Interview: Luis Rebollar González
Given that agriculture employs 12.7% of the population yet contributes just 3% to GDP, in what way can productivity be improved?
LUIS REBOLLAR GONZALEZ: The way in which the countryside is structured dates back to the time of the Mexican Revolution, when land was divided and given in tenure to small communities. The main challenge to the agriculture sector at present is to increase productivity, which has lagged behind ever since that period of our history. This is in addition to continuing with investment in research and development in Mexico, specifically for small and medium producers to potentiate production and infrastructure for the South to have access to technology.
In terms of productivity, while the proportion of arable land here has generally remained the same, it has decreased in those areas where population and urban areas have continued to grow. Indeed, Mexico has a large and rising population which is expanding at more than 1m people per year. The only way forward is to work on lifting productivity, as it has a positive impact on market prices. Low productivity results in scarcity and thus price increases. As productivity improves, overall income for farmers goes up and so does the product and market supply, creating a market dynamic that results in better-regulated and more competitive prices.
Companies operating in the agricultural industry also play a key role in the sector’s improvement. Advanced non-fertiliser products, for example, including insecticides, herbicides and fungicides, are being designed to help farmers boost productivity. Today, for instance, 1 ha of land can be protected with just one gram of such products. To this end, aiding agricultural output is a driving force of the agrarian reform being encouraged by the government.
What types of agriculture-related infrastructure upgrades should be prioritised?
REBOLLAR: Large-scale farms in the north are already very advanced. The state of Sinaloa, for example, extends lands into large plots and uses advanced agricultural techniques. In the south-eastern part of the country, however, there is a significant lag in infrastructure and technology, so increasing road connectivity is vital, and storage capacity must be augmented too.
Infrastructure should be seen from a long-term perspective. The example of how the EU had a joint vision for such targeted investment is valid for Mexico. In terms of agriculture, the way infrastructure development should be planned is by evaluating how each project will impact the productivity and professionalisation of our farmers. Agricultural credit, for example, is a very important issue in the country, and a stronger transportation infrastructure could be the lever that the sector needs for credit to flourish.
How seriously does low credit penetration affect the agricultural sector?
REBOLLAR: Mexico has historically suffered from limited credit accessibility, which has intensified when it comes to credit for primary activities. This is due to the idiosyncrasy of the agriculture sector, which is characterised by high rates of informality, a lack of technology and, in many cases, insufficient guarantees.
As an alternative to commercial credit, companies in the industry are developing financing programmes for farmers working on small- and medium-sized farms. This is being organised under longer-term payment schemes to help them plan investments or to support them in the process of applying for a commercial loan.
Private banks cannot be forced to lend to the agricultural sector when there are other sectors with better indicators and profitability. Rather, work must be done in providing help and advice to people applying for loans. In addition, better planning from farmers is needed in terms of the volume and type of crops being planted. Further modernisation, better education and business-growth programmes are also required. If these changes do not take place, the solution rests only with the government and the support it is able to provide through government guarantees serving as collateral.
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