CAB - Mexico's Distribution Infrastructure for Fresh Deciduous Fruits: Introduction

Research Publications

Mexico's Distribution Infrastructure for Fresh Deciduous Fruits After the North American Free Trade Agreement
by
Dr. Juan C. Batista, Lic. Jose Armando Martinez
and Antonio Soto
Introduction

CATI Publication #960301
© Copyright February 1996, all rights reserved

Statement of Problem

      The North American Free Trade Agreement (NAFTA) went into effect on January 1st, 1994. Proponents of the NAFTA supported the agreement on the grounds of economic development, growth, and prosperity for the three countries involved - Canada, Mexico and the United States, although the discussions in the U.S. focused mainly on trade and impacts between Mexico and the United States. The reasons for this were two: First, the Mexican economy is substantially different and smaller than both the other two economies; and second, the positive impacts from trade were going to be realized mostly in Mexico, again because the Mexican economy is comparatively small.
      As a matter of record, most U.S. supporters of the NAFTA realized that major economic benefits would come from opening the smaller, but growing market south of the border. That is, the NAFTA was touted as beneficial because trade would increase between the United States and Mexico, but it was the expanded exports from the U.S. to Mexico that sold the agreement to American voters.
      However, Batista and Hagen (1994) note that "international trade (between) countries depends, in large part, on each country's transportation and distribution infrastructure, which is designed to support trade. Any deficiencies in one country's infrastructure will most definitely lessen any gains from trade...."
      Batista and Hagen (1994) concluded that prior to the implementation of the NAFTA, Mexico's infrastructure supporting trade in apples and pears was less than adequate to take advantage of a free-trade agreement, and that major improvements were warranted before Mexico and the U.S. would realize the full benefits of a NAFTA. Now that the agreement is in place, the issue of an adequate infrastructure becomes even more important if "freer trade" is to benefit the parties to the agreement. This is especially important to agribusinesses that trade in perishable commodities highly sensitive to handling and transportation techniques.

Purpose and Objectives

      The purpose of this study is to determine if any significant changes occurred to the distribution infrastructure supporting trade between the United States and Mexico since the implementation of NAFTA. Changes are defined, for example, as improved efficiency, added capacity, revised protocols, etc. that accommodate and facilitate additional volumes of trade between the two neighboring countries. In addition, this study attempts to document the extent and impact of any changes if they occurred.
      This study focuses on fresh deciduous fruits. These highly perishable agricultural commodities are a particularly interesting case study because they require more attention and care in transport. In addition, these commodities have realized a substantial increase in trade volume between the U.S. and Mexico and thus represent a commodity group that would benefit from any improvements to the infrastructure.
The specific objectives of this study are to:

Create a "base case" for Mexico's trade infrastructure, which identifies the relevant elements and parameters of the infrastructure prior to the implementation of the NAFTA;
Design a survey instrument to collect information describing Mexico's infrastructure after January 1st, 1994;
Identify "agents" involved in the trade of fresh deciduous fruit between Mexico and the U.S., who include, but are not limited to, brokers, importers, wholesalers, retailers, customs brokers, and transporters;
Administer the survey instrument by mail, phone and/or in person to a sample of agents;
Collect secondary data pertaining to the volume of trade between Mexico and the U.S. and Mexico's infrastructure; and,
Analyze the information and data collected for significant changes in the infrastructure.

Overview

      This study is an extension of a study conducted earlier by Batista and Hagen (1994) that, in short, concluded Mexico's distribution infrastructure for fresh apples and pears was "...inadequate to handle the volume of potential trade generated by (an upcoming)...free trade agreement...," but that significant improvements were under way in anticipation of the NAFTA.
      The collection of fresh fruits in this study is expanded to consider more than apples and pears. Peaches, plums, nectarines, grapes, apples, pears, and apricots are also included in this study. The focus is still on fresh fruits because of the special protocol required for handling these commodities. The export protocol for the fruits mentioned above does not vary significantly; thus the results, both here and in Batista and Hagen (1994), are general enough to transfer and apply across most fresh fruits that require refrigeration in handling between Mexico and the United States.
      The report is organized into four sections. The following one describes Mexico and trade in fresh fruits with the United States. Mexico's distribution and transportation infrastructure is discussed in some detail next. The results from the survey are presented in the section entitled "Empirical Findings," and the study is summarized and concluded in the last section. The methodology used in the study is outlined in Appendix A.

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