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Posted
January 30, 2007

The Mexican Corn Crisis

Mexico's corn crisis sheds light on the human dimension of free-trade policies.

If there is one food that defines Mexico, it is corn. The nation has long been known as a massive producer of diverse varieties of corn. It is at the heart of their culture and cuisine. The Mayans called themselves “Children of the Corn.” So why is Mexico now “in the grip of the worst tortilla crisis in its modern history,” as the Washington Post (January 27) puts it? Let’s just say that “free trade” ain’t everything it is cracked up to be.

By embracing the NAFTA treaty, Mexico surrendered its corn output to the vagaries of the North American corn market. Now, all of a sudden, Americans want corn, lots of it. As part of a dubious strategy to make “cleaner” gasoline while rewarding Big Agriculture and farm states, the U.S. Government is shoveling huge subsidies to corn-based ethanol production. This new demand has bid up prices in the U.S. and caused acute corn shortages in Mexico, which in turn has tripled and quadrupled the price of tortillas.

In 2005, Mexico exported 137,000 tons of corn – but last year, it was actually forced to import 800,000 tons of corn from the U.S. and other countries. The “giant sucking sound” that H. Ross Perot predicted during the 1992 presidential campaign – American jobs heading to Mexico – is now the sound of Mexican corn flowing northward.

By the lights of neoclassical economics and the theory of comparative advantage, “we’re all better off.” If one food becomes scarce or too expensive, economists blithely assume that other foods are more or less substitutable, based on price.

But price isn’t the only story here. Cheaper foods are not necessarily “better.” The poor of Mexico have long depended on tortillas for more than 40 percent of their protein. Tortillas are an ideal nutritional food, and are credited with helping prevent rickets among Mexican children. They also have lots of dietary fiber. They are part of the Mexican identity. Now Mexican families with one wage-earner are being forced to spend as much as one-third of their income on tortillas – or find other foods. Some are resorting to cheap instant noodles as an alternative, but this means people are going to get sicker and fatter, or go hungry.

The claim that free trade “makes us better off” may apply in an aggregate economic sense, but that doesn’t take into account the distributional inequities or social costs. How competitive is trade when a single company, Grupo Gruma, controls as much as 80 percent of the Mexican tortilla flour market? Critics charge, furthermore, that the Mexican government has made sweetheart deals with big corn companies. Clearly any aggregate benefits from the trade in corn is not trickling down to consumers, but are pocketed by the dominant market players.

Equally troubling – but invisible to economists – is the impact on national culture and identity. Does it really make sense to surrender a food staple associated with the national identity to an oligopoly of corporations operating in capricious international markets? As angry families begin to protest, the Mexican government may find out that global trade is not necessarily the best arbiter of what is valuable.