Trends in Mexico’s avocado-growing industry

 Mexico's geography in the Press, Updates to Geo-Mexico  Comments Off on Trends in Mexico’s avocado-growing industry
Apr 212016
 

Mexico is by far the world’s largest producer, consumer and exporter of avocados. Production topped 1.3 million metric tons last year, well ahead of the USA (240,000 tons) and Chile (205,000 tons). Mexico’s avocado exports have risen by a staggering 414% over the past eight years to more than 600,000 metric tons in 2015, worth close to US$2 billion.

logo_brands_avocados-from-mexicoThe state of Michoacán is by far the most important single state in Mexico for avocado farms and accounts for 8 out of very 10 avocados sold in the USA, according to the Association of Avocado Producers, Packers and Exporters of Michoacán (APEAM). APEAM says that more than 50% of all the avocados consumed in the world come from Michoacán. In the town of Tancítaro, one of the main centers for avocado-growing, APEAM estimates that nine out of every 10 pesos can be traced back to avocado production. Mexico’s avocado industry employs more than 300,000 people in total, 100,000 directly and over 200,000 indirectly.

Many avocado farms are quite small. Mexico has more than 12,000 avocado producers with individual farms under five hectares in size. As noted in this previous post, the clearance of land for avocado cultivation can barely keep up with the ever-increasing demand.

Problems with drug cartel activity continue. As we noted a few years ago, narcos insist on their cut of the profitable avocado business and have made life difficult for growers, traders and truck drivers. The Wall Street Journal has reported that this makes Michoacán avocados the equivalent of African blood diamonds. Avocado producers reportedly have to pay cartels up to 1,000 pesos (US$60) a hectare to avoid problems.

Cartels aside, export success looks set to continue for a while longer, since China and South Korea have now opened their markets to receive Michoacán avocados.

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Mexico’s berry exports now exceed a billion dollars a year

 Mexico's geography in the Press  Comments Off on Mexico’s berry exports now exceed a billion dollars a year
Mar 152016
 

Berry production is one of the most dynamic segments of Mexico’s buoyant agricultural sector, and exports of berries (strawberries, raspberries, blackberries and blueberries) in 2015 totaled 1.1 billion dollars, according to preliminary figures.

Last year, 99.6% of all U.S. imports of fresh strawberries came from Mexico and 27% of all imported raspberries, blackberries and blueberries. Berry-growing, concentrated in Baja California, Jalisco, Michoacán, Guanajuato and Puebla, occupies around 25,000 hectares of farmland nationwide and provides 120,000 permanent jobs.

Postage stamp, strawberry exports

Postage stamp, strawberry exports

Strawberries were introduced from the USA to Mexico in the 1850s. Major commercialization of strawberries began after the second world war, following the construction of Mexico’s first freezing plant for berries. The two major strawberry-growing states today are Guanajuato (around Irapuato, “Mexico’s strawberry capital”) and Michoacán, where the cultivation of strawberries is concentrated around the city of Zamora.

Mexico has also begun exporting berries to China, a market with massive potential for future growth.

Berry farming has significantly changed the agricultural landscape of some areas. For example, sugarcane fields around Los Reyes, Michoacán, have been converted to blackberries over the past 15 years, and now supply 96% of Mexico’s total production of that fruit.

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Geo-Mexico has many other agriculture-related posts (easily found via our tag system). They include posts about the geography of growing/producing Christmas trees, cacao, honey, sugarcane, coffee, chiles, floriculture, tomatoes, tequila, horticultural crops and oranges.

We also have an index page dedicated to agriculture:

Feb 042016
 

Remittances sent home by Mexican migrants (almost all of them residing in the USA) rose to $24.8 billion last year, up 4.75% compared to 2014.

The average remittance sent to Mexico in 2015 was $292.00, a slight decline. Almost all remittances (97%) are now sent via electronic transfer.

Figure 1 of Pew Report

Figure 1 of Pew Report. Shaded area is period of recession.

Low oil prices have led to a sharp decline in the value of Mexico’s oil exports. Oil revenues last year totaled $23.4 billion, which means that remittances now exceed oil revenues as a source of foreign exchange. Before the implementation of NAFTA in 1994, oil revenues accounted for around 80% of all Mexico’s foreign exchange. In 2015, that figure was less than 20%, showing the degree of economic diversification that has been achieved post-NAFTA.

