THE EFFECTS OF NAFTA AND DOMESTIC REFORMS IN THE AGRICULTURE OF MEXICO: PREDICTIONS AND FACTS

We aim to study how economic policy reforms of the last 15 years have affected the agriculture of Mexico, taking into consideration the dual character of Mexican agricultural production. We will describe NAFTA and domestic reforms and then, taking an econometric approach, we will evaluate their predicted outcomes. We further consider policy shocks to rural households engaged in agriculture by applying a disaggregated rural economy-wide model (DREM) to simulated policy changes. Our analysis shows that NAFTA and Mexico's domestic reforms have not had the expected effects. We find that, among Mexico's major new post-reform agricultural policies, most have contributed to isolating large commercial producers of staples from foreign competition. As for rural subsistence households producing maize (the basic staple of the population of Mexico), our DREM demonstrates that lower maize prices could provoke more production of grain. The main conclusion that can be drawn from the Mexican experience is that economic liberalization results neither in market access, specialization and a more efficient use of scarce resources, nor in the development of agriculture.