THE VILLAGES AND THE DATA

The research data come from surveys of 50 randomly selected households in each of seven villages and a town located in four Mexican states. The surveys were designed to build databases to support multisectoral and econometric analyses. The surveys gathered the data necessary to calculate production, input use, net incomes from all the main economic activities of each household, expenditures, time use and market and non-market transactions of each household and the relations of the villages and town with regional, national and international markets, and socio-demographic characteristics of household members.

The surveys were designed to mirror the socio-economic structure of Mexico’s rural life in several important ways. All villages have fewer than 10 000 inhabitants; the households are involved not only in agricultural and non-agricultural production, but also participate in other income-earning activities in the village and outside it, as in many other parts of rural Mexico. Sample households engaged in agricultural production have characteristics similar to those in other rural locations in Mexico. These are small and medium-sized farms producing maize, beans, cash crops and livestock (Yúnez-Naude, Barceinas and Taylor, 1994).

Most non-agricultural production in a typical Mexican village does not involve manufactures, but includes activities such as processing corn for tortillas, handicrafts, services, retail sales, small machinery repairs and making basic construction materials such as bricks. Villages are linked to the outside RNFE primarily through commerce and labour markets. A considerable portion of the demand for inputs and consumer goods in small villages is satisfied by regional production; an important component of villagers’ income and sources of investment comes from supplying labour to regional, national or foreign labour markets.

Eight communities were selected from the sample to illustrate farm/non-farm linkages and their implications in different agro-ecological and market environments. The communities include:

• Concordia, an ejido or land-reform community in San Pedro de las Colonias, Coahuila;

• El Chante, in Autlan de Navarro, Jalisco;

• Napizaro, Puacurao and Orichu, three villages in the municipality of Erongaricuaro;

• the town of Erongaricuaro, the municipality or county seat, located in the Patzcuaro region of Michoacan;

• Naupan and Reyesoghpan, two indigenous villages located in the mountains of northwest Puebla.

The extreme temperatures and low rainfall of Concordia limit the development of rainfed agriculture and make irrigation indispensable. Until 1992, cotton was the principal commodity produced in La Laguna, where Concordia is located. This changed radically when cotton ceased to be a profitable alternative for La Laguna farmers, and most farmers substituted corn and beans. Basic grain production in La Laguna, including Concordia, is mostly for the market; yields are high and advanced technologies and input packages are used. As demand for labour in cotton production fell, and because of the seasonality of labour demands in maize and bean production, residents of Concordia were forced to seek agricultural and non-agricultural employment in regional towns, in other parts of Mexico, mainly the medium-sized city of Torreón, and in the United States. In short, the economy of Concordia is based on a combination of staple production and local and migration wage work.

El Chante is an agricultural community with a classic cash-crop economy. Rainfed lands are dedicated mainly to maize production for subsistence or for market; irrigated lands are used primarily for sugarcane production. The cane is sold to a mill in the valley, which supplies farmers with inputs and other production resources.

Napizaro is an ejido on the shore of Lake Pátzcuaro in one of Mexico’s major migrant-sending states. During the last 15 years, its economy has shifted from primarily agricultural staples to livestock. Maize and beans nevertheless continue to have an important role in local production. Most agricultural and livestock production uses family labour, often in combination with purchased chemical inputs and tractor services. Approximately 20 percent of total income consists of income remitted from migrants working in the United States.

Puacuaro and Orichu are very close to Napizaro; households in these two villages also produce staples and livestock. In the town of Erongaricuaro, agriculture remains an important activity along with some light manufacturing and municipal governmental services including the high school. As in Napízaro, remittances from international migrants are a major source of household income. In the SAM multiplier analyses in the third section of the chapter, the three villages are combined into a single village economy; the economies of the villages and the town of Erongaricuaro are then integrated into a model designed to highlight village/town linkages.

