Economics: Revised presidential decree on glyphosate and GM corn imports sets the stage for new trade disputes and crop challenges

MEXICO - Report 27 Feb 2023 by Mauricio Gonzalez and Francisco González

The week before last, President López Obrador and five of his cabinet ministers published a decree for the purpose of gradually eliminating the use of the agrochemical herbicide glyphosate, prohibiting the planting of genetically modified (GM) corn and restricting its use in various productive processes. The new text specifies and modifies a more confusing decree on the same issues that was published on December 31, 2020 and holds sectoral implications for agricultural output and livestock and industrial production chains that use corn as an input. Eventually, it will also have implications for consumers, as well as for Mexico’s trade policy, especially in relation to the United States and Canada.

The ban on the use of glyphosate will have an especially pronounced impact on commercial agricultural output of maize, citrus, sorghum, and cotton, precisely the crops with the highest relative use of this herbicide, as well as other grains and oilseeds in the Northeast, Northwest, and Bajío regions, where it is used intensely in nearly 75% of agricultural production. Eventually such a ban would translate into higher costs and, therefore, impact consumer prices for these products and erode the competitiveness of Mexico’s agricultural output.

The decree holds much more profound ramifications for GM corn as it imposes new regulations to ensure that imported yellow corn is restricted to industrial use or for animal feed. These measures will be very complex to manage and control and could generate significant cost increases and important restrictions on the flow of this grain into the country and on its domestic availability.

In this week’s Outlook we analyze the implications of the decree in a complicated context not only for inflation, which has yet to turn the corner, but also for already tense trade relations with the US and Canada in key economic sectors such as energy.

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