Government Intervention
The Mexican government owns a considerable percentage of the Mexican sugar industry—an industry it helps support by blocking imports, boosting domestic prices, and providing lucrative financing options.
Nearly half of the nation's sugar mills are owned by the Mexican government. Mexico expropriated these mills as part of a massive loan forgiveness program and uses its ownership to help control the domestic market and domestic prices.
To protect itself from cheap sugar from the world dump market, Mexico levies tariffs of up to 180%.
The government also limits other sweeteners, such as U.S. high fructose corn syrup, from entering the market and grabbing part of the domestic sugar market. Mexican taxes affecting U.S. corn sweeteners were recently ruled illegal by the WTO.
Numerous financing-related subsidies—namely debt restructuring, borrowing concessions, and government-backed financing for mills—also give the Mexicans a leg up on foreign competition.
Production and Price
Mexico produces 5.7 million metric tons of sugar a year, nearly enough to supply its entire market.
Unlike the United States, which imports roughly 1.65 million tons of sugar regardless of need, Mexico only imports only about 200,000 tons a year.
Wholesale sugar prices in Mexico were 28 cents per pound in 2004—a price that is nearly a fourth higher than world average wholesale prices or prices in the United States. Retail sugar prices in Mexico peaked at 41 cents per pound last year.
Trade with America
Mexico is one of the 41 countries from which the United States imports sugar. The United States is forced to accept this sugar whether the market needs it or not.
Under the North American Free Trade Agreement, Mexico can currently send up to 250,000 tons of sugar into the U.S. duty free every year. In 2008, Mexico will have unlimited access to the U.S. market for its subsidized sugar and could send thousands of U.S. sugar farmers to the unemployment line.
The U.S. market is already oversupplied with subsidized foreign sugar, which drives down prices, forces sugar facilities to close, and threatens 146,000 U.S. jobs. Efficient U.S. sugar farmers cannot afford to trade away more of their market to Mexico.
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