Leaving it to the market: the failure of liberalisation to help the rural poor of Mexico

Agricultural liberalisation aims to kick-start the rural economy and improve the livelihoods of rural people. By freeing market forces and discipline, efficiency should be raised and investment encouraged. The University of Reading's Department of Agricultural and Food Economics examined four villages in Central Mexico, and asked how international, national and farm-level policies have impacted on the village households since 1988. Why are many rural dwellers in Mexico still poor? What has liberalisation done, if anything, for the villagers?

Mexico is a middle-income country, urbanised and with a well-developed industrial sector. Yet at least one fifth of Mexicans still live in poverty, seventy percent of them in rural areas. Between 1982 and 1988 policy was addressed at the economy as a whole. Attention then turned to agriculture: protection was withdrawn and land tenure changed radically. How has the Mexican rural economy responded to a liberalised agricultural policy?

The four villages were studied between 1996 and 1998 in two different parts of central Mexico. The research reveals that in general, rural incomes are very unevenly distributed, with fifty percent of households living in poverty. Changes most keenly felt arose not from agricultural policy but from changes to the international economy (higher coffee prices, for example) and to the national economy (higher inflation rates). Specific findings include:

• Rural livelihoods are made up of diverse activities centring on farming and the food chain, including temporary migration.
• Women suffer clear discrimination in labour markets and tend to work in activities with the lowest income. Women also suffer reduced consumption and additional work in poorly-rewarded jobs during difficult times.
• A marked inequality of income distribution exists between the villages - all smallholding communities. Average incomes are well above the poverty line but half the households live in moderate poverty and one third in extreme poverty.
• Incomes vary largely depending on level of education and access to informal loans.
• Liberalisation had not led to increased private investment. Services previously provided by state agencies had not been replaced.
• Limited regional or national demand for village produce, the rising costs of inputs, and the lack of services and information has severely harmed livelihoods.

The implications for policy are clear:

• Macroeconomic stability is essential, even for smallholders in rural areas.
• Farming, the cornerstone of the rural economy, needs effective technical assistance, market information and access to capital, which the markets do not provide.
• Small rural businesses also lack market information and technical skills
• Access to education (secondary and tertiary) is critical, especially for women.

Source(s):
‘Changing livelihoods in rural Mexico’, Report to DFID (ESCOR R6528) by Steve Wiggins et al (1999)

Funded by: UK Department for International Development (ESCOR)

id21 Research Highlight: 26 July 2000

Further Information:
Steve Wiggins
Department of Agricultural & Food Economics
The University of Reading
Box 237
Reading RG6 6AR
UK

Tel: +44 (0)118 931 6484
Fax: +44 (0)118 975 6467
Contact the contributor: s.l.wiggins@reading.ac.uk

Department of Agricultural & Food Economics, University of Reading

Other related links:
Search Eldis for sources on agricultural reform