The value of oil exports in 2015 was also significantly lower than the value of manufactured goods exports, or the value of agricultural exports.

Want to learn more about remittances?

Is the Mexico-USA tuna war finally over?

 Mexico's geography in the Press  Comments Off on Is the Mexico-USA tuna war finally over?
Jan 042016
 

The World Trade Organization (WTO) issued a final ruling at the end of 2015 favoring Mexico in its long-running trade dispute with the U.S. over the labeling of tuna products. The acrimonious dispute began, more than 20 years ago, because the USA refused to allow Mexican fishermen to use the coveted “dolphin‑safe” label.  The “dolphin safe” labels certify that tuna fishing is in compliance with the International Dolphin Protection Program.

The USA is the world’s largest importer of tuna, imported tuna worth more than one billion dollars in 2014, only 2.1% of which (about 20,000 metric tons) came from Mexico.

Dolphin-safe-logoWhen the dispute began, there is no doubt that Mexican fishermen were catching many dolphins as by-catch. Part of the conflict revolved around the very different methods of fishing employed in the two countries. USA tuna fishermen use long‑line fishing in which every species hooked is killed. Mexican tuna fishermen, on the other hand, use the encirclement method which involves locating tuna by tracking the dolphins that swim with the tuna schools. Large nets are then employed. Any dolphins trapped in the nets are released by hand and returned (alive) to the ocean.

Mexico has introduced far more stringent restrictions on tuna fishing methods since the dispute began, including professional observers on every ship to record each tuna catch; conservation measures over the past two decades have reduced dolphin by-catch by 99%. Mexican fishing methods are now recognized as fully sustainable by the U.N. Food and Agriculture Organization.

Mexico is one of the world’s ten leading tuna producers. Mexico’s tuna catch (mainly yellowfin tuna) rose to 166,000 metric tons in 2013. Domestic demand exceeds 190,000 metric tons a year, so Mexico currently has to import some tuna.

Mexico’s leading producer of canned tuna for the domestic market, worth close to a billion dollars a year, is Pinsa Comercial. Its three main brands – Dolores, El Dorado and Mazatún – account for more than half of the local market. Consumption of tuna has been rising steadily in Mexico, and Pinsa has introduced various new presentations of canned tuna in order to boost it still further from its current level of around eight cans/person/year. Pinsa is a vertically-integrated firm with its own fleet of tuna boats and freezing plants. (The firm also has Mexico’s largest fishing fleet for sardines, used to make fish flour, sold to agricultural and pharmaceutical industries.)

Mexico’s tuna fishing quota, set by the Inter-American Tropical Tuna Fishing Commission, is about 35% higher than its current annual catch. Modernizing the tuna fleet is one way to raise catches and reduce tuna imports.

About 20,000 families in Mexico depend on tuna fishing for their livelihood. This figure includes not only fishermen but also those working in associated processing and packing plants. Mexico’s 130-vessel tuna fleet is the largest in Latin America.

The WTO ruling means that Mexico may now seek compensation for its trade losses.

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Mexico continues to be the world’s leading exporter of beer

 Mexico's geography in the Press  Comments Off on Mexico continues to be the world’s leading exporter of beer
Jan 012016
 

For the fifth year in a row, Mexico was the world’s leading exporter of beer in 2014. The final tally shows that Mexico exported 1,700 million liters of beer in 2014, worth 1.6 billion dollars. (Export figures for 2015 are not yet available but will show that Mexico remains well in the lead over Belgium and the Netherlands)

Cuauhtemoc Moctezuma brewery in Monterrey

Cuauhtemoc Moctezuma brewery in Monterrey. Photo: Tony Burton.

Mexico is the world’s sixth largest producer of beer and is predicted to leapfrog Germany and Russia this year (2016) into fourth place, behind only China, the U.S. and Brazil. Significant investments during 2015 have raised national production capacity 39% to 125 million hectoliters.

The two largest beer producers are Grupo Modelo and Cuauhtémoc Moctezuma (formerly Femsa). Grupo Modelo is building a new 310-milion-dollar brewery in the state of Yucatán and also expanding its breweries in Zacatecas and Coahuila. Cuauhtémoc Moctezuma is building a new 450-million-dollar facility in Chihuahua. A third brewer, Constellation Brands, is undertaking a 500-million-dollar expansion to its Piedras Negras plant in Coahuila, which will triple its annual production to 30 million hectoliters by 2017.

