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López Obrador’s price guarantee program failing Mexico’s small-scale farmers

An $800 million embezzlement scandal — the biggest in Mexico’s history — is actually secondary to what experts identified as the program’s main problem: its poor design.

MEXICO CITY (CN) — Lucio López Flores has always had his complaints about governmental support of small-scale grain farmers like himself. Costs like tractor rentals, fertilizers, fuel and labor make turning a profit from growing corn an untouchable pipe dream. He has gotten used to just getting by. 

“To be honest, it is difficult to put food on the table,” said López Flores, 53, who recently spoke with Courthouse News during a break from harvesting white corn by hand on a small plot of nearly four acres near Tepetlixpa, Mexico State.

In recent years, he was elated by the hope that the agricultural programs of President Andrés Manuel López Obrador would change that. The month after he took office, López Obrador announced the creation of the state-owned company Segalmex, which aims to “promote the development of small and medium-sized producers,” according to the company’s website.

“Here, [small-scale] producers were abandoned to their own fates,” he said during a press conference to publicize the founding of Segalmex on Jan. 18, 2019. “No more, now there will be support for producers.”

But despite the hope his initiative inspired in the most vulnerable people in Mexico's agricultural sector, many farmers like López Flores feel let down after four years that have not looked very different from those under previous administrations. 

Key to fulfilling that promise was the Segalmex price guarantee program, which, the policy states, is meant to favor “the producers and national regions that have the largest economic deficiencies.”

But López Flores has yet to see his economic situation improve in response to the Segalmex price controls. The costs of consumables like fertilizers and fuel for his truck are so high that he cannot afford to rent a harvester or threshing machine. The corn that he and his son Ricardo, 27, harvest by hand is taken to their home so that the whole family can help to separate the kernel from the cob.

Once the grain is ready to be sold, he will take it to the local Segalmex warehouse where he will be paid just under 7 pesos (US 38 cents) per kilogram. His costs will have run him around 5 pesos (27 cents) of that price, leaving him fewer than 2 pesos (11 cents) of profit per kilo.

“If you do the math, it doesn’t work out,” he said. “It’s enough to get by, but not enough to progress.”

Sitting across the truck bed from him in the rising heat of the morning sun, fellow farmer Crispín López Pérez, 67, agreed: “It’s not profitable.”

A sign at a Segalmex grain warehouse in Mexico State displays the guaranteed price the government is paying for a metric ton of corn in February 2023. Small-scale farmers generally produce around a metric ton or less per hectare, so most tend to speak of the price in kilograms. (Cody Copeland/Courthouse News)

Their concerns represent those of small farmers across the country. 

“Producers here do not see corn as an option for improving their economies, due to the costs of production and the sale price,” said Eloy Mireles, who grows corn in the state of Zacatecas. “The price in the warehouses must be raised.” 

While the fixed price Segalmex warehouses pay for white corn has gone up slightly since 2019, it has not kept pace with rising inflation. It has risen only 24% from the 5.61 pesos per kilo it was paying in October 2019.

Inflation in Mexico, on the other hand, has gone from 3.02% in that month to 7.91% in January, an increase of over 160%, according to Mexico’s central bank. And the financial squeeze has been felt even harder in the agriculture and livestock industries. That sector’s inflation went from 3.82% in October 2019 to 9.93% last month, and saw rates as high as 16.17% in 2022. 

“If the government is going to come in to protect the consumer from rising inflation, it should make and implement policies that compensate small-scale producers so that those costs don’t fall onto them,” said María Leticia López Zepeda, executive director of a rural development organization called ANEC.


A nationwide coalition of farmworker organizations, including ANEC, sent a letter to López Obrador last November expressing their concern over cuts to the government’s guaranteed price in the spring and summer of 2022 and asking him to make changes to the program to protect small farmers.

López Obrador, who signed a document declaring his solidarity with the coalition while on the campaign trail in 2018, has yet to respond to the letter. 

“The idea was that the fixed price would allow producers to have certainty in the sale of their grain, but at fair prices with respect to the market, so as not to fall into the hands of intermediaries,” López Zepeda said.

But that is not what has happened. Courthouse News’ interviews with farmers in the field corroborated this effect of the policy. With the fixed price so low, it ends up being more lucrative for farmers like Mireles and López Flores to sell to private sector intermediaries who pay just two pesos more than the Segalmex price. 

Fresh tortillas roll out of a machine at a stall in a busy Mexico City market. The price of corn tortillas in Mexico has doubled as a result of rising inflation. (Cody Copeland/Courthouse News)

These intermediaries, most notably the Mexican multinational Maseca in the case of corn, can then find much higher prices for the grain in cities. White corn, for example, currently sells for around 12.5 pesos per kilo at the wholesale foods market in Mexico City, just over an hour’s drive from López Flores’ fields near Tepetlixpa. The price of a kilo of tortillas has doubled as a result of rising inflation.

Maseca did not respond to a request for comment.

“Segalmex has been essential in order to raise the price that producers received before the arrival of Andrés Manuel López Obrador to the presidency,” said José Jacobo Fermat, national president of the Center for Farmworker and Popular Organizations (COCYP), also part of the coalition that wrote the president in November. “But as economic policy, it is insufficient to guarantee that what is currently being paid covers the producers’ investment costs.”

