent produced from U.S. corn.

In a 2007 Foreign Affairs article, Professors C. Ford Runge and Benjamin Senauer of the University of Minnesota said the demand for ethanol will continue to increase as oil prices rise. They predict that U.S. ethanol production will reach 11.4 billion gallons by the end of 2008 and could reach 35 billion gallons by 2017.

The large volume of corn required for ethanol production in the U.S. has contributed to the increase in corn futures to $4.38 a bushel in March 2007, the highest level in 10 years.
A June 2007 article from the Canadian Foundation for the Americas explains that the high U.S. demand for yellow corn for ethanol production has resulted in lower corn exports to Mexico.
The decrease in Mexico’s yellow corn imports, which is primarily used in for animal feed, has caused a greater demand for white corn as a substitute. As a result, Mexico’s price of tortillas
has reportedly increased from 63 cents a kilogram, or 2.2 pounds, in January 2006 to between $1.36 and $1.81 in January 2007.

Conclusion

Agricultural trade liberalization and the demand for ethanol have greatly shaped the recent history of Mexican corn. On the one hand it has led to an influx of yellow corn to Mexico and on the other it has increased the price of white corn, decreasing the consumption of tortillas, an important source of protein and cultural symbol.

Miguel Contreras is a senior at the University of California, Berkeley studying Political Economy of Industrial Societies. His Op-Ed on Mexico's Corn first appeared in the May issue of Pueblo Hispano.