Agro-industry has itself to blame for Mexico's price crisis

Unconditional government handouts are only making things worse.

It didn’t used to be like this. Back in the day, it was the little farmers who went out to Mexico’s main roads to block traffic until the government heeded their complaints. Now, for the past few weeks, it has been Mexico’s large and medium farmers who have been taking to the country’s main highways in protest.

The immediate trigger that set off the protests was a collapse in prices. At current rates, producers now lose money if they sell on the open market. Many blame the government.

“The previous presidential administration dismantled pre-existing price guarantee mechanisms. They’d been relatively successful, which is why we hadn’t seen these sorts of protests,” Abel Villa, an expert in agricultural supply chains and bioeconomy, told The Mexico Political Economist. “However, because the whole system was so corrupt, they cut it all together—not surgically, but with a hatchet—creating a crisis and leading into the motorway roadblocks we’ve been seeing over the past weeks.”

The answer, then, seems easy enough: Bring back the guarantee mechanisms. The problem is that president Claudia Sheinbaum’s administration has no money to spare, and what is a “government-guaranteed price” other than a euphemism for a subsidy?

Given that the government has insisted that Mexico must become food self-sufficient, surely Sheinbaum could find the cash to tide these struggling farmers over.

Yet, there lies yet another, deeper, problem. It was the subsidies in the first place which unleashed the current pricing crisis by keeping alive a system that is killing Mexican agriculture.

The road to hell is paved with productivity gains