Naupan and Reyesoghpan are on steep hillsides of the Sierra; each farmer’s agricultural plots are dispersed and very small, 1 ha at most. Of the five villages studied, Naupan and Reyesoghpan have the most indigenous roots. All households in Naupan and Reyesoghpan are engaged in agricultural activities, producing corn, beans and other staples for own consumption, and cash crops. The main cash crop in Naupan is chile; in Reyesoghpan it is coffee. Reyesoghpan farmers are involved in a regional cooperative that provides technological advice and marketing facilities to sell cash crops and to sell goods in a local shop with prices below those of local stores.

The economic structures of the villages: a SAM perspective

The level of economic activity varies in the five villages for which income multiplier experiments are carried out. In terms of gross village output (GVO), El Chante is the largest, producing 1.4 times more than Concordia, the second biggest village. Concordia’s GVO is 2.7 times bigger than Naupan; Naupan’s GVO is 3.6 times that of Napizaro, whose GVO is 1.6 times that of Reyesoghpan (see Table 1). These rankings do not change when value-added, or gross village product (GVP), is used instead of GVO, but the relative differences in the sizes of the economies change. The gap between El Chante and Concordia widens, for example; the opposite is true for Napizaro and Naupan. This means that El Chante is more internally integrated than Concordia, and that Napizaro is more integrated than Naupan. El Chante’s multipliers are hence expected to be greater than those of Concordia, and Napizaro’s to be greater than those of Naupan.

Differences in incomes are related to other characteristics of village households, including asset ownership, technology and schooling. Households in El Chante, for example, have an average of more that 7 ha of agricultural land, compared with just over 2 ha for the other non-indigenous villages and fewer than 2 ha for the indigenous villages.^[2] Farmers from non-indigenous villages use tractors, whereas farmers in the indigenous villages do not. Average education levels range from seven years in Concordia to five years in El Chante and the Municipality of Eronagricuaro and just over 2.7 years in the indigenous villages.

TABLE 1
Value and distribution of production

Source: Village SAMs and Banco de Mexico, Indices de Precios.

The diversification of income sources typical of rural households is strong in the five villages, including involvement in multiple product and labour markets. Households in all the villages produce staples, cash crops, livestock and other agricultural products such as fruit; in all the villages and the town, commerce is an important activity; in almost all households, some of members are involved in the local, regional, national and international labour markets. By contrast, fewer than 34 percent of the surveyed households are involved in local non-agricultural activities. The composition of non-agricultural production varies between villages. In El Chante, non-agricultural production consists mainly of vehicle and tractor repairs and a brick factory. In Erongarícuaro, the non-agricultural sector is dominated by a small factory producing furniture, a significant source of income for households in the community.

Retail is a major source of household income in all villages; it is as important as agricultural production and more important than non-agricultural production. The exceptions are Concordia and Reyesoghpan, which are located near cities or towns whose shops provide most of the non-staple items required by village households. Other sources of village income include leasing out land, providing capital services such as tractors and household-to-household and government transfers. These are not major sources of income.

The main production activities of the villages are agricultural, but the composition of this agricultural production is different (see Table 1). The most important agricultural activity in Concordia is staple production; livestock raising is the most important agricultural activity in Napizaro. In contrast, cash crops are the most important products of El Chante, Naupan and Reyesoghpan. Another important difference between the villages is local commerce: for Concordia and Naupan it represents more than 72 percent of GVO, for Napizaro 40 percent and for El Chante and Reyesoghpan less than 19 percent.

Family labour is a key production input in all villages, although considerably more important in the indigenous villages in Puebla. The share of family labour in total GVP is about 70 percent in Naupan and Reyesoghpan, whereas it is 54 percent in El Chante, 43 percent in Concordia and 21 percent in Napizaro. Hired labour is a major input in Concordia at 28 percent of value added, less important in Naupan, El Chante and Reyesoghpan, and very low in Napizaro. In Concordia, there is a significant demand for farm labour in the village during the peak season and active participation in regional labour markets. In Naupan and Reyesoghpan there is demand for hired labour during the peak seasons of cash crops. In El Chante, sugar cane production creates a large labour demand, which is satisfied locally and by contracting seasonal migrant workers from the neighboring state of Guerrero. In Napizaro, the most important production activity, livestock raising, uses little labour and virtually no hired labour.

