The impact of agricultural policy liberalization on rural communities in Mexico

Abstract

Mexico still has more than 24 million of its inhabitants living in poverty, the bulk of these living in rural areas. Since 1982 Mexico has carried out a model programme of structural adjustment and economic liberalization. From 1988 onwards the previously protective and interventionist farm policy has been liberalized. This paper examines the state of rural poverty and the effect of recent policy changes through detailed studies of four villages in central Mexico carried out between 1996 and 1998. In these cases, households maintained a diverse portfolio of income-earning activities, based on farming, salaried and waged work, temporary migration and small-scale enterprises. Incomes varied little between communities, but were highly unequal within the villages—almost as unequal as income nationally. Most of the inequality arose through the concentration of earnings from larger-scale business and salaried work. On the other hand, any additional income from waged work was likely to reduce inequality. Thanks to uneven distribution of incomes, half the households lived in moderate poverty and one third in extreme poverty. The main determinants of incomes were education, access to capital and migration. The chance of being poor was greater for households that had few sources of income and had no migrants. Cluster analysis revealed three groups differentiated by the pattern of their livelihoods. One third had specialized in salaried work or larger-scale rural business, and were rarely living in poverty; just over one sixth of households specialized in farming, also mainly not poor; and the majority who, while farming small plots, depended heavily on wage labouring for their subsistence and who were usually poor. The main changes affecting the economies of the four villages since 1988 were first and foremost changes in macro and external variables—inflation, stagnation of domestic demand, changes in the world coffee price, and knowledge of international migration. Farm and rural policy change—seen in terms of lower real prices for maize, fewer input subsidies and less state assistance to farming—had been less significant. Most of the changes lowered returns to farming and other rural businesses, pushed down real wages, and raised the cost of living. The retreat of the state and economic liberalization had not led to any countervailing entry of private services or capital. Despite harder times for many households, the response was usually to adapt by tightening belts and looking for extra jobs, rather than abandoning peasant life in the villages. Copyright © 1999 John Wiley & Sons, Ltd.