VZCZCXRO3107
PP RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #1258/01 0712221
ZNR UUUUU ZZH
P 122221Z MAR 07
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC PRIORITY 5779
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEHRC/DEPT OF AGRICULTURE WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY

UNCLAS SECTION 01 OF 03 MEXICO 001258 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR WHA/MEX 
DEPARTMENT PASS USTR FOR MELLE/VETTER 
USDA FOR FAS/ONA 
 
E.O. 12958: N/A 
TAGS: EAGR ECON SENV MX
SUBJECT: CALDERON ANNOUNCES INCREASED FARM ASSISTANCE TO 
SMOOTH NAFTA TRANSITION 
 
 
¶1. (U) This message is based on Global Agriculture 
Information Network Report Number MX7016 from Embassy Mexico 
City's Foreign Agricultural Service Section. 
 
Summary 
------- 
 
¶2. (U) Last week the Calderon administration rolled out a 
number of agricultural/rural development initiatives in a 
five-day media blitz dubbed "Countryside Week."  Calderon 
announced the continuation of several existing agricultural 
programs, including PROCAMPO (which channels direct payments 
to producers), as well as the creation of new ones, including 
an initiative to re-vitalize Mexico's forestry sector.  These 
activities are all captured under the umbrella of the 
Concurrent Special Program (PEC), and Calderon's proposed 
spending levels would make the 2007 PEC the largest 
allocation of federal funds for rural development in the 
history of Mexico.  In addition to the PEC programs, Calderon 
also announced an unfunded initiative aimed at boosting 
competitiveness in the four sectors (corn, dry beans, sugar 
cane, and milk) scheduled to be opened in January 2008, when 
Mexico implements its final NAFTA obligations. 
 
Funded Programs 
--------------- 
 
¶3. (U) The PEC is an umbrella funding mechanism for all GOM 
activities aimed at increasing agricultural production, 
stimulating rural economies, and improving rural livelihoods. 
 Annual PEC funding levels are renegotiated and voted upon 
annually by Mexico's Congress -- this year it will receive 
USD 16.3 billion, 15 percent higher than 2006 and the largest 
allocation of federal funds for rural development in the 
history of the Republic.  PEC funds are administered by the 
Intersecretarial Commission for Sustainable Development and 
are distributed among a diverse set of programs run by 
different GOM Secretariats (equivalent to USG Departments). 
According to the GOM, PEC programs reach 90 percent of 
Mexico's municipalities and directly benefit one out of every 
four Mexicans.  The major programs highlighted during 
Calderon's "Countryside Week" include: 
 
-- PROCAMPO: This is a system of direct payments to producers 
based on historic levels of area planted.  The program is 
primarily focused on growers of basic grains and oilseeds. 
PROCAMPO was initiated in 1994 and was to have expired in 
¶2008.  However, the Calderon administration decided to renew 
the program through 2012, a great relief to the 2.8 million 
farmers who are registered under the program.  The GOM 
announced PROCAMPO funding levels of USD 1.5 billion in 2007, 
a seven percent increase over 2006.  Furthermore, the 
administration also pledged to allocate USD 4.6 billion to 
PROCAMPO over the next two and a half years. 
 
-- Emergency Plan: The Emergency Plan offers financial 
support, through a number of mechanisms, for producers of 
corn, beans, sugar cane, milk, and other sensitive 
agricultural items.  This plan was designed in direct 
response to the impending opening of North American markets 
for these products under the NAFTA, and will receive USD 1.1 
billion in funding in 2007. 
 
-- Highway Infrastructure: PEC funds will be allocated for 
the enlargement and improvement of roads and highways to 
facilitate the transport of agricultural products and reduce 
operational costs.  PEC funds will also allow for the 
implementation of the "Rural Roads" program, which is 
designed to assist farmers access both urban markets and 
international ports. 
 
-- Agricultural and Livestock Census: The GOM has proposed 
roughly USD 148 million for a comprehensive census of labor 
and production capacity in the Mexican countryside for use in 
the further elaboration of farm policy. 
 
-- Strengthening of the Land Fund: The GOM will create a fund 
for the enforcement of property rights, as well as investment 
in the countryside.  Funds for the acquisition of diesel fuel 
are also included in this program. 
 
