The transnational role in Mexico's seed industry

by David Barkin and Blanca Suarez

For several decades the technology of seed genetics has progressed rapidly, attaining more and more recognized varieties and higher yields. Later, equally rapidly, problems began to arise from this green revolution technology. The most widespread of these was the erosion of the centres of genetic diversity, which means a process of displacement and elimination of local primitive varieties to the extent that traditional varieties are replaced by those obtained in plant research centres or the laboratories

Of transnational seed companies. Other problems derived from the control and privatization of seed technology at a global level by a growing number of transnational firms.

Improved seed is a strategic input for agriculture. Up to now it has been left mainly in the hands of genetic specialists under the direction of transnational corporations or the network of research centres of the Consultative Group for International Agricultural Research (CGIAR). However, as a factor in food supply, seed becomes a subject of debate in both social and technical aspects. Thus the interest of some countries in seeking mechanisms for greater control over the use and management of seeds.

This debate is now reopening, in that the question of food requirements is assuming greater importance in the face of the difficulties encountered by Third World countries in food production and supply. Many issues related to food security converge at precisely the issue of the future of seed production and conservation, that is to say, the capacity of each country to conserve its resources and allocate basic foods.

Today, the selection and use of a specific seed variety involves more than the production of a commodity, since such decisions depend on such other factors as the yield levels attained by different varieties, size and quality type of market, relative prices, and demand. In other words, selection is governed mostly by the logic of economic viability, as shaped by world market trends, even in the case of individual farmers, as a result of the growing involvement of the rural sector in the capitalist system.

In this context, the role of the seed industry is significant. The evolution and development of the industry worldwide has witnessed important modifications in the management and appearance of new enterprises. There is also a strong tendency toward transnationalization, even when in some countries, such as Mexico, laws and regulatory mechanisms have been introduced to develop this activity. The presence of transnationals in the seed industry of Mexico plays a major role both in the performance of the industry itself and in the appearance of some new cultivation trends.

The purpose of this article is to examine the structure and functioning of the Mexican industry as well as the problems it encounters in the protection of genetic resources. It will also be important to look at both the extent to which the Mexican Government has intervened in the regulation of seed industry activities and the prevailing place that transnational firms have come to occupy in the industrial structure.

The seed industry and official agencies. Agricultural research in Mexico goes back to the first years of this century, with the founding of the Experimental Station at San Jacinto in 1907. From that time on, the Government displayed constant attention to improving yields and agricultural practices in the Mexican countryside. The history of these efforts constitutes the base of the present seed industry, which has always relied upon strong government support. In fact, a law passed in December 1960 established the National System for the Production, Certification, and Marketing of Seed.

The intent of this law was to increase the availability of good quality seeds, which were to be produced from the genetic materials that had been improved by scientists in the national research programmes. Twenty-five years later it is interesting to find a state commitment to oversee the growth of the industry and to participate in the production of seeds for basic crops. Even today, the Mexican agreement to consider all activities related to research, grading, production, yield, and certification, as well as the distribution, sale, and use of certified seeds as a public utility (even if not a state monopoly) is unique in the world.

The new system is integrated with the National Institute for Agricultural Research (INIA), the National Seed Producer (PRONASE), producers' associations, and other agencies involved in the registration, grading, and inspection of seeds. The legislation of 1960 opened the possibility that a group of institutions could confront, with power of decision and a broad field for action, the requirements of Mexican agriculture for seeds, including the problems encountered by campesinos in the modernization of agriculture. The law represented a legal and institutional framework sufficiently broad for the development of an improved seed industry in Mexico. It constituted a solid base over which the public sector could operate and control the development of the industry without disregarding the active participation of the private sector in research, production, and marketing of high-yielding seeds.

But any standard system simply establishes some guidelines for its functioning. Its impact on society is the result of its interaction with the actual production establishment and with economic pressures.

Organization and functioning of the industry. At present the functioning of the seed industry depends to a great extent upon the activities of INIA and PRONASE. INIA is concerned with research on genetic materials for the improvement and breeding of new varieties and the conservation of existing varieties; PRONASE, together with some producers associations, receives the results of research, the basic and registered seed. Also participating in this framework are the national private sector, which imports seeds for multiplication in the country, and the certification for distribution to rural producers. Then there are the transnational enterprises that import genetic material directly from their parent companies.

The productive and structural results of INIA's work are shaped by the performance of the agricultural sector and its present crisis. This does not mean that INIA must assume all the problems of agriculture; but the twists imposed by the market and by agricultural policies come to be reinforced by the lack of a basic research effort in appropriate agricultural technology for rainfed production and of basic crops for mass consumption.

This productive turn and the debates regarding the orientation of research that influenced the creation of INIA in 1961 are not isolated cases. In fact, it follows the prevailing conflict between the professionals who advocated the production of hybrid seeds and those who worked to improve the selection of native and other open-pollinated varieties. These debates are reopening today between those who defend private rights to genetic material in favour of the transnational system of seed production and marketing and those who are concerned for the preservation of genetic diversity, the increased availability of open pollinated seed varieties, and the strengthening of peasant production systems.

