Agricultural Policy and Rural Poverty in Mexico

Agriculture and rural development policies in Mexico have experienced a profound reform process over the last two decades, including the ejido reform of 1992, the liberalisation of agricultural markets under the North American Free Trade Agreement (Nafta, between 1994 to 2008), and the introduction of new instruments of agricultural support (Procampo, Aserca, Alianza para el Campo) and rural poverty alleviation (Progresa/Oportunidades, FAIS, PET). The study presents an assessment of these reforms, focusing on the allocation and distribution of public resources, and their impact on rural poverty. First, though average public expenditure in agricultural support and rural development in Mexico is modest by OECD standards, it is among the highest in the LAC region, relative to both agricultural GDP and other public spending demands. Second, a strong urban bias in the allocation of public social spending in education, health and food programs prevalent up to the mid-nineties has been reversed, largely through the effect of Progresa/Oportunidades. Third, in contrast, the principal output and input agricultural support programs, like the older price support mechanisms, have proved to be both ineffective in transforming Mexican agriculture and highly inequitable. The benefits of these programs are overwhelmingly concentrated on a small fraction of agricultural producers in the rich northern agricultural states, at the top extreme of the rural and national income distributions, failing to reach the poorer and vulnerable producers. Even in the case of Procampo, the one program reaching subsistence farmers, 23% of transfers are concentrated in only 2.6% of producers in the top national income decile. With the latter exception, agricultural subsidies are more regressive even than the rural income distribution, thus aggravating, rather than reducing original, asset-based inequality in Mexico.