Briefing Papers Number 11, January 2011 | Page 4

Table 1: U.S. Assistance to Mexico by Account, FY2009 Total, U.S. $ millions Account FY2009 Child Survival & Health 2.9 Development Assistance 11.2 Economic Support Fund 15.0 Foreign Military Financing International Military Education & Training International Narcotics Control & Law Enforcement Non-proliferation, Anti-terrorism & Related Programs Total 299.0 0.8 454.0 3.9 786.8 Sources: U.S. Department of State, Congressional Budget Justification for Foreign Operations FY2008-FY2011, FY2009 Supplemental Appropriations Act (P.L. 111-32). considered poor and up to 18 percent live in extreme poverty, unable to meet their basic food needs.23 Reducing migration pressures will require development and job creation throughout Mexico, but poverty and international migration are particularly concentrated in the countryside. Although about a quarter of all Mexicans live in rural areas, 60 percent of Mexico’s extreme poor are rural and 44 percent of all of Mexico’s international migration originates in rural communities (see Figure 2).24 This means that more than half of rural Mexicans live in poverty and 25 percent live in extreme poverty.25 As one expert states, “Rural poverty is one … of the principal “pushfactors” in Mexican migration to the United States” and thus should be the primary focus of development efforts aimed at reducing migration pressures.26 After decades of declining support among international assistance agencies,27 agriculture and rural development is now re-emerging as a vital development focus. The World Bank’s 2008 World Development Report states, “Agriculture continues to be a fundamental instrument for sustainable development and poverty reduction.”28 Research has also found that agriculture is one of the best returns on investment in terms of poverty-reduction spending.29 For example, each 1 percent increase in crop productivity in Asia reduces the number of poor people by half a percent. This correlation also holds for middle-income countries such as Mexico.30 Among the options for agricultural development, support for smallholder farmers is the most promising path for poverty reduction. The World Bank states, “Improving the productivity, profitability, and sustainability of smallholder farming is the main pathway out of poverty in using agriculture for development.”31 And smallholder farmers in Mexico are especially in need of assistance. After decades of declining 4  Briefing Paper, December 2010 support from the Mexican government and increased competition from subsidized U.S. producers under the North American Free Trade Agreement (NAFTA), small-Mexican farmers have found it increasingly difficult to make a living. NAFTA and Mexican Small Farmers After defaulting on its foreign debt in August 1982, the Mexican government began a major shift in its development strategy from a protectionist, state-run model that nurtured domestic consumption and industrialization to a more market-based model focused on cutting government spending and encouraging exports, all with the aim of reducing debt, inflation, and currency instability.32 Although the reforms of the 1980s were aimed at stabilizing the economy, the shift in economic model was wrenching for Mexicans. The 1980s saw falling wages, a decline in living standards, job displacement, and lowered prospects for economic mobility The impact on small farmers was particularly harmful. In addition to a reduction in state support, small and mediumsized producers faced the cumulative impact of long-term drought, multiple economic crises, increased competition from U.S. producers, falling agricultural commodity prices and increases in the price of agricultural inputs, and reduced access to credit. Mexico’s rural population decreased from 58 percent in 1950 to 25 percent in 2005. While many of the rural poor migrated to Mexico’s overcrowded cities, others opted for the United States.33 The 1994 North American Free Trade Agreement (NAFTA) was the culmination of the economic liberalization that began in the 1980s. NAFTA was touted as a Mexican job-creFigure 2: Rural Versus Urban Immigration 80 Rural Urban 75% 70 56% 60 50 44% 40 30 25% 20 10 0 Percenta