CAB - Mexico's Distribution Infrastructure for Fresh Deciduous Fruits: Summary and Conclusions

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
Summary and Conclusions

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

Summary

      This study identifies differences in Mexico's distribution infrastructure for deciduous fruits imported from the United States that may have occurred at the end of 1993 and today. One significant event that took place in that time period was the approval of the North American Free Trade Agreement (NAFTA), which went into effect on January 1st, 1994.
      The methodology used to ascertain any differences in the infrastructure was a survey technique. The method included interviewing marketing agents responsible for getting the fresh fruit into Mexico and analyzing secondary data and information collected by the U.S. and Mexican governments, trade associations, and periodicals.
      In order to identify any differences, a base case was created as a point of comparison. The results from a study conducted by Batista and Hagen (1994) was used for this purpose. Batista and Hagen studied Mexico's distribution infrastructure for fresh apples and pears as of late 1993, just before the NAFTA was implemented. Generally speaking, apples and pears require the same handling procedure for exportation as the fruits of interest in this study. Therefore, the study by Batista and Hagen was timely and served as an excellent base from which to make comparisons with the more recent findings.
      A questionnaire was used as a guideline from which to conduct interviews with the study's participants. The questions in the instrument covered nine general aspects about or pertaining to Mexico's distribution infrastructure. Seven of the aspects were identical to the ones Batista and Hagen investigated: mode of transportation, time in transit, cost of transportation, border crossing, trade protocol, quality of fruit, and facilities. The two additional aspects analyzed were infrastructure improvements and the devaluation of the peso.

Conclusions

      The single most noteworthy conclusion is that Mexico's distribution infrastructure for fresh fruits improves directly with the volume of fruit traded. For instance, the industry claimed that a considerable investment in cold-storage capacity occurred over the last year and a half. Not surprisingly, the volume of trade over this period grew substantially. California's table grape industry, for example, shipped 10,757 metric tons to Mexico in 1993 and shipments jumped to 22,589 metric tons in 1994. It would be expected that an infrastructure designed to support trade would receive improvements if it were to support a doubling in the volume of trade.
      It is not clear that NAFTA made a difference in the volume of deciduous fruit traded between the U.S. and Mexico. Part of the reason for this uncertainty is that there has not been enough passage of time or data generated since January 1st, 1994 to analyze a trend, and the devaluation of the Mexican peso on December 21st 1994 caused a dramatic halt to Mexico's importation of fresh fruit. The data suggest the values of exports to Mexico in apples, grapes, and apricots increased as a result of the NAFTA. Plums, pears, and peaches did not appear to realize a significant increase in the value of exports to Mexico after the implementation the NAFTA. However, there may have been other factors besides the devaluation that caused this.
      The results obtained from this study did not, in general, differ much from those discovered by Batista and Hagen. That is, Batista and Hagen (1994) found that "...the single most noteworthy conclusion...is Mexico's infrastructure...has improved substantially (p. 25)." Batista and Hagen attribute the improvements to the growth in the Mexican marketplace. Since then, the Mexican market had continued to grow until late 1994 when Mexico's economy experienced a setback that has lasted through the time of publication. This study found the improvements to and investment in the infrastructure continued through the growth in 1994 and then ceased or slowed when Mexico's economic slowdown started in late 1994.
      The improvements that did occur came from programs supported by both government and private investments into the infrastructure. Partnerships developed in all aspects of the infrastructure. Joint ventures targeted interests in seaports, railways, airports and, most of all, highways. The majority of cargo imported into Mexico enters via trucks on highways.
      The focus of the investment programs was on improving the flow of both cargo and information so as to expedite shipments, border crossings and regulatory protocol. The NAFTA has had a significant impact in these areas by establishing guidelines by which to harmonize the process among the three countries dedicated to the agreement.
      It is the opinion of the authors that the devaluation of the peso relative to the dollar has slowed down trade flows and investments to support those flows, but in no way should the devaluation tarnish the intent of the NAFTA. The NAFTA was designed to support freer and fairer trade among Mexico, Canada and the United States. Mexico's economic hardships should not adversely affect that intent. The economic fundamentals are still there for profitable trade among the three North American trading partners, especially in the trade of fresh deciduous fruits.

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