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Mexico has undertaken significant agricultural policy reform in the last two decades, reducing the amount of support by half since 1991-93, and reallocating remaining support to less distorting forms of support. Mexican support to agriculture is at 12% of gross farm receipts, below the OECD average.
The level of price distortions has been reduced to only 4% in 2008-10, as documented by the Nominal Protection Coefficient. However, since 2000 Mexico has increased payments based on variable input use, in particular subsidies to electricity and to price hedging contracts.
- Mexico has significantly reformed its agricultural policies in the last two decades as reflected in reductions in %PSE. Market price support has been reduced and less distorting payments based on non current area or animals have been implemented. However, since 2000 payments based on variable input use have increased and the deficiency payments programme Ingreso Objetivo has not been removed despite high market prices in recent years. Instead, subsidies to new price hedging programmes have grown since 2005.
- Reform has been driven by trade liberalisation and direct payments. PROCAMPO was designed in 1994 and has played an important role as a transition income support programme to be ended in 2008. It was extended until 2012 with no redefinition of its objectives. Only marginal changes in its operational rules were decided in 2009.
- The consistency between agricultural policies and environment objectives remains weak despite the inclusion of objectives for agriculture in the Special Programme on Climate Change 2009-12. For instance, large and increasing subsidies to electricity for water pumping seem inconsistent with the objective to reduce water use.
- The attempt of the Programa Especial Concurrente (PEC) to undertake an integrated strategy for development in rural areas – including infrastructure, health, education, social and environmental policies – has not succeeded to implement a strong enough planning tool for a truly horizontal policy strategy.
- Mexico should concentrate its policies on fostering sector and economy wide investments in infrastructure and innovation, while improving the horizontal consistency between policy areas such as agriculture, the environment, rural development and poverty alleviation.
Mexico: OECD Producer Support Estimates (PSE)
Level and composition by support categories, 1986-2010