NOT MUCH NOISE ON NAFTA IN WESTERN MEXICO

UNCLAS SECTION 01 OF 02 GUADALAJARA 000031 SIPDIS SIPDIS E.O. 12958: N/A TAGS: EAGR ETRD PGOV MX SUBJECT: NOT MUCH NOISE ON NAFTA IN WESTERN MEXICO GUADALAJAR 00000031 001.2 OF 002 ¶1. Summary: The January 1, 2008 ending of the last remaining duties on agricultural products has so far not generated major protests or controversy in west-central Mexico. Agriculture Association leaders in Jalisco, one of Mexico's most important farming and ranching states, tend to view NAFTA as more of an opportunity than a threat, though they do worry about certain more vulnerable sectors such as milk and sugar production. The greatest concern is not US competition but a steady rise in the price of many basic inputs, especially feed grains and the effect on food prices for consumers. End Summary. -------------- Protests are Political -------------- ¶2. In a January 10 meeting with the Consul General and Commercial Officer, the President of the Jalisco Council of Agricultural Associations (CAJ),Mauro Jimenez, declared that recent anti-NAFTA protests in other parts of Mexico were politically, not economically motivated. Neither he nor his colleagues on the Council expect to see similar demonstrations in Jalisco. The Party of the Democratic Revolution (PRD),which has been the most vocal in demanding changes in NAFTA, has little support in this conservative part of the country. ¶3. While discounting major NAFTA-related protests, the Association leaders did fault the Federal Department of Agriculture (SAGARPA) for failing to make necessary preparations before January 1st. "They didn't do their homework" said Jimenez, but added that in fairness, even with another 10 years the Government probably wouldn't have been able to plan effectively without a crisis. Now SAGARPA has to scramble to review the needs of vulnerable agricultural sectors. ¶4. The Department's delegate (Chief Representative) in Jalisco does not accept this criticism. He noted that SAGARPA has established programs to shield producers, especially those who are smaller and less efficient, from the full effects of market competition. These programs include direct payments and subsidies, technical aid to help increase technology and mechanization, and government loan guarantees. In fact, the delegate asserted that the biggest current problem for corn producers is not inefficiency or uncompetitiveness, but corruption: he contends that much of the government financing aid is being siphoned off by unscrupulous middlemen. 
 -------------- Opportunities and Challenges -------------- ¶5. Jalisco is an agricultural powerhouse, ranking first in the production of eggs, pork, milk, and corn, and second in the production of beef, chicken, and sugar cane among all Mexican states. Leaders of most of these sectors are not overly worried by full NAFTA implementation. The dairy sector, and milk producers in particular, are bracing for very strong competition but believe that with modern technology, they can compete effectively. Sugar cane growers are the most concerned given their relatively high costs of production. Other sectors such as poultry producers believe they are in good shape and want to work on eliminating additional barriers, such as sanitary restrictions, on chicken exports to the US. Meat producers are also looking at ways to "add value" to their products through expanded local processing. Jalisco's avocado growers would like to export their product to the United States, capitalizing on the successes of growers in Michoacan. All of the sector leaders are interested in US agricultural equipment and technology, and satisfying this interest is a key objective of Guadalajara's Foreign Commercial Service office. ¶6. Officials from rural areas in the consular district, who represent many smaller producers, are more worried about the effects of NAFTA competition than the Agricultural Association's leaders, but they echoed the latter's view that protests were unlikely. At present, the prices of many agricultural products are up, especially grain and corn, benefiting local producers. -------------- - Grains and Trains - the Big Problems: -------------- -- ¶7. It is the rise in the price of inputs, especially feed grains and corn, that has the Agricultural Association and others most concerned. This raises the production cost of beef, pork, chicken, and dairy products among others - a cost which will have to be passed on to consumers, the majority of whom live in urban, not rural areas. The end of NAFTA restrictions may actually help ameliorate this price rise, by facilitating grain imports. ¶8. Importing grain also presents challenges, with the Association leaders complaining about the high rates and poor service provided by Jalisco's main railroad, Ferromex. A serious shortage of railroad cars to carry grain has also caused problems. The Association is a strong supporter of additional GUADALAJAR 00000031 002.2 OF 002 government investment in the railroad network, especially the construction of a new line from Guadalajara to Aguascalientes, which will run through the Jalisco's agricultural heartland. (Since business leaders also favor this line as a means of expediting containers of Asian imports from the Pacific port of Manzanillo to US markets, the chances of its eventual construction are good). -------------- -------------- Comment: For Now, the Campo is Calm -------------- -------------- ¶9. While Jalisco media has reported extensively on anti-NAFTA protests in other parts of Mexico, this key agricultural state has not joined in, and according to its agricultural leaders, it is unlikely to do so. These leaders have faith in themselves and their work ethic, faith in technology and new opportunities, and faith in the government to eventually assist vulnerable sectors if things go really wrong (the current Federal Minister of Agriculture, Alberto Cardenas, is a former Governor of Jalisco). Far more worrisome than NAFTA competition is the rise in price of many agricultural products, which if prolonged and unchecked, could have a major negative impact on the millions of urban poor. RAMOTOWSKI