Frontera NorteSur, September 1999

Kent Paterson, FNS Guest Columnist

Border Food Fights Heat Up

Millions of Mexicans, almost 100 million according to the latest estimates, represent one of the largest food markets in the world. Bank and debt crises aside, everyone has to eat. It's little wonder then that an intense struggle is raging for the pesos and pallates of Mexicans all the way from the colonias of Ciudad Juárez to the pueblitos of the Yucatan Peninsula. Food, after all, is an almost depression-proof business, somewhat immune from the cyclical buying sprees that characterize the popularity of more expensive, big-ticket consumer items.

In México today, a variety of forces are struggling for the loyalty of the Mexican consumer. The protagonists hail from family-owned, chicken processing companies to foreign-owned ice cream makers. They encompass everything from small tortilla makers to giant supermaket chains. And they draw in the gritty loud vendors at the traditional markets as well as the smoot-talking suited businessmen who communicate in the international commercial lingua franca.

Several trends stand out to explain why the Mexican food market is the scene of such intense activity these days. First, demographic and economic changes are witnessing more women working out of the home and workers of both sexes taking on double shifts, leaving little time for food preparation. Second, liberalized trade policies stemming from the old GATT agreement and NAFTA are opening México's door to foreign products of all kinds. And third, the decapitalization of the Mexican countryside coupled with the persistence of drought in sections of the country is strengthening México's dependence on foreign imports.

A milestone perhaps of sorts was publicized earlier this year by México's National Chamber of the Restaurant and Condiment Indsutry (CANICRAC). In a survey sponsored by the organization, 50 percent of the respondents said they preferred pizza and hamburgers over traditional Mexican foods and 83 percent opted for fast foods in general. Although the news item might have been released with more than a bit of self-interest in mind, Juárez's "Hamburger Row" in the Pronaf district certainly attests to the acceptance of McDonald's and other fast food chains.

According to a recent publication by the United States Department of Agriculture (USDA) "Supermarket chains are expanding in the fast growing towns that have sprung up near urban centers, and most of México's major chains have entered into alliances with U.S. retailing giants . . . in general U.S. products are well regarded in the market because of the perception that the quality is high and that good value is received for the money spent. Today's conscientious Mexican consumers demand high quality and reasonable prices."

While competition rages over food stuffs of all kinds, a look at three products--tortillas, chicken and beef--sheds light on some of the main actors involved in the current trade and market battles. The tortilla, México's staple food and nutritional symbol, was for years made with Mexican white corn and patted into cakes by small shopkeepers and housewives. Beginning several decades ago, a Monterrey-based company, Grupo Industrial Maseca (MASECA) revolutionized the tortilla business by
developing a new method of mass-producing corn flour used in the manufacuture of tortillas. MASECA was so successful, the U.S.-based conglomerate Archer Daniels and Midland struck up a partnership with the company a few years back. Other changes have since swept the tortilla market, such as the introduction of plastic-wrapped, flour tortillas on to supermarket shelves. And recently, a U.S.-based company, Albuquerque Tortillas, has begun making inroads into the Mexican tortilla market. The New Mexico-based manufacturer's products are retailed in Juárez supermarkets for more than they fetch at home.

Corn, the primary product used in making tortillas, likewise highlights the direction of the Mexican food market. Within the past year, reports from Mexican trade associations and government agencies indicate that México will suffer a shortfall of corn production and be forced to import somewhere between 5-5.6 million metric tons of the basic grain in 2000-2001 alone. A time could come in the not-too-distant future when the typical Mexican tortilla is made with U.S.-grown corn and
processed or sold by a U.S.-based company.

If tortillas are the Mexican food par excellence, then chickens are probably not far behind, given the prevalence of rotisseries in Juárez and the rest of México. Sometimes Mexicans will assess their economic well-being by comparing the price of this year's chicken with last year's. David Fernandez, sales manager of Fres-ke-cito, a large broiler and egg producer and processor in the state of Chihuahua, described the changes that have overcome the chicken trade in recent years.

