Mexican Irrigation Boosts Economy (Part 3)
Mexican farmers buying bulk of irrigation equipment from U.S.
By Danielle Supercinski, July 2005
Mexican irrigation technology continues to advance due to its own necessity, resulting in a boost to the U.S. economy from Mexican farmers purchasing irrigation equipment from companies on the U.S. side of the border.
"The (Mexican) economy is highly integrated with the U.S. economy in this regard," said Juan Enciso, Assistant Professor and Extension Irrigation Engineer at the Texas A&M Agricultural Research and Extension Center in Weslaco. "They have big areas of drip and micro-irrigation, and they import several components, like sprinklers, drippers, etc., from U.S. suppliers."
Enciso said Mexican farmers invest in these irrigation systems because land is more expensive in Mexico than in the U.S., so they want to maximize production per unit of water and land.
"At the beginning of NAFTA, they were importing whole systems – pipes, pumps and drippers – because they were tax exempt," Enciso said. "However, they continue importing large amounts of drip tape, accessories, sprinklers, center pivots and drippers. Currently, irrigation components are taxed, but in one or two years, irrigation replacements and parts will also be tax exempt."
For border locations where row crops are grown and furrow irrigation is used, polypipe is an option.
"We saw that polypipe was an option in the Rio Grande region – for Mexico and the U.S. – because big volumes of water are delivered in a short time," Enciso said.
Mexican farmers often come to Texas and the rest of the U.S. to buy irrigation equipment they need that cannot be bought in Mexico, or the U.S. produces higher quality equipment.
"They contribute tremendously because they buy 90 percent of their irrigation and agricultural equipment in the United States," said Tony Hinojosa, Assistant to the President for Latin American Affairs at Texas A&M Kingsville and Extension International Agricultural Specialist. "Even if they buy equipment in Mexico, it’s usually imported from the U.S."
Hinojosa also said more Mexican farmers will be coming to the U.S. and Texas to buy irrigation and agricultural equipment due to the promotion of new techniques. They will need to come to the U.S. to buy new equipment as these new techniques and technologies are introduced to them.
However, things are becoming more complicated.
"American manufacturers want to sell directly," Enciso said. "Before, they used to sell through stores established on the border; of course the big profit was seen by the retailers. Now, manufacturers want bigger profits and they want to skip these retailers."
The U.S. also has more competition with other countries that offer Mexico their services or have established factories in Mexico. Such is the case of several countries like Spain that have established factories of PVC pipe and polyethylene hoses. Therefore, U.S. manufacturers want to have direct presence to compete with these manufacturers from other countries.
"Before NAFTA, Mexican manufacturers of PVC had 100 to 150 percent margins," Enciso said. "After NAFTA their margins shrank to 40 percent, so farmers benefited from NAFTA."
Some sprinkler manufacturers in Mexico produced poor quality sprinklers in the past. Now, with competition from the U.S. and other countries, their quality has greatly improved, which also benefits the farmers.
"People don’t realize how big this trade is," Enciso said. "Personally, I think the Lower Rio Grande Valley and Texas is very fortunate that Mexicans love to come and buy here because it generates more jobs and wealth."
More economic research is needed to collect and evaluate information regarding how Mexican farmers buying equipment from the U.S., and particularly Texas, impact our economy.
"It would be good to have more economic research on how the Mexican farmers contribute to the Texas economy," Hinojosa said. "Unfortunately, it’s very difficult to obtain numbers because some of the farmers, traders and suppliers don’t report the things they export and import. Most of the exports aren’t made through the proper process so that information is not recorded."
Even though there are no exact numbers, Mexican farmers are definitely contributing to the Texas economy more and more each day. As long as there are new irrigation and agricultural techniques and technologies being developed, this trend is expected to continue.
