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Report 1 Downloads 4 Views. Mexico in the context of the opening up of agricultural markets through the The original decree for the creation of Procampo lists an extended list of Unfortunately, at the time of writing the tables from the Agricultural. This study benefited from excellent comments and suggestions from Jonathan Fox and the other participants in the Woodrow Opciones productivas sedesol 2018 project.
Expert research assistance for data processing was provided by Francisco Islas. Abstract This study presents a comprehensive incidence analysis of agricultural and rural development programs implemented in Mexico over the last two decades, in the context of an ambitious reform effort to modernize the agricultural sector and address rural poverty.
It reviews the evolution of agricultural production, productivity, employment, salaries, and the declining impact of the sector on the income of the rural population. It analyzes the distribution of agricultural subsidies at the state and municipality level, considering the geographic distribution of growth, productivity and employment, as opciones productivas sedesol 2018 as the incidence of benefits at the producer and household level, quantifying the conflicting impact of agricultural subsidies and rural development programs on rural income inequality in Mexico.
The Incidence of Agricultural Subsidies in Mexico Introduction This study presents a detailed and comprehensive incidence analysis of the principal agricultural and rural development programs ARD introduced in Mexico in the context of the opening up of agricultural markets through the North American Free Trade Agreement in These programs have been the subject of various evaluations in recent years.
The poverty-reduction potential of agriculture as well as is a principal theme of the World Development Opciones productivas sedesol 2018though the report also emphasizes the growing importance of non-farm rural activities. However, given the compensatory rather than productive objectives in the design and allocation of most of these subsidies, these have tended to favor established large-scale, capital-intensive grain production, rather than the development of more labor-intensive fruit and vegetable production.
There is no evidence of positive employment effects of agricultural subsidies at the state level. Over the last decade agricultural employment has declined significantly in most states, but disproportionately so in those receiving the larger subsidy shares section 5. The study refines the benefit incidence analysis of agricultural subsidies by controlling for variations in the opciones productivas sedesol 2018 and productivity of land, as well as 1 Recent comprehensive evaluations of agricultural and rural policies in Mexico have been produced by the OECDIADB and World Bankthough only the OECD report has been published to this date September Alianza para el Campo has been evaluated by FAO This reveals that the preliminary assessments of previous studies overestimated the degree of regressivity concentration on wealthier producers in the case of the delinked Procampo transfers, but underestimated the concentration in the case of Ingreso Objetivo, as of most of the other subsidies concentrated on larger commercial producers.
Not surprisingly, the analysis also reveals that land assets, thus adjusted, are far more unequally distributed than suggested by the unadjusted land data commonly used to measure land inequality in Mexico and internationally Deininger and Olinto The study is structured as follows. Section 1 considers the relevance of distributive analysis in the present context in the light of the multiple and opciones productivas sedesol 2018 conflictive objectives of agricultural subsidies.
In particular, the section responds to a well-established view among policy-makers in the sector dismissing such analysis as the imposition of equity objectives to instruments concerned purely with efficiency objectives. Section 3 opciones productivas sedesol 2018 the evolution of agricultural growth, productivity and employment and wages, considering the possible effects of agricultural subsidies on these trends.
Section 4 reviews recent data on rural poverty and human development deprivation, and analyzes the income sources and labor market profile of the rural poor. Section 5 analyzes the economic impact of agricultural subsidies at the state level, considering agricultural Opciones productivas sedesol 2018, productivity opciones productivas sedesol 2018 and the agricultural labor market employment and wages.
Section 6 analyzes the distribution of agricultural subsidies at the state and municipality level, and its incidence on growth, productivity and employment. Section 7 presents a benefit incidence analysis of agricultural subsidies at the producer and household level, and estimates the first-order impact of ARD expenditures on rural income inequality in Mexico. Opciones productivas sedesol 2018 section derives policy recommendations.
Productive, compensatory and distributive objectives in agricultural policy The distributive incidence of agricultural subsidies in Mexico has received growing attention not only in the cited international reports but also in a number of governmental and non-governmental initiatives as well as in the media. To motivate the distributive analysis to be presented below it is therefore important to clarify this issue at the outset.
The design and evaluation of public agricultural policies in Mexico has often been plagued by a problem which is common opciones productivas sedesol 2018 complex policy areas: This is often aggravated when the objectives are confused and implicit, rather than clearly defined. A notable example of this is the case of Procampo, as will be seen below. Despite its intended function as an integrating and coordinating institutional framework for rural development policy, the PEC has served in actual practice as little more than a classificatory scheme, grouping the large set of agricultural and rural development programs by common functions, at the broadest partition productive vs.
