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The International avocado market: Mexican entrance to the USA market illustrated with a spatial eqilibrium… Salas-Romero, Francisco Miguel 1998

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THE INTERNATIONAL AVOCADO MARKET: MEXICAN ENTRANCE TO THE USA MARKET ILLUSTRATED WITH A SPATIAL EQUILIBRIUM MODEL by FRANCISCO MIGUEL SALAS-ROMERO L A E , Instituto T e c n o l o g i c o y de E s t u d i o s S u p e r i o r e s d e M o n t e r r e y , C a m p u s C i u d a d d e M e x i c o , 1994  A THESIS SUMBITED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF SCIENCE IN THE FACULTY OF GRADUATE STUDIES (Department of Agricultural Economics)  W e accept this thesis as c o n f o r m i n g to the r e q u i r e d s t a n d a r d  T H E UNIVERSITY O F BRITISH C O L U M B I A M a y 1998 © F r a n c i s c o M . S a l a s - R o m e r o , 1998  In  presenting  degree freely  at  this  the  thesis  in  partial  fulfilment  University  of  British  Columbia,  available for  copying  of  department publication  this or of  reference  thesis by  this  for  his thesis  and study. scholarly  or for  her  Department  of  The University of British Vancouver, Canada  DE-6 (2/88)  Columbia  I further  purposes  gain  the  requirements  I agree  that  agree  may  representatives.  financial  permission.  of  It  shall not  be is  that  the  permission  granted  allowed  an  advanced  Library shall  by  understood be  for  for  the that  without  make  it  extensive  head  of  my  copying  or  my  written  Abstract  In 1997 the United States partially lifted its import ban on Mexican avocados. The purpose of this thesis is to evaluate the impact of the entrance of Mexican avocados into the United States on international avocado markets. The international market for avocados is significant: about 200 thousand metric tonnes are traded world-wide every year with an estimated value of $280 million US dollars. The main exporter is Mexico, followed by Israel, South Africa, Spain and the United States. These countries compete mainly in the European market as suppliers of France, Great Britain, Germany, the Netherlands, and even Japan and Canada. The United States, an important avocado-producer, is also an importer. Because of its proximity, Mexico would likely be a source of avocados for the US. Yet imports from Mexico have been banned since 1916 to avoid plagues infiltrating the producing areas of California and Florida. A Spatial Equilibrium Model, is used to portray the international avocado market with five importing and five exporting countries. The exporters are Mexico, United States (California), Chile, Israel and ROWE (other exporter countries). Importers are France, United States (19 Northeast states), Canada, Japan and ROWI (rest of the world importers). Two scenarios are presented: one with a ban on Mexican exports to the United States and the other one without restrictions to trade. The impact of the change in US policy is determined by comparing these two scenarios. The results of the empirical model indicate that Mexico will export 27,000 M T of avocados to the Northeast of the US. Producers from Michoacan, the only region in Mexico authorised to export to the US, receive a moderate increase in producer surplus. California will shift its supply to Canada and Japan and its market share of the U.S. Northeast will decrease to 8,500 MT. California will also begin shipping to the ROWI market (21,000 MT). Overall, Californian producers will experience a decline in welfare due to a decrease in prices. Chile will remain an exporter into the USA-NE with 14,400 MT but its producers will be negatively affected. France receives fewer avocados from Mexico and this causes Israel to increase exports to compensate for the lack of Mexican supply. The internal price in France will increase, thus resulting in reduced consumer surplus. Overall, the simulated effects on Mexico's entrance into the U.S. market are relatively small and less significant than expected. A sensitivity analysis revealed that changes in transportation costs and elasticities have a small to moderate impact on the main results.  ii  TABLE OF C O N T E N T S Abstract  ii  Table of Contents  iii  List of Tables  v  List of Figures  vi  Acknowledgements  vii  Dedication  viii  Chapter 1  Introduction.  1  1.1  Problem statement  2  1.2  Research questions  3  1.3  Purpose of the study  4  1.4  Outline of the study  5  Chapter 2  The avocado fruit: description and market overview.  