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Part II: Case studies


Food distribution, consumption, and price policies in Mexico



Adolfo Chavez

The population of Mexico can be divided into three nutritional groups. About 25 per cent of the people subsist on an extremely deficient diet, in terms of both quantity and quality. This severely undernourished population includes rural dwellers, isolated and marginal, and also the so-called indigenous people who live in the rural fringes, in widely separated towns, and in arid, mountainous regions. These people have been pushed into the less hospitable areas and their condition is now critical. That 25 per cent comprises almost 20 million people.

About 60 per cent of the population, or a little over 30 million people, are members of the working class whose lives were somewhat improved by land reform and urban migration. Their nutritional condition is intermediate in that they do not have a calorie-deficient diet at present, but were undernourished as children, and the aftereffects of early malnutrition are causing them problems now.

About 15 per cent of the Mexican population lives at a higher socio-economic level and is well nourished.

To trace the events that have led to Mexico's current food and nutrition problems: from 1940 to 1967, that is, for about 27 years, food production increased greatly. The population doubled, but food production expanded threefold. This was the period of the Green Revolution, the results of a definite plan to increase and improve corn production. A national Corn Committee studied all aspects of corn agriculture and invited the Rockefeller Foundation to carry on research related to crop production. The Corn Committee also promoted CONASUPO, a price and market control system formed during World War 11. Its goal was to try to restrain the flow of Mexican food crops to the United States. Originally called SEIMSA, the organization that became CONASUPO controlled imports and exports in an attempt to balance the demand for exports of food at a time when food was scarce in Mexico. its national storage system was also formed at this time, and irrigation zones were created in the agricultural regions. This was one of the earliest food policy and planning programmes, designed in response to a corn policy that led to truly explosive growth in food production. At the same time, the demand for food increased as Mexico began to industrialize, and many people moved from the country into the cities. The nonagricultural working class and lower-class urbanites both grew in number. This whole panoply of events led to the three-fold increase in food production that took place in this 27-year-period

By 1967, food production reached its maximum level. From 1960 to 1967, Mexico exported 17 million tons of corn and wheat. Internally, food availability was 2,750 calories and 80 grams of protein per person per day. After 1967, this growth suddenly came to a halt. Production of basic foods such as corn, wheat, and beans has remained at the same level over the past 12 years, despite a population increase of over 20 million. Initially, sorghum production rose considerably, and it was believed that it was being substituted for corn and wheat because of an internal demand for sorghum for animal feeding. Corn and sorghum are similar in their agricultural requirements, and at first no one was concerned about this apparent need for sorghum over and above corn for human consumption. Then sorghum production levelled off. Even so, the lag in crop production was considered a temporary response to drought and internal financial problems. However, the problem has persisted and the phenomenon can no longer be thought of as a "conjunctural crisis."

It is, rather a structural crisis, related to social structure and to the infrastructure of production and demand. Mexico's development has not favoured the agrarian sector of the economy. Industrialization has expanded and cities have burgeoned along the patterns followed by developed countries to the neglect of the rural sector. The high costs of urbanization and industrialization have been largely met by transferring capital from the country to the cities, leaving the farmers without capital for production.

The structure of demand has also changed greatly, because industrialization has generated different kinds of demand. For instance, the development of the dairy, egg, and meat industries was rapid, requiring large land areas and great amounts of forage land for grazing. The 20 million poorest people in the country now consume less grain than is fed to the animals producing meat, milk, and eggs for the rich.

The price policies applied over the last few years have supported this inequitable system; i.e., CONASUPO's guaranteed price policy has weakened the storage and distribution systems to the detriment of the poor. The per capita income in the rural sector is one-eighth that in the cities. This may be one of the most extreme examples of income disparity in the world.

