According to analysts, setting minimum export prices for tomatoes aims to secure production and increase national competitiveness. However, this policy, implemented by the Ministry of Economy (SE) and the Ministry of Agriculture and Rural Development (Sader), could have unintended side effects.
A report by Banamex states that the minimum export prices are intended to reduce low-cost exports to the United States, benefiting consumers with lower prices. However, they could harm producers by causing losses. The report adds that a decline in exports and sales at reduced domestic prices would lead to lower incomes, hurting the profitability of the agricultural sector.
Additionally, the absence of an anti-dumping investigation limits Mexico's ability to negotiate with the United States and remove the tariff, maintaining pressure on exporters. Minimum prices create an unstable balance. On one hand, Mexican competitiveness abroad declines, while domestically, supply stabilizes, which results in reduced profits for producers and traders.
The announcement of the 'minimum export prices' follows the U.S. government's decision to end the tomato tariff suspension agreement that has been in place since 1996. This agreement allowed Mexican tomatoes to be exported duty-free. In recent years, U.S. producers argued that Mexican tomatoes were being dumped at lower prices.
The implementation of minimum export prices is introduced as a trade mechanism to prevent products from being exported at artificially low prices, avoiding trade disputes with the United States. This measure aims to prevent exporters from declaring low prices to pay less taxes or evade regulations.
The SE and Sader announced that tomato prices will be reviewed annually or sooner, depending on market conditions.
Source: elceo.com