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The geography of Mexico’s beer industry

 Maps, Other  Comments Off on The geography of Mexico’s beer industry
Jan 292015
 

In a previous post – The emergence of two major beer-makers in Mexico – we looked at how Mexico’s beer industry came to be dominated by two large players: Femsa and Modelo, both now owned by foreign corporations.

The map below shows the location and date of inauguration of all major breweries in Mexico.

The location and inauguration dates of Femsa and Modelo breweries in Mexico

The location and inauguration dates of Femsa and Modelo breweries in Mexico

How large is Mexico’s market for beer?

A 2010 report from the national beer industry claims that the average annual consumption of beer in Mexico is 60 liters per adult, a figure that has not changed significantly in the last 20 years. The equivalent figure in Germany is 120 liters a person, so there is still considerable potential for growth. Mexico’s breweries provide about 80,000 jobs directly and a further 800,000 indirectly.

Total beer sales each year are worth as much as 20 billion dollars. The value of sales has risen sharply, at about 5% a year, due mainly to higher exports. Mexico has become the world’s second largest beer exporter, after the Netherlands, and is the world’s sixth largest producer and consumer of beer, brewing over 8.6 billion liters a year.

The USA is the main export market. Five of the 25 most popular brands in the USA are Grupo Modelo beers: Corona, Modelo Especial, Corona Light, Pacífico and Negra Modelo. This has helped Grupo Modelo, Mexico’s leading brewer, become the world’s sixth largest brewer. Modelo’s Corona beer has been the #1 imported beer in the USA since 1997. It is one of the world’s top five beers in terms of sales, even though it is not especially popular in Mexico!

One of Modelo’s fastest growing export markets is China, where it has rapidly become the second most popular imported beer. In Mexico’s domestic beer market, Modelo and Femsa face increased competition from imported beers such as Budweiser, Miller and Heineken.

There are several other smaller breweries in addition to those owned by Femsa and Modelo. One significant trend, echoing other regions in North America, has been a marked upswing in the number of small, specialist, boutique breweries, such as Cervecería San Angel and the Santa Fe Beer Company in Mexico City and Minerva Brewery in Guadalajara. Other popular brands of craft beer include Perro Negro from Guadalajara, Insurgente from Tijuana, Libertadores from Michoacán and the varied products of the Baja Brewing Company from Los Cabos.

These smaller “craft” breweries produced 10.5 million liters of beer in 2014, according to the Mexican Beer Makers Association (Asociación de Cerveceros de la República Mexicana, Acermex), and account for only 0.16% of the total market, but their share of the market is growing at more than 40% a year. The association hopes that smaller breweries can enjoy as much as 1% of the market by 2016.

The rise of craft beers has seen a corresponding proliferation of specialist pubs that stock pale ales, pilsners, porters, stouts and wheat beers in the trendier districts of all the major cities, including Mexico City, Guadalajara, Monterrey and Querétaro.

In Guadalajara, in 2008, two local craft breweries – Cerveceria Minerva and  Cerveceria Revolución – co-founded the Guadalajara Beer Festival to showcase Mexican their products and introduce previously unavailable European import brands. The festival is now a three day event that attracts as many as 30,000 visitors a year; it claims to be Latin America’s largest beer festival.

Mexico’s economic geography is analyzed in chapters 14–20 of Geo-Mexico: the geography and dynamics of modern Mexico. Buy your copy of this invaluable reference guide today!

Mexico’s vehicle industry

 Teaching ideas, Updates to Geo-Mexico  Comments Off on Mexico’s vehicle industry
Dec 272014
 

Mexico is one of the world’s “Top Ten” countries for vehicle production and for vehicle exports. In 2014, it has overtaken Brazil to become the world’s 7th largest vehicle producer and fourth largest exporter. 80% of Mexico’s production of around 3.3 million vehicles in 2014 were made for export. The trade surplus generated by the automotive sector exceeded 47 billion dollars in 2014.

auto-exports-forbes

Mexico’s vehicle exports in 2014. Credit: Forbes, México.

