Liberalization of Staple Crops: Lessons from the Mexican Experience in Maize

In this paper we inquire why after more than 25 years of domestic agricultural reforms in Mexico and 15 years of trade liberalization of maize under NAFTA –a non-competitive crop and the major staple in Mexico–domestic production of this field crop has increased. We present new empirical evidence showing that, as expected, maize prices in Mexico dropped until 2006 and have experienced a process of convergence with USA prices, and maize imports from the USA increased. However, despite lower prices, maize production in Mexico rose and has experienced a positive structural change since 1992, two years before the beginning of NAFTA’s implementation. Based on the heterogeneity of maize production in Mexico, three possible explanations are proposed to explain this unexpected outcome: government supports to big commercial farmers in the agriculturally rich North of Mexico; the persistence of maize production by subsistence farmers; and to a lesser degree, increasing yields on some irrigated maize farms. We finish the paper by drawing lessons from the experience of Mexico for other Less Developed Countries.