Getting the Price Right: Maize Production in Mexico After Market Liberalisation

Alan David Schlachter, Carleton University, September 2001

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Abstract

The liberalization of the maize economy through NAFTA eliminated Mexico's guaranteed prices for maize and was expected to result in the reallocation of productive resources away from maize and into other crops in which Mexico had a comparative advantage. This research essay explores the observation that in spite of the lower world price being adopted and a corresponding loss of profitability, the amount of land area allocated to maize production has not been reduced. Commercial and subsistence decision-making frameworks are presented that provide the basis for a qualitative analysis of this observed response. The essay concludes that commercial producers reallocated land to other crops but their withdrawal was compensated by a corresponding increase in land allocated to maize production by subsistence producers.