ORGANIC GROWTH

Mexico 2016 | AGRICULTURE | INTERVIEW

TBY talks to Rafael Gamboa González, Director General of FIRA, on the significance of agriculture in Mexico, challenges in the sector, and the rapid rise of the country's berry industry.

Rafael Gamboa González
BIOGRAPHY
Rafael Gamboa González received an economics degree from the Instituto Tecnológico Autónomo de México in 1990 and a master’s in economics from the University of Western Ontario in 1991. That same year he began pursuing his PhD in economics at the University of California, Berkley, which he completed in 1996. He has held teaching positions at the Instituto Tecnológico Autónomo de México, the University of California, Berkely, and Universidad Iboamericana. He began his career with Banco de México in 1996 and has since gone on to hold numerous high-ranking positions. In 2013, he was appointed Director General of Fideicomisos Instituidos en Relación con la Agricultura (FIRA).

What is the importance of the agricultural sector for the economy?

The agricultural sector in Mexico is a fairly large sector in terms of the amount of employment and also in terms of contribution to GDP. However, you have to look at the agricultural sector as a value chain. You have the primary activity, but you also have the transformation and also the commercialization and trading of those goods. The primary sector represents a little more than 3% of GDP. If you add the industrialization part, you reach more than 8.5% of GDP and if you add the trading part, you get closer to 20% of GDP. In terms of employment, the primary sector represents around 12% of the employment force. The agricultural sector in Mexico has been going through a strong structural transformation after the trade agreement with the US and Canada, NAFTA. Since then, Mexico has opened up and we have been going through a sharp change in the composition of our output. That is reflected in a strong and continuous growth in exports not only to the US and Canada, but to the world. Since NAFTA, we have been able to diversify our trading partners and that means Mexico has broadened and strengthened its production.

What challenges face producers in this sector?

We have challenges from the structure of our agricultural and rural sector and also challenges from the financial markets. Before the revolution, in the beginning of the 20th century there was a major change in the holding of land and it was concentrated in a few hands that were mostly idle. After the revolution, there was a sharing of those lands to small producers, which helps explain the high growth of 6% per year during the 20th century. Today, structuring land in small holdings has been a factor in limiting the economics of scale that agribusiness needs. Therefore, we have been working with what we have to generate those economies of scale, either by working with producers in cooperatives or associating them with larger industries that know the market and work and compete in the international markets. That is the way of being able to get these small producers the economies of scales they need to compete.

Mexico is the third-largest berry producer in the world. What is behind the growth of that sector over the last 20 years?

We have a tradition of producing berries, especially in Michoacán. We knew this product could be grown successfully in Mexico. When we opened to the world market, in the case of berries, consumers wanted fresh berries and the largest market for berries is the US. Large trading companies recognized the potential in Mexico and began coming here, financing some producers, to set up production. We are now reaching a different stage. The lands that were initially identified as ideal for activities were in Michoacán and parts of Jalisco are getting expensive. Most of these international trading companies are reaching the lending limit for producers, which is where FIRA enters. We can help finance producers so they can set up plantations with a contract of buying from a trading company and a contract of retention so that they retain payments to the financial intermediaries. I have seen some financial intermediaries getting into these activities after recognizing the potential of vegetables and livestock in Mexico, and the amount of lending to the agricultural value chain is starting to come from the largest banks in Mexico. The medium-sized banks started after the crisis; however, large banks have been participating in this sector only in the last three years. Some banks have set up special units for the agricultural sector. We are seeing the dawn of a strong increase in financing for the agricultural sector.