"In the broiler business, the major change is that people used to eat the broiler, the whole bird, and now people are changing for parts-breasts, drumsticks, processing parts like (burgers) and marinated parts," explained Fernandez. "People don't want to eat as much fat as before, so they look for boneless breast meat. That's what the market is changing for, more healthy food."

As in the United States, the Mexican chicken market has been segmented into different products for different economic classes: breasts for the affluent, drumsticks for the poor.

Founded in 1962, Fres-ke-cito faces stiff competition in the lower end of the chicken market from even bigger U.S. processors, whom Fernandez accused of "dumping" large amounts of cheap chicken legs and drumsticks onto the northern Mexican market since the advent of NAFTA. Indeed, USDA recently reported that U.S. poultry exports, primarily chicken and turkey, to México tripled between 1993 and 1999. Members of the Chihuahua Association of Poultry Raisers this year alleged that U.S.firms flooded the market with old meat, raising health concerns.

Under NAFTA rules, said Fernandez, the U.S. was permitted a jump start in the cross-border poultry trade. Ironically, Fernandez held that Fres-ke-cito's future depended in part on the ability of his company to penetrate the U.S. market.

"By the year 2003, hopefully we'll be able to export breast meat to the U.S., which will make it more even, because now we cannot export to the U.S., but the U.S. can export to México," added Fernandez.

Like poultry, the beef business is another sector where sharp struggles are breaking out over market control. During the past decade, some U.S. ranchers have blockaded ports of entry and filed trade challenges alleging Mexican cattlemen with dumping their herds on the U.S. market. More recently, some Mexican meat producers have accused U.S. companies with dumping their products on the Mexican market.

However, the battle lines aren't as simple as they seem. For instance, much of Chihuahua's cattle herd is sent to the U.S. for fattening and slaughter. Backed by a potential capital flow of $4 billion, the Texas Cattle Feeders Association (TCFA) actively solicits business from Chihuahua stock-raisers. The giant TCFA feedlots are supplied by giant grain trains that arrive from the Midwest, ensuring a steady supply of beef for the region's packing plants. Presumably, some of the processed meat is then shipped back to México. According to USDA, sales of U.S. beef, lamb and pork products to México reached $470 million in 1997. Complaints from Mexican meat sellers forced the country's federal government earlier this year to declare provisional duties on six U.S. beef products.

On the other hand, some Mexican meat packers claim they are forced to purchase cattle from the United States because of the lack of available animals in Chihuahua and elsewhere. Fernando Rios, general manager of Empacadora Ganadera in Chihuahua state, said in a recent interview that about half of the 40,000 cattle slaughtered every year in his operation are bought in the U.S. Rios' business sells meat to stores in northern and central México and is a supplier for Burger King. Echoing Fernandez, Rios added that the U.S. export market is being eyed by his company. Empacadora Ganadera's Chihuahua plant is USDA-certified and meat samples are sent to a laboratory every week in México City for bacteria testing. "We can export to the U.S. when we want to," said Rios.

Overall the current trade battles signify a shift away from strictly nationalist disputes pitting North Americans against Mexicans. Because of changes in the economic structures of both nations, the economic contest is best understood by examining the company connections and marketing networks that link one end of the food chain to the other. In the NAFTA economy, corporate lines are often more important than border lines. One classic example occurred in northern Chihuahua early this year when farmers from the Janos and Ascensción regions protested an attempt to drill a new water well by Mexican potato growers working with the Pepsico-owned snack food company Sabritas. Nevertheless, some of the well protestors were chile farmers for the booming U.S. export market who, suddenly, found themselves in conflict over a scarce resource with other Mexican growers connected to their own international production and marketing network.

Whether the commodity is apples or potato chips, tortillas or beef, food is likely to remain a key arena of economic contention in the México of the 21st century.