An obvious implication of this interpretation is that productive instruments should be evaluated by their success in increasing productivity, not by their distributive incidence and vice versa for social programs. For example, Rosenzweig presents this concern in a opciones productivas sedesol 2018 analysis of agricultural policy produced for a panel of independent experts on Procampo reform set up by Sagarpa and the IDB: Given the prevalence and basic economic logic of this claim, it is important to be as clear as possible in explaining why this is in fact an argument for considering the distributive impact of agricultural subsidies in their overall assessment, rather than ignoring it.
Note first that even if the conditions of the welfare theorems did apply, allowing a strict separation in the implementation of efficiency and equity policies, this would still not make the distributive effects of the efficiency instruments irrelevant.
On the contrary, designing and implementing the equity instruments to achieve the social optimum would of course require precise understanding of the collateral distributive effects of the efficiency instruments. These effects could be neutral or even opciones productivas sedesol 2018, thus facilitating the task of the equity opciones productivas sedesol 2018. As we will see, agricultural subsidies in Mexico as in most countries are actually highly regressive, most of them even more regressive than the distribution of private incomes in the rural sector.
This implies that to achieve the social optimum assuming this gives some positive weight to equitythe redistributive instruments would have to be designed to compensate for the effect of the productive instruments as well as for the other market determinants of inequality. Es el Rico vs el Pobre. In fact, of course, the idealized assumptions of the welfare theorems are highly unrealistic, and especially so in the context of rural and agricultural markets and institutions.
The theorems assume the existence of complete and perfectly competitive markets for all goods and factors of production, perfectly informed economic agents, and costless perfectly informed redistributive instruments. In addition to assuming no market failures, the welfare theorems assume no failures in non-market political, government and non-government institutions required to identify and implement a socially optimum opciones productivas sedesol 2018. The close interdependence between efficiency and equity conditions in economic growth has received much attention in recent years, as reviewed in the World Development Report This interdependence may be illustrated with many specific examples, and even with the broad history of agrarian reform and agricultural support policies in Mexico over the last century.
At the risk of gross simplification, this history may be summarized as follows: To recap the separation of equity and efficiency instruments: The opciones productivas sedesol 2018 of these policies, as we will see bellow, is an agricultural sector which is both highly unequal, and relatively inefficient, as well as resilient to reform section 3. This outcome reflects many failures of design and implementation within the two mayor policy categories distributive and productivebut is also explained by the historical separation of these instruments, leading respectively at one extreme to a populous, commercially unviable small-holder and subsistence sector, which has survived as a form of minimal social insurance, and at the other end large-scale northern grain producers receiving the bulk of subsidies without much evidence of significant impacts in productivity or employment see sections 3 and 5.
These are generally not poor enough to benefit from Progresa or other social programs and not large enough to attract significant agricultural subsidies under present allocation criteria, but may well be the potential beneficiaries with the highest impact: A similar argument was made fifteen years ago by De Janvry et al.
Agriculture Trade Adjustment and Compensatory Programs after NAFTA The principal ARD policies currently implemented in Mexico originated in the context of a broad, market-orientated reform effort to modernize the agricultural sector in the early and middle nineties, in the context of both, the opening up of opciones productivas sedesol 2018 commodity markets under the North American Free Trade Agreement NAFTA in with a 15 year transitional period, and the constitutional reform of the Ejido land tenure system in By design, these support policies where opciones productivas sedesol 2018 highly distortionary and inequitable, failing to reach the small and subsistence farmers created opciones productivas sedesol 2018 the agrarian reform.
The expectation was that these programs would not only play a compensatory role in the face of growing external competition but, in the case of Procampo and Alianza, would also provide the necessary support for farmers to modernize production and switch to higher value crops in the context of the newly liberalized land and product markets.
The list of objectives includes emphasis added: The principal instruments emerging from these reforms have been retained with some minor changes afterthough the pace and depth of the previous reform effort has not been sustained in the present decade. A potentially important institutional innovation was the passing of an umbrella law for rural development, opciones productivas sedesol 2018 Ley de Desarrollo Social Sustentablewhich included an effort to create a coordinating framework for ARD expenditures, the Programa Especial Concurrente para opciones productivas sedesol 2018 Desarrollo Rural Sustentable PEC.
SinceARD spending has almost doubled in real terms, reaching a federal ARD budget of billion pesos for The opciones productivas sedesol 2018 political mobilization by farmer organizations led to the negotiation of the Acuerdo Nacional para el Campo As will be shown below, the consequent expansion of APE was allocated to the more distortionary instruments and some new, like agricultural Diesel subsidiesa partial retrenchment of the previous reform effort.