The situation has become so unstable that the future outlook, considering current statistics and the plight of the small farmer, grows ever more bleak. There is a sense of hopelessness because of a lack of investment in the rural sector and the loss of interest in basic food crops. The prices paid to farmers and the import-export policies all point to further deterioration in the production of basic nutrients. This means that the problems of marginal populations in the hardest-hit areas of the country will worsen. There are marginal regions containing pockets of even worse poverty, and this segment of the poor is walking on a nutritional tight-rope. About two million people living in such areas are on the brink of starvation. This pattern of development apparently occurs in other countries as well, and requires all our attention to reverse these trends in food production and distribution. Indeed, it is not yet known whether the amount of food produced per capita has changed, or whether the problem is largely one of maldistribution.

Near the end of the 1940s and in the early 1 950s, there was a huge transfer of income from the country to the city to finance industrialization. This may have led to lower food consumption by the farming class. Or, perhaps the problem is more complex than that, and the historical background should be explored in more depth.

Mexico carried out an extensive land reform programme that began in the 1920s and expanded in the 1930s. Initially, tracts of land were distributed to the peasants with the idea of co-operative farming. This pattern changed to one of private ownership. This type of reform had a profound effect on industrialization. The largest ranches were made somewhat smaller, which compelled the ranchers to modernize their equipment and methods. They were capitalist-oriented and hired peasants to work for them. A significant part of the population was transferred from the old ranches to "ejidos," or communal farms. Water never arrived in the ejidos, nor did credit for the land the peasants had farmed under the old system. The infrastructural changes that have taken place over the past 50 years have favoured the capitalist landowner, while the huge population in the ejidos devote part of the year to their own land parcels and work as wage labourers for the rest.

As a result, these people have very low salaries, which eases the transfer of any excess funds to the city, even when prices for agricultural producers are good. This is because of both the low salaries and the method of land distribution. Curiously, even when income transfer to the city was high, nutritional status seemed to improve in the country. To interpret this, however, it would be necessary to know more about food distribution.


Detlef Schwefel

Chavez has described the development of food availability in Mexico over the past two decades or so, but has not gone deeply enough into an explanation of why there is a malnutrition problem. In my opinion, the problem will never be solved in Mexico or in other Latin American countries as long as the approach to its solution is indirect. It is a fundamental error to suppose that general overall development will satisfy the basic needs of the entire population. The emphasis has been solely on increasing production without giving any thought to who would consume what is produced. Neither policy nor planning models have looked at who, among the social strata, will benefit.

But this does not go far enough. A policy concentration on increasing GNP invariably means that distribution of income and power will not favour meeting basic human needs of the majority of the population. Instead, overconsumption and obesity coexist with hunger and undernutrition, both of which are costly to society in terms of nutritional disease.

The traditional approach of economics to development needs to be changed. Many signs indicate that it would be worthwhile to set rational standards of consumption that are not based on abundance for a few, while the majority cannot consume an adequate diet or participate in economic growth.

The instruments to draw up a planning model meeting basic needs of the whole population already exist. Effective production policies must be oriented toward defining, first of all, how much needs to be produced to meet nutritional requirements. Such a model has been applied in the Soviet Union for several years. It consists of setting up a rational food budget based on nutritional requirements, taking into consideration food habits, development strategies, and production conditions.

One further point: Given the present economic and power structures in Latin America, it is difficult to plan for meeting basic needs of the entire population. The nutritional implications of all existing projects, programmes, and policies should be evaluated. All of them have nutritional consequences, whether they are directed toward production of goods, increasing employment, or generating income.

Mario Montanari

Chavez provided an accurate description of food production in Mexico. I would like to complement this with a discussion of methods of approach to the problem of food production and its relationship to nutritional needs in this and other countries in Latin America, from both the short- and long-term perspective.