Like INIA, PRONASE was conceived as a cornerstone of the new seed policy. Maize and wheat have had priority in its programmes. During the 1970s a substantial part of its limited resources were designated for increasing the production of seed for such basic crops as rice, beans, maize, and wheat. This concentration in basic crops gave way suddenly to a policy of diversification in response to important structural changes. The principle of a new phase for the private sector was recognized in 1968 with the creation of the Mexican Seed Association (AMSAC). This reflected the enormous growth in the numbers of foreign and national firms and the consequent increase in the availability of improved seeds. But INIA was also able to supply new crops and varieties in sufficient quantities to permit the launching of a certified seed multiplication programme for general use. Beginning in 1970, PRONASE linked its expansion and diversification programmes to the necessity of regulating the basic market to ensure that it had a larger role in the production of the different seed varieties required by farmers.

This meant that new areas were contracted for the production of these seeds and the yield potential of more crops and varieties was increased. However, despite the great diversification efforts of PRONASE, its relative share in the other markets did not reach any spectacular growth. In some crops, such as the traditional ones, it maintained a high degree of participation. But in maize, its share of the market began to drop in the face of competition from the transnationals. All this necessitated reconsideration of its role in the improved seed industry.

Transnational enterprises in the industry. The transnationals were beginning to establish themselves at the beginning of the 1960s, confining their activities almost exclusively to the importing and distribution of seeds in the domestic market. Meanwhile, construction was beginning of the first installation for improvement of seeds produced in Mexico under the direction of private capital. In 1961, three subsidiaries of North American enterprises began operations in an effort to penetrate the Mexican market: As grow, Northrup King, and Semillas Hibridas (Dekalb). These enterprises were concerned with carrying out their own research to adapt basic genetic materials to Mexican conditions in order to generate new varieties in different types of crops to facilitate the rapid penetration of the market.

In parallel with the burgeoning of these enterprises (between 1960 and 1965), other smaller nationally financed firms began to appear. These initiated their activities with the importation of seeds from seed companies in the United States, giving birth to a private sector which would eventually dominate importation and distribution of vegetable seeds and of sorghum and maize hybrids. Over the 1960s the number of enterprises increased to 25, of which more than half were transnationals. At present, 30 firms are operating, and although the number of national firms (13) is high, it is transnationals, 17 in all, that have determined the guidelines and behaviour of the industry as a whole.

The private sector firms are grouped in AMSAC, through which they have sought to structure and organize the many groups working in the industry, as well as to help face the problems that frequently arise with government agencies concerning permits for import, export, or research.

The promoters of this organization were the transnationals. They probably conceived it as a mechanism that would in the future permit them to negotiate on matters of interest to them, and at the same time as a pressure group, since its members include most of the firms producing and distributing seeds.

Recently the Association managed to gain membership in the Committee for Grading Plant Varieties. Its presence on the Committee obviously allows it to negotiate and defend better the positions and interests of its associates. Thus, AMSAC is an effective instrument for the industry in its efforts to shape a structure able to secure the objectives of the industry.

Despite some examples of managerial innovation and production with which Mexican firms have responded to necessity, the real situation in which these firms operate is determined by their access to North American genetic material. In 20 years of gradual expansion, these firms have achieved a certain influence in the national market for oilseeds, vegetables, and, some of them, sorghum. They have also been most successful in competing with their foreign counterparts, since the technology and systems of production and distribution which they use differ very little. The private sector as a whole, maintains a high level of participation in oleaginous, industrial, and vegetable seeds. Although of minor importance, an increase was achieved in basic crops as well.

The majority of the transnationals involved in seed production are based in the United States and only seven have been authorized to undertake their own research, while others have had to wait for permission. These privileges are granted directly by the Ministry of Agriculture and Water Resources. Subsequently, the other agencies of the National Seed System (Comitalificador de Variedad de Plantas y el Servicio Nacional de Inspecci Certificacie Semillas) had the responsibility to evaluate, grade, and approve the registration of new varieties. In this sense, the transnationals' research included concrete measures to cover an agreement on the technical standard set by these agencies. However, the criteria for authorizing the research permits have till now been subject to the decisions of the incumbent minister rather than to more specific rules. Nevertheless, some national forums have examined the possibility of increasing soon the number of research permits, which would stimulate availability of varieties and volumes of seeds, but under criteria previously defined by the National System.

Under these conditions, the transnationals have been in a favourable situation, having the capacity to develop or adapt their own varieties and to adapt the requirements of the national market to suit their interests. However, some executives in the private sector estimate that the majority of the seed firms are working with 70 per cent imported seeds and only 30 per cent Mexican. Transnationals do encounter problems with importation now and then, but these are often only bureaucratic procedures that hamper the delivery of permits or the like and do not constitute real obstacles to their operations.

The majority of the firms interviewed declared that they intended to reduce imports to the extent that it was possible to increase production capacity. This intention seems real, considering that expansion plans appear to respond to the enlargement of the market created by national policy. However, it seems that dependency upon seeds imported from transnationals will continue.

