Mexico's new President promises higher wages, more domestic food production

Last week, Mexico elected a new president, Andrés Manuel López Obrador, and growers are now assessing what impact the new President-elect will have on the country's fresh produce industry. López Obrador secured 53 percent of the vote with a 60 percent turnout for the vote and is considered a leftist. According to many reports, frustration with the way Mexico was heading, in terms of centralized power and forgotten outer regions, helped to propel the 64 year old into power in the hope of changing the nation's direction.

Three major policy announcements have already been made that will affect growers. Firstly, Mr. Obrador intends to raise the minimum wage. He expressed that Mexico needs to be more self-sufficient and grow more of its own produce, and he also wants to distribute power away from Mexico City and give more power to the states.

One of the more prominent policies that Mr. López Obrador announced was his promise to raise the minimum wage. This will no doubt have an impact on growers, some of which mentioned that it has been increasingly difficult to secure labor. Many though are welcoming the move, stating they already pay more than the minimum wage to ensure a steady workforce, while noting that it will increase the amount of cash people have, improving their consumption of goods.

"Wages will increase, they have to increase," said Alberto Sevilla of Bellflower Produce. "Food costs are rising and the minimum wage of 80 pesos per day is too low to sustain a family. We don't predict this will hurt growers as many are already paying more than this. Moreover it will increase the spending power of consumers because they will have more money in their pockets."

Sevilla noted that not only will the minimum wage increase, but it will also be evened out across the country. "Right now, each zone has a separate minimum wage," he explained. "These zones are the north, central and southern regions, with the rate steadily decreasing as you move south. The President-elect has proposed scrapping this zoning and will have the same minimum wage in all regions."

Mexico currently relies heavily on imports for its own food needs. The newly elected President wants to change that by encouraging more domestic production and improving the local market. For Mexican growers, this is likely to be excellent news as they will be encouraged to enter, or re-enter, the local market and to look to expansions in anticipation of greater domestic demand.

"Mexico imports most of its food, but Mr. López Obrador wants the country to be more self-sufficient," said Sevilla. "If this is successful, it will really help Mexican growers. At the moment, domestic markets are not very strong and it's one of the reasons why many growers turn to the US market. By pushing for more local production and making the local markets more robust, it will be good for us as a business and for the country in general."

Some growers, however, are more skeptical, citing the poor record of previous Presidents when it comes to making promises. "To be honest, as far as I see, Mr. López Obrador doesn't have a concrete proposal that could benefit the produce industry," observed Alberto Diaz of Spring Valley Fruits. "Mexican politicians usually don't focus their promises in concrete proposals. For example, Mr. López Obrador promised to end corruption as if by magic, being honest and being the example to everyone. That's not a concrete proposal, it is not even doable. Also proposing to be a food self-sufficient country is not a concrete proposal and is not doable either."

In response to general public sentiment that too much power is concentrated in the capital, López Obrador wants to give states more power. As part of this measure, he will distribute government ministers to be based in what they determine to be the center of their relevant departments. For example, the Secretary of Tourism is said to be relocating to Yucatán, which is one of the biggest states for tourism. For agriculture, Sonora has been selected to be the home for the office of the Secretary of Agriculture.

"The new President wants to move the SAGARPA office from Mexico DF to the state of Sonora," said Bram Hulshoff of Desert Farms. "As he describes that this will help to give an impulse to the Agricultural Sector. He also wants that federal support and decisions are made throughout the country and not in one certain place. This will help to spread the wealth throughout the country and provide horizontal growth of the economy within the different states."

Hulshoff added that the intended outcome is to improve the foundations of the agricultural industry, starting from education. "The President-elect is planning to educate the youth as they are the future for the country, and he is dedicating a budget to guarantee that 100 percent of all youth have access to education, including agricultural education," he said. "Mr. López Obrador also wants to create support for the smaller farmers within the country and to ensure there is better support for these smaller farmers in order to succeed."

Amidst all the talk and hopes and promises, it will take another six months for anything further to be made clear, as the President-elect will not take office until the end of the year. This will also likely delay any further progression on NAFTA 2.0 negotiations until well into next year. In the meantime, growers can only hope that whatever eventually occurs will benefit not only them, but the Mexican fresh produce industry in general, and so far, the general consensus is one of optimism.

"Overall it seems that the President-elect is in favor of developing the country," Hulshoff summarized. "He wants the forgotten fields to be re-activated - fields that closed due to lack of attention/support or finance. This together with improving the agricultural education for the country in our opinion only can benefit the agricultural sector, create more produce, wider harvest windows and more variety. This is all of course if the President-elect can and will keep his promises, which will become a certain challenge"

 

"Yes, the minimum wage might go up, but we are already paying well above the minimum wage, otherwise we wouldn’t have any workers during the harvest," he continued. "Also, we see the same thing happening in many countries. At the same time there is more and more innovation on the harvest and production side with the automating of different processes. The important thing is to create a solid base, with good producing fields to start with. A broader offer in different fruits and vegetables and a larger harvest window Mexico would get real far, translating into a better overall economy."

For more information:

Alberto Sevilla 

Tel: +1 (956) 739-9345

Bram Hulshoff 

Tel: +1 (209) 221-4704

Alberto Diaz 

Tel: +1 (956) 618-2239