The industry attracts large amounts of Foreign Direct Investment (FDI). Vehicle assembly plants provide around 65,000 jobs, with a further 85,000 employed in distributorships nationwide and a whopping 450,000 employed in the autoparts sector.

The autoparts sector along produces items worth $80 billion/year, but Mexico also has to import components made elsewhere worth a further $35 billion. Clearly, this offers some opportunities for additional investment aimed at import substitution. Most of the opportunities are likely to be for Tier 2 companies. It is customary to divide the autoparts sector into three distinct parts: OEM, Tier 1 and Tier 2. OEM (Original equipment manufacturer) refers to companies that make a final product for the consumer marketplace (eg Volkswagen). Tier 1 companies are direct suppliers of components to OEMs, and Tier 2 companies are the key suppliers of parts or raw materials to Tier 1 suppliers.

Total production in 2014 topped the 3 million barrier, and the Mexican Automotive Industry Association (AMIA) believes production could reach 4 million units by 2015 and 5 million by 2020.According to  AMIA, the best selling models on the domestic market are the Aveo (GM), Jetta (VW), Versa and Tsuru (both Nissan).

There are about 30 vehicle assembly plants in Mexico, manufacturing many brands of cars and trucks (see map). In addition, there are 1200 firms specializing in making parts for vehicles.

Vehicle manufacturing firms that have announced or confirmed major new investments during 2014 include:

  • Chrysler – 1.25 billion dollars to expand its assembly plant in Saltillo and manufacture a new line of Tigershark engines.
  • Nissan – to open its second plant in Aguascalientes.
  • Mazda – an additional 120 million dollars for its plant in Salamanca (Guanajuato), where it will manufacture several Mazda models as well as one Toyota model.
  • GM – investments worth 690 million dollars, divided  between its plants in Silao (Guanajuato), San Luis Potosí and Toluca (State of México).
  • Audi – about to open a 1.3-billion-dollar plant in San Jose Chiapa, near Puebla.
  • VW – 700 million dollars investment to adapt production lines in Puebla to produce its redesigned Golf hatchback.
  • Kia – plans to build a $1 billion vehicle assembly plant at Pesquería in the state of Nuevo Leon (scheduled to open in 2016) to produce up to 300,000 vehicles a year. The new plant is expected to generate a further 1.5 billion dollars in investment from firms seeking to join Kia’s supply chain.

This map is an updated version of the map we included in Where are Mexico’s vehicle assembly plants located? (2011).

Vehicle assembly plants in Mexico, 2014

Vehicle assembly plants in Mexico, 2014. Credit: Tony Burton/Geo-Mexico; all rights reserved.

As the map shows, certain areas of Mexico have attracted more investment in vehicle assembly plants than other areas. The two largest existing concentrations are focused on Toluca in the State of México, and on Saltillo-Ramos Arizpe in northern Mexico. However, the fastest growing cluster is in the central state of Guanajuato.

Virtual visit to the Chrysler plant in Saltillo (video, no commentary):

For a series of discussion questions related to this map and the vehicle assembly industry, see our earlier post – Where are Mexico’s vehicle assembly plants located?

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Mexico is the world’s leading exporter of beer

 Mexico's geography in the Press, Updates to Geo-Mexico  Comments Off on Mexico is the world’s leading exporter of beer
Nov 262014
 

For the fourth year running, Mexico was the world’s leading beer exporter in 2013, with beer exports reaching a record 2.2 billion dollars, a rise of 4.2% compared to 2012, and well ahead of both the Netherlands ($2.0 billion) and Belgium ($1.6 billion).

cerveza-victoria-bicentenaryMexico has become the leading supplier of beer to the USA and now accounts for almost 50% of that country’s beer imports. It is also the leading supplier to Australia, Chile, Guatemala, Argentina and New Zealand, as well as the third leading supplier to Canada and the fourth largest to China and Japan.

The two major beer producers in Mexico are Grupo Modelo and Cervecería Cuauhtémoc Moctezuma.

The leading export brand is Corona which reaches 180 countries around the world. Over the past decade, Mexico’s beer industry has grown at 2.5%/year and analysts expect this rate to quicken, predicting output will rise from 71 million hectoliters this year to 82 million in 2020.

In the USA, quite a few Mexican beers will be consumed this Thanksgiving Day… Happy Thanksgiving to all!