There is no doubt that the increase in food production sustained from 1940 to 1965, and even up to 1970, can be explained by the country's growth model in those years It represented the typical model of domestic production substituting for imports throughout Latin America, a situation now in a state of crisis. During these years, the price of major food items such as grain remained stable until 1973 - 1974, when food prices rose to alarmingly high levels, increasing the inflation that was beginning to be felt. It was expected that higher food prices might reverse the stagnant agricultural production, but this did not happen. The price of corn increased 60 per cent, yet corn production has remained static. The same is true for wheat and other basic food items. What happened was that the agrarian sector, through prices, financing, and surplus income, transferred its income to the industrial sector, which led to a great imbalance between the sectors and polarization within agriculture. Just one sector- the commercial, agrarian economic sector-concentrated production, controlled the land, consumption, and investments during the period of import-substituting industrialization, already beginning in the 1940s. Basically, 70 per cent of the agricultural investments were for hydraulic resources. Thus, two poles can be seen in this "farming economy" that produces less, whose per cent contribution to the economy of the country is less and less relevant, and indeed, is actually a negative factor in the whole development process in Mexico.

These two poles cannot be considered as part of a dual economy, because they are two distinct economic elements. The stagnant farm economy and the economic structure of trade explain why price and production policies and even investments that attempt to stimulate agricultural production have no effect. For example, in 1975 1976, large investments were made and many ample credits were awarded, but the results were so small as to be out of proportion to the magnitude of the resources directed to the agrarian sector.

It is helpful to look at the interrelations among the different components of agricultural production for an explanation of current problems and future perspectives in production. There are four stages in food production. First, capital goods, seeds, fertilizers, and machinery-the latter for both agriculture and the food industry. The second phase is agricultural production itself. The third consists of distribution and marketing, and the fourth, final consumption.

If we look at these four phases and analyze the economic, institutional, and social agents that interact in the production of food and animal feeds, and their interrelations in all four phases, the basis of agricultural production and its projections will be apparent. This needs to be studied not only for production in general, but according to different products in order to understand the dynamics of agricultural production. The economic trend in Mexico pertains to the whole world, namely, the growing vertical integration in the production of various food and feed crops. It is therefore very difficult to use traditional analytical methods in the analysis of modern agricultural production.

In looking at these four phases, it is evident that the Mexican development model emphasized the production of consumers' curable goods, with a lack of concern for production of capital goods-specifically agricultural and industrial machinery. Therefore, the country is faced with a considerable deficiency in its "agriculture-food" chain. It has acquired heavy debts for imports, technology, know-how, etc., and more important, the technology it has imported applies to products made only in the United States and Europe.

Now that the substitution of imports for local production has reached crisis proportions, there is finally an awareness that what is needed is a policy of capital goods for agriculture and the food industry that will stimulate agricultural development. Such a policy could lead to important advances in agriculture.

The second relationship to be clarified is that between what is produced and who produces it, because the main responsibility for production of basic grains lies in the farming economy. The small farmers (campesinos) grow 70 per cent of the grains, beans, and other basic items. Therefore, to design an effective agricultural policy, it is essential to locate the producers and learn what and how much they produce, and to realize that problems associated with growing perishables like fruit and vegetables are different from those related to meat and grain production.

Since World War I I, the agricultural industry has greatly expanded its development. From 1967 on, multinational corporations have loomed large on the agricultural horizon. But the relationship between industry and agriculture is asymmetric. Industry exploits agriculture by imposing its own production structures, and determines what kind of technology can be used. It also exploits it financially. This factor has to be considered in any analysis of the kinds of products being made, and it determines what fraction of economic surplus is appropriated in the different production phases. Agriculture is an ever smaller link in the food chain that joins capital goods and the consumer. Vertical integration of agriculture and industry now appears as a necessity imposed by technological development, but this integration must become more egalitarian. Heretofore, the products of integration have not been those meeting basic human needs. The Government, too, participated only marginally in basic food production; most of its involvement has been in fertilizer and in experiments with tobacco on sugar plantations.

CONASUPO, important as it was initially, is unable to control more than 15 to 20 per cent of agricultural production in Mexico; basically, its influence is limited to grain. The Government is now providing support for food production, but economic and nutritional analyses have yet to be incorporated into agricultural planning.