The importance of income from wage labour increases if remittances from family migrants are considered. Remittances by international migrants are the main external source of income for households in the Michoacán microregion. Most remittance income in Concordia and all in the low-income Indian villages comes from family migrants working in other parts of Mexico.

Income sources and their distribution

Sources of household income vary by village (see Table 2). Income from local activities is the most important source in El Chante, Napizaro and Reyesoghpan, where agriculture is the main income source, accounting for about 70 percent household income. Sources of income in Naupan are evenly distributed between local and regional, whereas Concordia’s households rely much more than any other village on regional sources of wage income.

The distribution of income between the grouping of households carried out to build the five village SAMs is in Table 3. Concordia and El Chante consist of non-agricultural households; the remaining three villages consist of farming households. The main income sources in non-agricultural households in Concordias and El Chante are wage labour followed by remittances from the rest of Mexico and from the United States. Agriculture is the main income source for subsistence households in Napizaro, although they own little land. The main income source for medium and large farm-households in Napizaro is also farming, but these households own much more land and are engaged in remunerative livestock production. An important portion of the income of these households comes from remittances of family members who are international migrants. The income sources of Naupan and Reyesoghpan are similar across the three household groups. Subsistence households rely more than medium and large farm households on remittances from internal migrants.

TABLE 2
Net income (percent)

Source: Village SAMs.

TABLE 3
Income distribution by household type

Source: Village SAMs.

Linkages with outside markets

The openness of rural Mexican communities to the outside world is striking. All of them export agricultural and livestock to domestic markets outside the village, receive income in the form of worker remittances from the rest of Mexico or abroad, and import consumption goods and inputs from nearby towns. These market linkages transmit the impacts of changes in outside economies to the communities and vice versa. Village or town imports represent leakages that dampen local income multipliers, or more accurately transfer multipliers resulting from local income changes to other parts of the Mexican economy.

Production

An important portion of village crop and livestock production is sold outside the villages in regional markets. This is true to a lesser extent of non-agricultural production. There are sharp differences between communities, however (see Table 4). Virtually all of El Chante’s sugar cane production is sold to a nearby mill; most of its staple production is sold in the region. In Concordia, 93 percent of staple production and 74 percent of non-agricultural output is marketed outside the village. Napizaro is a livestock and migrant exporting economy: 65 percent of livestock output is sold outside the village. Most of the rest is sold locally as investment goods. A large portion of Naupan’s cash-crop output and livestock is sold in regional markets; the same is true of Reyesoghpan’s cash-crop output.

The destinations of staple production is differ among the communities. Most of the output from Concordia and El Chante is sold in the regional market; most of the staple production in Naupan and Reyesoghpan is for own consumption. The differences between Concordia and El Chante and the other villages in terms of output destination also holds for non-agricultural production.

Inputs purchased for agricultural production activities outside the village represent from 12 percent to 38 percent of the gross value of staple production; the non-agricultural sector typically requires over 50 percent of the non-agricultural sector’s GVO. Linkages between the villages and outside product markets also occur through purchases of inputs from stores in the villages, the commerce sector in the SAM, because most commercial-sector goods originate outside the village. Staple producers in Concordia, for example, spend 23 percent of their GVO on inputs from the village commerce sector in addition to 18 percent of their CVO on inputs purchased outside the village. Reyesoghpan’s productive activities rely much less on local commerce, because the high proportion of local inputs in the commercial sector results from local intermediaries buying cash crops from farmers to sell outside the village. The single largest production sector across all communities is commerce, which serves as the conduit through which many goods enter the village or town from outside markets (Table 5).

