Saturday, January 20, 2007

Mexico's Government And Corn Prices

Hypocritical politicians aren't exactly a new phenomena, nor is it something limited to Mexico, but Mexico's politicians are now doing everything they can to prove that they aren't an exception to that. For years, Mexico's politicians have attacked the provision in NAFTA that means that Mexico will by 2008 have to do away with the quotas limiting imports of highly subsidized and therefore cheap American corn. Most have viewed it as a necessary evil in order to get the U.S. to dismantle barriers to Mexican exports, while some have argued that it is not worth the prize. But they have all agreed that it is bad. As have some American protectionists who argue that this will increase illegal immigration into the U.S. as the American corn will put Mexican corn farmers out of business.

But while there are many good reasons for opposing U.S. farm subsidies (namely that they hurt American taxpayers and consumers), the idea that it will hurt Mexico is nonsense. While to be sure, Mexican corn farmers will be hurt, the vast majority of Mexicans that aren't farmers will benefit from it as the price of their food is lower and so their purchasing power will be higher. As corn is eaten to a particularly high extent by the poor in Mexico, poor city dwellers will benefit particularly. To the extent that farm subsidies in the U.S. increase illegal immigration, it is because they increase U.S. farm employment where illegal immigrants are disproportionally represented, not because they hurt the Mexican economy.

Now another U.S. subsidy, that on ethanol, is starting to raise corn prices which have meant that the price of corn have risen in Mexico too. Something which have raised protests. The Mexican government have in response to this denounced "price gougers" and will enforce price caps. The narrowly defeated leftist candidate Andres Manuel Lopez Obrador has also seized on this issue and used it as a rallying cry. The fact that both the government and Lopez Obrador have previously denounced the inflow of cheap corn (Lopez Obrador in fact called for NAFTA to be re-negotiated to spare Mexico from cheap U.S. corn) from the U.S. doesn't appear to stop them from denouncing the drying up of the very same inflow.


Post a Comment

<< Home