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How Mexican Avocados Are Reducing Poverty

mexican avocadosMexico is the second-largest nation in Latin America with over 130 million residents. Mexico exports an abundance of fruits and vegetables but its number one export crop is avocados. Not too long ago, avocados were not the number one crop being exported from Mexico. Today, the economic impact of Mexican avocados has helped many people escape poverty.

Poverty in Mexico

According to the World Bank, in 2018 almost 42% of Mexicans lived in poverty, with the rural population being the most impacted. Moreover, around 62% of Mexican children make it to high school and only 45% graduate. To reduce poverty, Mexico has increased its social spending to help those in need. The Mexican government has implemented programs such as cash transfers, farmland subsidies, scholarships and subsidized medicine. These programs are put into place in the hope of reducing poverty in Mexico.

The Mexican state of Michoacan is one of the poorest in the country. A whole 46% of people in the state lived in poverty in 2018.  However, Michoacan is rich in agriculture. In fact, around 20% of the land is used for agriculture and the industry employs 34% of the population. Moreover, Michoacan’s most popular crop is the avocado.

The Avocado Industry Boom

Michoacan is the top producer of avocados not only for Mexico but for the entire world. Increased demand for avocados has created an economic boom in the country. Mexican avocados make up 82% of all U.S. avocado sales. Furthermore, Mexican avocados have created more than 30,000 U.S. jobs and have an economic output of $6.5 billion. Even during the COVID-19 pandemic, avocado sales were flourishing.

The United States had banned the import of Mexican avocados in 1914 due to fears of insect infestation. In 1994, The North American Free Trade Agreement (NAFTA)  implemented between Mexico, Canada and the United States resulted in the ban being lifted. The agreement led to the free flow of Mexican avocados into the U.S. The company Avocados From Mexico (AFM) has sold 2.1 pounds of avocados in 2020 and expects 2.3 pounds to be sold in 2021. Mexican avocados have had such a great economic impact that they are called “green gold” by the locals.

Impact of Mexican Avocados

The increased demand for Mexican avocados has led to less migration of Mexicans into the United States. The competitive wages avocado farming has produced has meant many more Mexicans are willing to stay in their home country. The popularity of avocados has led to the creation of thousands of jobs in Mexico. Due to this fact, families do not feel the need to migrate to the United States for employment.

The demand for Mexican avocados has led to employment opportunities, less migration and closer economic ties to the United States. The Mexican avocado industry is playing a part in reducing global poverty.

– Andy Calderon Lanza
Photo: Flickr

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Legacy of the North American Free Trade Agreement

North American Free Trade Agreement
In December 2019, the United States House of Representatives passed the United States–Mexico–Canada Agreement, ushering in a new paradigm for trade between the three North American countries. In doing so, it ended a 30-year trading period governed by the North American Free Trade Agreement (NAFTA). This was a landmark trade deal that George H. W. Bush initiated in 1989 with the passage of the U.S. Canada Free Trade Agreement. Negotiations with Mexico ensued, with Canada joining the talks and a conclusion of a deal between the three, signed into force under the administration of Bill Clinton in 1994. With the adoption of the USMCA, the previous agreement has become obsolete. One can now assess the legacy of the North American Free Trade Agreement, though the countries will update and analyze the agreement throughout the next few years as the components of the new deal take effect.

Proponents and Opponents of NAFTA

NAFTA broke ground in neoliberal terms. Free trade principles that Bush, Margaret Thatcher and Ronald Regan championed dissolved tariffs and liberalized trade with a focus on the agriculture, textile and automobile industries. Supporters of the deal proclaimed the benefits that the deal would bring, including boosting the trade and economies of the three countries, particularly Mexico’s developing one. They forecasted that Mexicans would find better jobs in Mexico. Therefore, they would stay, rather than immigrating illegally to the United States. Furthermore, NAFTA would benefit U.S. and Canadian companies seeking markets for goods and cheap labor.

There were many arguments against NAFTA from the onset. Critics jeopardized the legacy of the North American Free Trade Agreement before it even started. Headlined by then third-party U.S. presidential candidate Ross Perot, opponents claimed that opening the Mexican border to free trade principles would result in what he called a “giant sucking sound” as companies outsourced American jobs to Mexico to seek lower wages.

The Results

With the benefit of hindsight, experts now say that NAFTA had neither as good nor as bad of an impact on the economies of the United States, Canada and Mexico as some initially predicted. Like many things, the reality lay in the middle. While trade objectively increased, even tripled by some accounts, American jobs did indeed flee to Mexico. Many left the Midwest and created the so-called Rust Belt. An article published by the Economic Policy Institute details the extent of the losses, contending that 682,900 jobs suffered in the U.S. at NAFTA’s expense. Many of these job losses, 60.8 percent, were in manufacturing. Supporters predicted manufacturing would see an increase of up to two million in five years.

In short, U.S. companies benefited at the detriment of Mexican families. Further, two million Mexican families with previous engagement in farming activities lost their livelihoods. In addition, small businesses closed in the 10s of thousands. Between NAFTA and subsequent free trade deals with countries like Peru, Colombia and some Central American and Caribbean countries, millions experienced displacement from their homes and fled. Many fled to the United States, proving to exacerbate illegal immigration rather than alleviate it. Mexico did see an increase in jobs for a while, especially in the automotive industry, expanding from 120,000 to 550,000 since 1994. However, this has not been nearly enough to offset the harm caused; even when accounting for a boost in trade and considerable improvement in foreign direct investment to Mexico from $15 to $100 billion.

The Potential Future

Overall, companies in the U.S., Canada and Mexico benefited in some ways from free trade. Generally, this left a significant legacy of the North American Free Trade Agreement. However, it came at a substantial loss for individuals and worsened existing problems like outsourcing and illegal immigration. The biggest hope for the future lies in the United States–Mexico–Canada Agreement. The USMCA, agreed to by the three countries, passed with bipartisan support in the House of Representatives. Ideally, it will right some of the wrongs that NAFTA inflicted, while continuing to promote trade and economic growth in North America.

– Alex Meyers
Photo: Flickr