Productive public investment in agriculture for economic recovery with rural well-being: an analysis of prospective scenarios for Mexico

Mexico's gross domestic product (GDP) contracted unprecedentedly as a result of the COVID-19 crisis. While the primary sector has relatively been the most resilient, the agriculture sector lacks sufficiently strong productive dynamism and has high rates of informal work and low wages. Investing more in the sector's productive infrastructure would help accelerate economic recovery while improving people’s well-being. A public investment policy should be developed on the basis of evidence, such as that provided in this study. In 21 prospective scenarios that simulate the allocation of additional public investment in productive infrastructure across subsectors of agriculture, equivalent to 0.25 percent of GDP (around MXN 50 billion) between 2021 and 2023, there is an improvement in total and agrifood GDP, and in the well-being of the Mexican people, as measured by private consumption and rural poverty reduction. However, it is recommended that new investment be focused on certain subsectors and that it be financed through foreign borrowing. According to a ranking of subsectors that receive new investment, the sugar cane subsector ranks first in three of the four variables considered (private consumption, total GDP, agrifood GDP and rural poverty). Cereals, mainly maize, but also others (rice, sorghum, oats, barley and other cereals), and the more export-oriented crops, such as flowers and coffee, also appear at the top of the ranking.