Poverty alleviation potential of speculation crops and remittance flows in Mexico

Abstract

Agricultural growth and poverty reduction are not necessarily interconnected. Productivity increase can be fueled by few powerful organizations leaving aside large number of ostracized smallholders who do not participate in global production-market channels (characterized by economies of scale, capital accumulation and globalized market diversification). The choice of agricultural products that provide the best combination of income level and long term stability is a key decision. This is especially important for marginalized population that lack of a geographically spread product portfolio that could offset potential price volatilities as well as production variation. The study analyzes the impact on poverty reduction of four strategic traditional agricultural products produced in Mexico (corn, beans, chili pepper and tomato). Thirty two Mexican states have been included in the study within the span of 10 years. The work takes into account influences of macroeconomic character and concludes that commercial crops with a speculation potential, for instance tomato, may have been a better choice for the small scale producers than subsistence crops, as they seem to have a statistically important impact on poverty reduction. As to the other variables studied, remittances show to be another crucial factor for poverty reduction. These are essential for Mexican rural smallholders due to family interconnections with U.S. labour markets.