Adolfo Chavez

Montanari indicated that 70 per cent of the basic grains are produced by the campesinos, but it is not clear how policy can augment grain production. There is not much campesino land left on which to grow grain, and little possibility for increasing yield. More important is the fact that the grain-producing peasants now must work for salaries most of the year, a pattern that disturbs their traditional farming practices.

They are forced to grow commercial products and are therefore less able to produce food for their own consumption. The longer this trend continues, the less likely it is that grain production will be maintained at even current levels. There is also necessarily a connection between the size of a farm and the kinds of crops it produces. Moreover, support for research and incentives is minimal for small producers. This is also true in Brazil, where millions are spent for research on soybeans and coffee, its major export crops, but where only seven people are involved in the research programme on beans, the staple food crop of the population. A Brazilian colleague pointed out that bean production cannot be mechanized, and therefore there is no incentive to support research on beans. I am inclined to think that this is more a matter of how research is oriented.

Jose Bengoa

I would like to know whether data exist on consumption patterns for the 1940 - 1967 growth period, and on any variable that may have influenced nutritional status. Did it improve or deteriorate?

Adolfo Chavez

There are data on apparent consumption, i.e., on food availability, but not on actual consumption. In fact, there was a large increase in reliance on commercial foods during those years. Before 1940, Mexicans were self-sustaining food producers, at least at the community level. Peasants working on commercial farms were allowed to keep half of what they raised for their own consumption, and this was not included in national statistics. Estimates of food availability indicate that calorie intake rose from 1,900 to 2,750 per person between 1940 and 1967, but this may reflect improved statistical methods rather than a real increase in calorie availability.

From my own experience, I would say that food consumption among the peasants has remained about the same. Surveys of rural consumption carried out in 1958 - 1962, and repeated recently, show no changes, except that people are eating lesser amounts of beans now. They consume more pasta, and they prefer noodle soup instead of beans, a negative trend from the nutritional standpoint. There is also evidence at the community level that people are eating more products containing sugar, such as soda, pastries, and other "fashionable" foods, to the detriment of their diets. The national average caloric intake is rising, but this is not true for the poor, whose dietary intake in the future may be adversely affected by socio-economic changes that are taking place now.

Giorgio Solimano

Montanari referred to subsidies. Mexico has maintained an interesting subsidy policy. Perhaps he could comment further on this subject.

Mario Montanari

Important as the subsidy policy is, it has one important defect. It is a policy supposedly applicable to the whole agricultural sector, but in actuality it is applied very unevenly and reinforces the inequality among producers. Subsidies given by way of capital goods have been concentrated on only a few recipients, and 93 per cent of these goods benefits the commercial sector.

The situation with credit is no different. It, too, is concentrated on capital goods. The same applies to imported capital goods. The over-valuation of the peso, while it lasted, led to the import of machinery.

Finally, the policy of consumer price subsidies acted against production of basic foods from 1968 until 1973, because price fixing on these products depressed agricultural production. The problem is one of how to make the subsidies available to the people who need them.

Adolfo Chavez

CONASUPO formerly played a large part in the food economy. Its first function was to regulate imports and exports immediately after World War I I. During the war, the United States needed large quantities of food. The big foodindustry monopolies began to channel a large proportion of their exports to the United States, leaving the Mexican population without adequate food supplies. The Government, therefore, had to intervene.

CONASUPO's second, and very important, function was to compete against the monopolies because in the small towns there were leaders (caciques) who bought up the cheapest goods and sold them at exorbitant prices. For example, a peasant was paid 100 pesos for a ton of corn that would bring 500 or 1,000 pesos in the cities. CONASUPO stepped in and reduced the profit margins for basic foods as well as the number of middlemen involved. The peasant, formerly paid 100 pesos for his ton of corn, now received 500 from CONASUPO. CONASUPO then sold it for 520, even though it cost 100 or 200 pesos to handle and market the corn. In other words, CONASUPO subsidized the corn market, which greatly stimulated rural production of staple foods, and the development of large cities as well, by furnishing corn cheaply to the urban consumer.