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What are Mexico’s leading exports?

 Other  Comments Off on What are Mexico’s leading exports?
Nov 032014
 

The table shows the destinations of Mexico’s major export flows, excluding petroleum-related exports, for the first five months of 2014. (All data from Pro-Mexico.) It is no surprise that Mexico’s two main export partners are the USA and Canada, its partners in the North American Free Trade Agreement (NAFTA), but the other countries in the list are far harder to guess, and even most economists would struggle to get them in the right order!

Mexico's leading exports by country, Jan-May 2014 (Pro-Mexico, 2014)

Mexico’s leading exports by country, Jan-May 2014 (Pro-Mexico, 2014)

Spain, on account of its colonial dominance and shared language, has long been a major destination for Mexican exports, whereas China (#4 on the list) is a recent entry, and one that has risen rapidly in importance for a wide variety of products. The other Asian countries on the list of the top 15 export destinations are Japan, India and South Korea.

All the remaining top 15 destinations for Mexican exports are in either Europe or Latin America.

In terms of the items exported, vehicles of various categories clearly lead the way by a wide margin, while various electrical or electronic items (telephones, televisions, computers) are also important. It appears that Japanese consumers must like Mexican pork, since that is Mexico’s leading export to Japan.

And who would have guessed that Mexico also exports significant quantities of iron and steel waste to India, or lead minerals to Italy?

For more details of Mexican exports, and a link to an interactive webpage about Mexico’s foreign trade since 1964, see our previous post Trends in Mexico’s foreign trade and Economic Complexity.

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Oct 232014
 

The online Atlas of Economic Complexity is now interactive, allowing users to choose and combine a large number of variables related to imports, exports, date and country. In the webpage’s own words, it is “a powerful interactive tool that enables users to visualize a country’s total trade, track how these dynamics change over time and explore growth opportunities for more than a hundred countries worldwide.”

What is economic complexity?

A country with a high Economic Complexity has a wide range of complex knowledge capabilities related to productive enterprises. Its economy is likely to produce sophisticated products that require a very wide and diverse set of knowledge capabilities. For example, relatively few countries have the capabilities to produce highly complex chemicals or pharmaceuticals, since their production requires very specialized equipment and very precise measuring instruments. Equally, very few countries have nuclear power stations or space stations, since they lack the range of knowledge capabilities needed to build them. At the other end, a very large number of countries have far less complex economies that are capable of producing simple products (basic foods, mineral ores, lumber, garments, shoes, glass, kitchen utensils, furniture) but not products involving more complicated processes or technology

We first discussed the Atlas in 2012 in How “complex” is the Mexican economy?, when we noted that the Atlas ranked Mexico’s Economic Complexity Index (ECI) as #20 of the 128 countries studied. The interactive nature of the online Atlas has added the opportunity to explore many more trends in trade, generating a range of related, visually-appealing infographics.

In particular, choosing Mexico as the country, the Atlas can answer questions such as:

  • What does Mexico import and export?
  • How has Mexico’s trade evolved over time?
  • What are the drivers of Mexico’s export growth?
  • Which new industries are likely to emerge in Mexico? Which are likely to disappear?
  • What are the GDP growth prospects of Mexico over the next 5-10 years, based on its productive capabilities?

Playing with the variables and dates in the Atlas is a really interesting way to explore just how Mexico’s exports and imports have changed over the years. For example, compare these infographics for Mexico’s exports in 1964 and 2010 respectively:

What_did_Mexico_export_in_1964_

Mexico’s exports in 1964

Mexico's exports in 2010

Mexico’s exports in 2010

It is sometimes hard to imagine just how much Mexico has changed in the past fifty years! Overall, at rank #20, Mexico turns out to have an unusually high Economic Complexity Index given its income level. (All the other countries in the top 20 have significantly higher incomes than Mexico).

According to the Atlas, during the rest of this decade Mexico’s GDP should grow relatively rapidly, bringing its GDP rank more in line with its Economic Complexity Index. In general, analyses in the Atlas indicate that during the last few decades countries with higher than expected ECIs compared to their income levels experience more rapid economic growth.

Note, though, that while this relationship is empirically true, it does not explicitly include other factors thought to be important to economic growth such as governance and institutional quality, corruption, political stability, measures of human capital and competitiveness indicators.

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