HAVE NAFTA AND PROCAMPO PROMOTED THE CONVERSION OF AGRICULTURAL AREAS IN MÉXICO?

Abstract

Conversion of agricultural areas to cropping areas with comparative advantages, such as high labor intensity, is a goal for the Program for Direct Assistance in Agriculture (PROCAMPO) that began in 1993, and for the North America Free Trade Agreement (NAFTA), which started in January 1994. Two models were estimated, one for grains and another for fruits and vegetables, to determine the factors that could explain the conversion process of agricultural areas in the period of NAFTA and PROCAMPO. In each model, area is the dependent variable, while crop price, PROCAMPO payment, prices of inputs and rainfall were independent variables. Results indicate that from 1994/96 to 2006/08 grain-sowed surface decreased 0.6 % annually, while fruit-and-vegetable-sowed surface grew each year 0.7 %, as a result of price behavior. Decrease in the real PROCAMPO payment observed in the 1994/96-2006/08 period caused an annual decrease of 0.7 % in the grain-sowed surface, and an annual increase of 2.7 % in the fruit-and-vegetable-sowed surface. These results indicate that NAFTA has favored the conversion of sowed surface, and that the decrease in the real PROCAMPO payment has reinforced this process, although the earnings have been rather small.