TABLE 4
Destination of village production (percent)

Source: Village SAMs.

The total value of village imports - goods purchased from domestic markets outside the village or, in rare cases, from abroad - exceeds gross village product in Concordia, El Chante and Naupan. The resulting village trade deficits are financed by income from wage work outside the village through migrant remittances, in other words through labour exports, and by government transfers.

Leakages may take the form of capital outflow from villages, for example to banks in nearby cities. In El Chante, investment leakages from the village are large in relative and absolute terms. Investment outflows make up 90 percent of total investment - more than 5.5 million pesos - representing almost 40 percent of leakages from the village. At the other extreme are Concordia, Naupan and Reyesogpan: capital leakages from these villages represent only about 0.5 percent of total investment and a much smaller fraction of leakages.

TABLE 5
Origin of inputs as a percentage of GVO and weight of inputs in village GVP

Source: Village SAMs

The communities have strong ties with outside labour markets. For Concordia, the regional labour market in the Laguna region and the nearby city of Torreon accounts for more than 71 percent of village income. Household income in Napizaro includes remittances from migrants elsewhere in Mexico - 4 percent - or in the United States - 19 percent. The weight of international remittances in Concordia’s and El Chante’s household income is low; there are no international migrants in the Sierra villages. In Naupan, however, remittances from migrants in the rest of the region represent 44 percent of total income; in Reyesoghpan, remittances from the rest of Mexico account for 17 percent of total income.

The village/town microregion: a SAM perspective

As in the other communities, the economies of Napizaro, Puacuaro, Orichu and Erongaricuaro are diversified. The income sources of their households include involvement in multiple product and labour markets. Households in the three villages and in the town produce staples, cash crops, livestock and other agricultural products; commerce, wage labour and remittances are important in all of them. The composition of their economic structures varies, however. Commerce and services are important in the three villages, representing 34 percent of the villages’ GVO; they are even more important in the town, where they account for 50 percent. This difference results from the importance of town stores that supply goods to villagers and villages, and from government services located there. The composition of the productive activities varies among the three villages and the town: livestock is the major activity in the villages, while non-agricultural production is the main productive activity in Erongaricuaro.

The three Michoacan villages are linked to the town of Erongaricuaro through commodity markets. The town is not a source of intermediate inputs for village production activities; these activities obtain their inputs either from within the village, for example local seed and feed for livestock, or else from distributors outside the village/town microeconomy, for example fertilizer. The one exception is services, consisting principally of the village stores that stock their shelves with consumption goods from Kleenex to Wheaties, some of which are supplied by distributors operating out of the town. Households also purchase consumption goods directly from the town, bypassing village stores. Of the total value of goods and services purchased by stores in the villages, 35 percent comes from Erongaricuaro. Of total village merchandise sales, 34 percent are to Erongaricuaro. Through these market linkages, changes in village incomes such as multiplier effects of migrant remittances are transmitted to the town, setting in motion an income multiplier.

Changes in town incomes could in turn stimulate incomes in the villages by increasing the town’s demand for village-supplied goods. Backward linkages from town to villages are small, however, especially relative to the size of the town economy. The only such linkages evident in the SAM are for commodity purchases for commercial agriculture, and for the town’s nonagricultural sector, primarily wooden furniture produced in Napizaro for a furniture-finishing factory in the town.

Linkages between the town and regional markets outside the village/town microeconomy are crucial in determining the size of town income multipliers resulting from exogenous changes in town or village incomes. The town sub-SAM reveals a high degree of openness to outside markets, particularly for consumption goods entering the town through the service sector - town stores - or through household purchases outside the microregion. The extraregional savings leakage equals about 25 percent of total savings in the villages and 50 percent of total savings in the town; there is no bank in either the villages or the town. Capital outflow from the microregion is small compared with the income leakages created by trade, representing only about 10 percent of total leakages.