Government Subsidies: Mexico’s Advantage Leads to Increased Imports

Clint Thompson Exports/Imports, Florida, Georgia, Top Posts

By Clint Thompson

One of the key factors in Southeast producers’ fight against increased imports are subsidies. Growers and industry leaders have said for years that the Mexican government provides subsidies to its producers.

Farmers can afford to sell their produce at low prices or literally dump them in the U.S. if they are supported financially.

University of Florida Associate Professor Zhengfei Guan describes the impact that a subsidy can have on Mexico’s farming operations.

“The government is giving out money to growers to reduce their cost of production, for example, to pay for costs of greenhouses. Growers can get up to 50% of the greenhouse investment,” Guan said. “Like for one project, the grower could get up to 200,000 U.S. dollars. That’s the subsidy amount they could get. That’s a huge amount of money.”

In return, the subsidies lead to more products being exported to the U.S. and Mexico’s vegetable and fruit industry having a larger market share in the U.S.

“Actually, they are now a market power in the fruit and vegetable market,” Guan said. “Even if Mexico stopped subsidizing now, it would still have an impact.”

Subsidy Background

From 2006 to 2016, the average annual budget for subsidies was 59.2 billion pesos or $4.5 billion dollars. Protected agriculture is one of the subsidy programs. The government subsidizes 50% of the costs of protected structures like macro-tunnels, shade houses, anti-hail mesh and greenhouses.

Mexico’s protected acreage has increased dramatically over the previous two decades. Guan said protected acres increased from 300 hectares in 2001 to 54,000 in 2019. Subsidies have helped imports from Mexico increase substantially over the last 20 years.

Strawberry imports from Mexico were one-third the total production in Florida in 2000. However, in 2019, Mexican imports were two times higher than Florida’s production.

After being non-existent before 2009, imports of blueberries totaled more than 90 million pounds in 2019, compared to Florida’s 24 million pounds. And in tomatoes, Florida production was 20% higher than Mexico in 2000. But imports are now five times higher than Florida’s production.

Imports have also factored in low prices for other crops like bell peppers and cucumbers.

“The increase in imports will reduce Florida growers’ market share and depress market prices for them,” Guan said.