CONASUPO also expanded its control over food prices by developing a market system to sell what it purchased. Eventually, there was a CONASUPO store in each city. This was particularly important during this period, because it prevented politicians from exploiting the food market in large urban areas.

This is how CONASUPO used to function, but now it is losing large sums of money.

Mario Montanari

CONASUPO is one of the most interesting experiments of its kind in Latin America. Lately, however, it has run into a series of problems. The basic one is that it has to compete with 366 other public institutions in the Mexican agricultural sector, all of which exert their influence through their respective policies. Private enterprises resent CONASUPO's participation in setting up a market system. It is especially resisted in some of the cities, because it fixes prices on certain products that sell at higher prices in the large chain stores that control a large portion of the food consumed in Mexico.

Another development posing problems for CONASUPO among its competitors is that, while 15 years ago, brand names for food products were unimportant, they are desired by today's consumers. CONASUPO is now giving its brand names to small and medium-sized producers and stimulating competition via advertising.

CONASUPO therefore still plays an important role. Because it has diversified, it has become more complex and is causing some confusion in the marketplace. It has not co-ordinated its activities with those of the other agricultural institutions, but may still be capable of solving price and brand-name problems and regulating the commercial market, all of which are related to the production of basic foods in Mexico.

Adolfo Figueroa

I would like to look more carefully at the profit margins mentioned by Chavez in connection with CONASUPO vs. the private sector. I cannot comment on the situation in Mexico, but in Peru there is much discussion about whether these margins are really as large as they are thought to be, or whether other real costs cut into them. If the latter is the case, the apparent margin would be less, because profit margins depend on methods used in price policies. Something similar to CONASUPO was created in Peru, but it has gone bankrupt. Some thought it would be easy for this government enterprise to appropriate for itself 200 to 300 per cent above the value of the price paid to the intermediaries.

A. Sanchez Marroquin

The "rondo Nacional de Fomento Ejidal" had vast amounts of capital available, and it had some good and some frankly disastrous effects. After its demise, it did leave behind a useful infrastructure that should be utilized in some way. What is the current thinking on this? Is there a plan being devised to take advantage of this?

Mario Montanari The "rondo Nacional de Fomento Ejidal" alluded to by Marroquin was organized to create rural or agricultural industries. It was one of the failures in the last regime's attempts to improve the agroindustrial sector. This is because little is known about all of the phenomena interacting in the food production chain from farm to consumer. It is not merely a matter of scale of production, as is often the case for industrial crops.

The agro-industrial infrastructure in Mexico is just beginning to be studied. The first analyses will give an idea of concentration of ownership, the role of multi-nationals, and types of diversification characteristic of Mexican agroindustries.

One of the main problems with agro-industrial plants is that 80 per cent are scattered throughout the country. The whole issue is now being studied on the basis of the four phases of agricultural production, discussed earlier, not just to understand the food chain, but to co-ordinate government policies that impact on agricultural production.

For example, financial support for agro-industries is extremely uneven. They have had sufficient funds to finance production, but not enough to bring to market and sell what was produced, and even less to sustain the effort. Also, efforts throughout the system were not co-ordinated.

To answer the question on current plans, a very ambitious agro-industrial development programme has been proposed. Its aim is to industrialize agricultural production, and in phase three {distribution and marketing), to facilitate increased agricultural productivity. The concept is that the government can more easily motivate and provide incentives for increased production through the food industry, or through agro-industrial complexes that could serve as small dynamic centres for development that would pull up, so to speak, the rural agricultural sector.

If this were achieved, this integrated agro-industry, as it is called in some circles, might dissolve the unbalanced relationship that now exists between agriculture and industry. The goal of these agro-industrial complexes is to function as economically integrated units, thereby destroying the imbalance on the market between capital goods and the raw materials of agriculture.

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