Seed marketing. The distribution and marketing of improved seeds involves a variety of channels through which transnational and national firms as well as PRONASE distribute them to agricultural producers, once a variety has passed yield trials. Most of the seed moves through commercial channels. The amount that firms sell directly to producers is reduced. The most usual distribution channels for Mexican seed firms are the National Rural Credit Bank (BANRURAL) and private distributors. Seed producers associations, which operate mainly in the northwestern part of the country, are also an important means of distribution, especially for wheat, in both national and international markets.

BANRURAL buys seed principally from PRONASE on behalf of those producers for whom it is providing financing. Seventy per cent of the certified seed that PRONASE produces is sold in this way. Private firms sell most of their seed production through an extensive network of distributing houses located through the country. Since these distributors are obliged to offer a full range of varieties in order to cover their regional markets, exclusive representation is rare. Thus, distribution is not an activity integrated within the seed firms, but is managed independently of the proprietor of the brand name and of the yield trials. In this way, farmers usually resort to these outlets to acquire certified seed.

One of the major problems that arises in seed marketing concerns BANRURAL. The bank issues contracts specifying that it will buy "up to a certain quantity" but promises to take only that amount which effectively qualifies for credit. The informality and uncertainty of this procedure causes numerous problems for the firms, substantially increasing their costs. However, the problem of ensuring an adequate supply of seeds is really linked more closely to the general fragmentation of the industry than to the difficulties of any one particular sector in the chain of distribution. This reflects the lack of harmony between the requirements for basic foods and what the seed industry produces for national agriculture.

Some final comments. The fragmentation of growth in the seed industry in the recent past appears clearly. Although it has been able to rely on the legal and institutional base conferred upon it by the national seed legislation, which permitted its development, today it does not present a common effort to enable an adequate supply of seeds. Even more, it is well known that the conduct of each of the participating sectors is not governed by the same strategy. Let us consider that in 1961 PRONASE emerged through political necessity immediately after serious conflicts within the agricultural community that were resolved in favour of modern technology. The same legislation that created the National Seed System also allowed for the emergence of numerous private enterprises for seed production and marketing, although this development received considerable official surveillance. The fragmentation to which we refer results from the absence of a clear policy regarding the respective roles that the public and private sectors should play in seed production. The original intentions of PRONASE to regulate the market and ensure the production of seeds for staple food crops encountered problems accordingly as private firms specialized in working for commercial farmers whose production was oriented toward sorghum and high-priced export crops. PRONASE responded to the growth in the less private seed sector by diversifying its activities and giving priority to commercial products. In the 1960s the institution was operating under the general guidelines of an economic policy then in vogue that favoured the growth of the modern sector of agriculture, implicitly leaving behind the majority of farmers practising the cultivation of staple food crops with traditional methods.

The present structure of Mexico's seed industry does not respond to the needs of the country. It is not capable of guaranteeing a regular supply of high-yielding seeds (either hybrids or selected native varieties) for staple food crops. Even in the seed market covering commercial and export crops, the supply of hybrid and improved seeds is inadequate and frequently inappropriate. For example, in the private sector the anarchical organization of the market and the duplication of effort among firms has led to overproduction of sorghum seed while large volumes of seeds for other crops continue to be imported.

To these problems of private initiative is added the lack of a sensible strategy in the public sector for intervening in the regulation and strengthening of the market.

Investment in basic research reflects contradictory criteria, motivated, on the one hand, by the evaluations of specialists as to the number of varieties that could be released and their desired level of production; and, on the other hand, the policy decisions regarding the immediate priorities of the agricultural sector.

There is a deep conflict in the public sector in regard to industry. The dominant current would convert it into a pillar of support for the transformation and modernization of agriculture, accelerating its orientation toward export markets and the support of cattle raising. In this scenario, PRONASE would produce seeds for commercial lines and gradually reduce the programmes that currently represent a subsidy to the campesino sector. INIA would also move in this direction, expanding its research in horticulture, sorghum, and forage crops.

On their side, members of AMSAC would enjoy another privileged moment in its history. The boom in demand for improved seeds has probably scarcely begun. Real restrictions on research and production activities have diminished, even though there have been no modifications to legislation. At present it is being advocated that the country subscribe to the industrial code for patents in order to protect its innovations; however, there is the inconvenience that this would also permit the acquisition as private property of varieties that are now in the public domain.

The opposite tendency to this scenario would be to place major emphasis on the campesino economy. This points toward the incapacity of society to continue its dependence on imported food and reflects the lack of alternatives for many of the resources that peasant societies possess. Besides the social cost implied in allowing the campesinos sector to underutilize its resources: the development model does not offer the campesinos productive employment alternatives in other sectors of the economy, and they are obliged to defend their social and even material existence.

All the while, the tendency exists to safeguard the most efficient and to leave traditional producers to defend their own resources. This implies strengthening still more the production of improved seeds, since the best producers are identified by going modern and are rewarded with credit and technical assistance. The campesinos, who are now adrift, will have to respond energetically to this situation in order to survive. The form and consequences of this response remains to be seen. However, there is a danger that the natural and social phenomena that have so greatly eroded the native seed stock in recent years will seriously restrict the options for this social group in particular and for the country in general, when food self-sufficiency is restored again as the order of the day.