-- Pro-Trees: Calderon also announced the creation of a new 
PEC initiative to promote the transformation of the forestry 
 
MEXICO 00001258  002 OF 003 
 
 
sector.  USD 556 million will be invested in reforesting 
unproductive areas and developing aquifers.  The program will 
focus on conservation and restoration, planning and forest 
organization, productivity, and infrastructure development. 
Pro-Trees will be directed toward Mexico's poorest regions 
and will partially support nearly 400,000 people. 
 
-- Fisheries Development: Another announcement the President 
made was to create a new fisheries program to arrest the 
decline that industry has suffered over many years due in 
part to lack of government support, inappropriate 
regulations, and obsolete infrastructure.  The GOM will 
allocate, through the PEC, USD 120 million toward the 
provision of banking and credit services, improving the 
efficiency of the fisheries sector, promoting infrastructure 
investment, and strengthening the enforcement of the 
regulatory framework. 
 
Plan to Increase Competitiveness for NAFTA Crops 
--------------------------------------------- --- 
 
¶4. (U) In addition to the PEC, the GOM also used the 
"Countryside Week" to announce "Actions to Promote Corn, Dry 
Beans, Sugar Cane, and Milk Competitiveness 2007-2012."  This 
is not a funded program.  Rather, its activities are already 
being implemented under an array of existing federal 
initiatives, including PROCAMPO and other PEC-funded 
programs.  But the announcement did give the Calderon 
administration a chance to articulate its goals for these 
sensitive commodities (all of which will be finally and fully 
liberalized to U.S. and Canadian imports at the start of 2008 
pursuant to NAFTA's agricultural chapter) and draw attention 
to the government support (approximately USD 1.7 billion) 
already being directed to raising total production and 
productivity levels for these commodities.  In each case, the 
Calderon administration highlighted how these ongoing 
activities are helping to strengthen farmer organizations, 
sustainably increase productivity, create safety nets for 
producers, and expand access to credit.  For corn, the GOM is 
shooting to raise average yields from the current 2.8 tons 
per hectare to 3.5-5.0 tons per hectare, and raise total 
production from 21 million metric tons to 26-30 MMT.  Some 
progress is certainly attainable, but with average annual 
corn consumption in Mexico already around 31 MMT, and given 
Mexico's ethanol production ambitions and its growing 
livestock and poultry industry, consumption is likely to grow 
considerably.  That means that, even in the unlikely event 
that Mexico reaches the upper-range target of 30 MMT, it 
would still be a net importer and thus somewhat vulnerable to 
international prices.  For dried beans, efforts aimed at 
increased production could result in a significant surplus, 
since consumption of dried beans continues to fall in Mexico. 
 Mexico is net importer of both sugar and milk.  If the GOM 
production targets for those two commodities were reached, 
Mexico might become a net sugar exporter but would still be a 
net importer of dairy products. 
 
Comment 
------- 
 
¶5. (SBU) The "Countryside Week" announcements were all 
somewhat vague, with funding levels for specific activities 
under the various PEC programs still to be determined. 
Furthermore, they included little focus on more systemic 
problems like small plot sizes that hinder the application of 
technology.  The announcements have been met with mixed 
initial reviews by the agricultural sector.  Though many 
producers were pleased that current support programs would 
remain in place, a number of farmer groups expressed dismay 
that the GOM had not consulted with the agricultural 
community when formulating these policies.  In addition, some 
in Congress noted that the administration had increased 
proposed expenditures over its own budget request.  With many 
of the details still not filled in, there will undoubtedly be 
some bargaining among interested parties.  Perhaps what is 
more significant is that the GOM is focusing with renewed 
vigor on the lagging competitiveness of much of Mexico's 
agricultural sector.  Whether or not the production goals are 
reachable, Calderon is using both the bully pulpit of his 
office and the federal purse to let Mexico's farmers know 
that he cares about their anxieties and that his government 
will intends to make extra efforts to dampen the transition 
pains to free trade.  Intent as he is on honoring Mexico's 
 
MEXICO 00001258  003 OF 003 
 
 
final NAFTA commitments without having to pay too great a 
political price, this seems a prudent message to send. 
 
 
Visit Mexico City's Classified Web Site at 
http://www.state.sgov.gov/p/wha/mexicocity 
GARZA