The principal challenge for a quantitative historical analysis of APE is the availability of a sufficiently comprehensive and consistently classified timeseries data base.
Perhaps the best data available for this purpose is the Producer and Consumer Support Estimates OECD Database OECDwhich covers the period before and after the reforms and uses a careful classification scheme designed to monitor the economic efficiency of agricultural support policies.
Its principal limitation, as in all such efforts, is the accuracy and consistency of the data fed into this scheme. The present analysis uses the OECD data reported for Mexico, corrected for an error in the reporting of the Procampo budget for This error is large enough to imply a serious underestimation of the total support estimates for the relevant years. For the years the OECD data reports numbers of the order of million pesos, while the expenditure numbers are above 10, million.
There may well be other, less obvious errors, but a systematic revision of the OECD data to ensure full consistency over time is beyond the scope of the present study. We classify the instruments by the degree of distortions they impose on agricultural goods and input markets, and evaluate the historical trend in the allocation of support resources between these types of instruments.
The most distortionary forms of support include MPS and payments based on current output and variable input use, while the least distortionary include spending on sectoral public goods, classified in the OECD terminology as General Opciones productivas sedesol 2018 Support Estimate GSSEand payments based on historical entitlements based on area, animals, revenues or income. This data reveals the following broad trends in agricultural support policies: Since then it has bounced back, in particular through the growth of variable inputs energy subsidies, principallyand by it again accounted for the largest share in APE.
In terms of its budgetary weight as well as coverage, Procampo was opciones productivas sedesol 2018 largest APE program over the last decade. This may have resulted in part because of a failure to replace the natural attrition from the program. Though they declined with the dismantling of Conasupo, contracting to a third of opciones productivas sedesol 2018 value bythey have increased steadily thereafter mostly through the expansion of inspection and marketing services.
In the present decade, however, these trends have been reversed, with the more distortionary instruments gradually gaining ground and the least distortionary loosing opciones productivas sedesol 2018.
Considering that ARD spending has almost doubled in Mexico in real terms between andit seems likely that Mexico would still be found at the upper end of this distribution. We also modify the FAORLC estimates by using a narrower public expenditure category, gasto programmable, which excludes non-discretionary expenditures mandatory tax revenue shares to the states and debt paymentsand thus better represents the policy stance and fiscal effort on behalf of ARD.
This provides a rather different assessment than suggested by the above graph. From towe observe a declining trend in the economic importance of the sector as well as the share of public resources allocated to it, interrupted by a growth of ARD expenditures inassociated with the Salinas reforms.
The fall in corresponds to a drop in the electricity subsidy for groundwater pumping for irrigation, while the sharp increase in corresponds to the introduction of large energy subsidies. The new output-based payments in correspond to the introduction of Ingreso Objetivo ASERCAwith large subsidies for grains and other crops in The declining trend has been reversed in the present decade, and the AOI has started to converge towards unity. Actual spending, except andwhich report budgetary commitments.
Subsidies, Growth, Productivity, and Employment in Agriculture 3. However, the gap between the national and agricultural growth rates has narrowed in more recent years: In andwhen total GDP growth stagnated 0. Immediately after we observe a significant increase in opciones productivas sedesol 2018 production of fruits and vegetables, but only a modest expansion in grains consistent with the pre trend.
The former was associated with an expansion in cultivated land in the case of vegetables, and opciones productivas sedesol 2018 increase in the productivity of land in the opciones productivas sedesol 2018 of fruits. By contrast, afterthe growth of vegetable production opciones productivas sedesol 2018 down, and in the case of fruits declines, while grains grow opciones productivas sedesol 2018 an average 7. The and periods present similar trends in the relative behavior of grain vs.
This coincides with the surge of MPS and output-based support for grains, as well as the opciones productivas sedesol 2018 of variable input-based support, which is also mostly linked to the latter. These opciones productivas sedesol 2018 may indicate a conflict between the market liberalization process, initiated in the early s and culminating inand agricultural support policies.
Both MPS and output-linked ASERCA payments have targeted mostly traditional crops, particularly maize and other grains, as well as raw sugar and some animal products like milk and poultry meat. Fruits and vegetables, on the other hand, have not received significant support, but 18 CIDE The Incidence of Agricultural Subsidies in Mexico have benefited from the liberalization of agricultural markets.
Far from being resolved, this conflict has been revived in the present decade, with the gradual shift back towards more distortionary support policies. TFP growth estimates are from Avila and Evenson