In the polarized and personality-based climate of Mexican politics today, alliances run deep. The directors of the national farmworkers’ coalition, as well as the farmers interviewed by Courthouse News, expressed a refrain common among supporters of the president: that transforming a country like Mexico is not going to happen overnight and that López Obrador is doing his best to root out the bad apples in his government. 

Quite a few of those rotten apples are in the Segalmex basket. This month, federal auditors announced they had found “irregularities” totaling over 15 billion pesos (US $816 million) in the company and its distribution subsidiaries Diconsa and Liconsa since 2019.

That number more than doubles the previous record for government embezzlement in Mexico: the so-called “Master Fraud” during the administration of López Obrador’s predecessor, President Enrique Peña Nieto. That scandal saw 7.6 billion pesos ($410 million) disappear from government coffers through 128 shell companies created by public servants.

The record-breaking embezzlement, however, is not even the main problem at Segalmex, according to Gustavo Gordillo, a policy consultant who is researching the price guarantee program for the Latin American Center for Rural Development.

While most of the corn Mexico produces comes from industrial farms in northern states like Sonora, corn in the south of Mexico is more commonly grown on small plots such as this family-run farm in the mountains of the southern state of Puebla. (Cody Copeland/Courthouse News)

“There is an issue of corruption, yes, but there is also an issue of poor design, and the second one, to me, is more important,” said Gordillo, who has worked in Mexico’s agricultural secretariat and the Food and Agriculture Organization of the United Nations during his career. 

“The corruption is serious, obviously, but the other is serious because it damages the promise that the government made,” he said. “It wrapped itself in the assurance that it would provide better incomes for small-scale farmers, and they haven’t kept that promise.”


One of the main issues Gordillo pointed to is the low number of beneficiaries the program reaches. Of Mexico’s estimated 2 million small-scale grain farmers, only around 67,000 are registered under the price guarantee program. 

The program's budget has nearly doubled from its 2019 amount to just under 12 billion pesos in 2023. While much of its budget has surely been prey to the embezzlement that is being investigated, there are also significant disparities in how the funds that reach beneficiaries are disbursed. 

Nearly a quarter of the money that makes its way to beneficiaries goes to just tenth of that group.

“The price guarantee program reaches very few people, and of those few, those who have more money receive more of the benefits,” Gordillo said. 

López Flores, the corn farmer, used a local idiom to describe the situation: “He who has more saliva eats more pinole,” he said, referring to a pre-Hispanic sweetened corn flour commonly eaten in rural Mexico. 

Another agricultural program that is working, according to Gordillo, is a direct subsidy payment program for small and medium-scale farmers. Like the government's direct benefit payments to senior citizens, it is having a positive effect, he said. 

But, like the president's tree planting initiative that has been shown to drive deforestation rather than curb it, the Segalmex price guarantee program is failing as predictably as similar initiatives that Gordillo saw miss the mark during his service under previous administrations. 

“There was a time when price guarantees were welcomed by small-scale farmers, but that’s a total myth,” he said. “Price guarantees were good for the richest, for the biggest farmers. Really, very good.”

This myth is why the price guarantee program was implemented, despite his advice against it in consultations with members of López Obrador’s government at the beginning of his term. They told him that the people’s faith in the president would make the program a success. 

Crispín López Pérez (left) and Ricardo López Rosales chat during a break from harvesting corn in Mexico State in February 2023. López Pérez, 67, complained of dental and health problems for which he blamed the fertilizers and other chemicals he uses to get as much as possible out of his fields. (Cody Copeland/Courthouse News)

“López Obrador won the war of symbols,” Gordillo said. “He does not want to live in the presidential residence, he takes his own car, he flies commercial, he’s honest — that’s the symbol. And it’s a strong one.”

Indeed, even those whom the president’s programs are clearly failing still want to hold to the idea that his policies will finally tip Mexico’s economic scales in their favor. López Flores and his companions also commented on how Mexico will not be rebuilt in a day, citing malfeasants who hinder the president in his quest to transform Mexico. 

Meanwhile, they work seven days a week most weeks just to keep their families fed. 

“Here, we’re born to work, and we’ll kick the bucket working,” said López Pérez, who blamed the loss of some of his teeth on the fertilizers they use in order to make their small plots produce as much as possible. 

Health problems from exposure to agricultural chemicals is common among small-scale farmers in Mexico, according to Mercedes López, a sociologist with the campaign No Country Without Corn. Access to health care is also a problem in rural Mexico.

“Here we tell each other, ‘Don’t cut yourself, because there’s no health insurance with this job,’” said López Flores.

For these reasons, López of No Country Without Corn also considers the price guarantee program a failure.

“There needs to be a transformation and a comprehensive system of trade so that they can raise those prices and return dignity to the work of the people who feed us and who live in the worse poverty, with more health problems and less access to healthy foods,” she said. 

Several attempts to reach someone at Segalmex by phone culminated in a hang-up. The office of the president did not respond to requests for comment or interviews.

Four years into López Obrador’s term, farmers like López Flores may be starting to question the president’s dedication to his promise to come through for rural Mexico. 

“We’re not seeing enough from AMLO,” he said, referring to the president as he's colloquially known. “No one ever sees consequences for what they do. They can convince us that they’ll support us, but that doesn’t mean that they’re going to do what they said they’d do.”

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