6  2.1  Background of the avocado  2.2  International market  10  2.3  Major producers  11  2.4  Main importers and exporters  14  2.5  Interactions and trade balance  20  Chapter 3  7  North American market  22  3.1  Mexico  23  3.2  United States  27  3.3  Canada  34  3.4  Avocado-production competitiveness: Michoacan and California  36  3.5  N A F T A and the avocado industry  42  3.6  Proposal and legislative process to allow Mexican avocado imports to the United States  44  Synopsis of North American trade characteristics  49  3.7  iii  Chapter 4  Research Hypothesis, Model Description and Data  53  4.1  D e v e l o p m e n t of the hypotheses.  54  4.2  T h e theoretical m o d e l : selection a n d d e s c r i p t i o n  56  4.3  E m p i r i c a l m o d e l construction  63  4.4  W o r l d regions a n d d a t a  67  4.5  A d a p t i n g the e m p i r i c a l m o d e l to selected regions a n d d a t a  73  4.6  W o r k i n g scenarios  75  Chapter 5  Results  78  5.1  Tables a n d e x p l a n a t i o n  78  5.2  Hypotheses validation  89  5.3  Sensitivity A n a l y s i s  92  Chapter 6  Conclusions  99  6.1  Conclusions and Comments  99  6.2  L i m i t a t i o n s of the m o d e l  102  6.3  R e c o m m e n d a t i o n s for further s t u d y  104  List of References  106  Appendices  111  Avocado international production and trade  112  Canadian avocado imports  118  California Avocado C o m m i s s i o n  122  Israeli avocado exports  125  Chilean avocado exports  127  Population of the United States  128  Spatial equilibrium model. Results  129  Sensitivity analysis of the Spatial Equilibrium Model  iv  135  LIST O F T A B L E S  Table 3.1. Production costs reported by grove owners  40  Table 4.1. Set of Kuhn tucker conditions/restrictions of the spatial price equilibrium model.  63  Table 4.2. Data and countries used to generate the empirical model.  74  Table 4.3. Current trade expressed by the switch matrix  76  Table 5.1 Summary of quantities presented by the spatial equilibrium model across scenarios.  79  Table 5.2 Summary of prices presented by the spatial equilibrium model across scenarios  79  Table 5.3 Trade matrices reported by the spatial equilibrium model across scenarios  82  Table 5.4 Trade matrices expressed as percentage to exporters across scenarios  84  Table 5.5 Trade matrices expressed as percentage to importers across scenarios  85  Table 5.6 Summary of consumer-producer surpluses and welfare across scenarios  87  Table 5.7 Trade matrices of scenario b reported by the sensitivity analysis results.  94  Table 5.8 Prices and welfare changes reported by the sensitivity analysis results.  95  LIST OF FIGURES Figure 2.1 Hass Avocados on the tree (A) and cross-section view (B).  8  Figure 2.2. Avocado shares by country.  13  Figure 2.3. Balance trade of avocado producers.  13  Figure 2.4. Quantities imported into main avocado markets.  15  Figure 2.5. Prices paid for avocado imports in different markets.  15  Figure 2.6. Quantities exported from major avocado producers.  19  Figure 2.7. Prices paid for avocado imports in various markets.  19  Figure 2.8. Interactions of avocado producing areas around the world  21  Figure 3.1. Avocado-producing regions and their shares in Mexico.  24  Figure 3.2. Example of seasonal US avocado-production and international trade.  28  Figure 3.3. Monthly distribution of exports from the United States.  31  Figure 3.4. Monthly distribution of export's prices from the United States.  31  Figure 3.5. Shares of avocado shipments from California into the continental United States.  32  Figure 3.6. Average prices in the United States.  33  Figure 3.7. Avocados sold in Canada by country.  35  Figure 3.8. Prices paid for avocado imports into Canada.  35  Figure 3.9. Northeastern United States allowed to import fresh Mexican Hass avocado  49  Figure 4.1. Two-region basic trade model  57  Figure 4.2. Two-region spatial equilibrium trade model  59  Figure 4.3. Setup of the empirical model.  65  Figure 4.4. Map of the regions included in the model and their trade flows.  68  vl  Acknowledgements T h e r e are m a n y p e o p l e that I w o u l d l i k e to t h a n k . First I w o u l d l i k e to t h a n k m y a d v i s o r , D r . James V e r c a m m e n for h i s s u p p o r t a n d assistance d u r i n g the d e v e l o p m e n t of this thesis, a l o n g w i t h D r . R i c h a r d B a r i c h e l l o , m y graduate a d v i s o r , w h o has b e e n the core of o u r D e p a r t m e n t . T h a n k s to D r . T h o m a s Ross, m y boss i n the F a c u l t y of C o m m e r c e a n d Business A d m i n i s t r a t i o n , for a g r e e i n g to act as e x t e r n a l reader o n m y advisory committee. It is essential  to r e c o g n i z e  CONACYT  (Consejo  N a c i o n a l para la Ciencia y  T e c n o l o g i a ) , the agency i n charge of e n c o u r a g i n g the scientific a n d t e c h n o l o g i c a l d e v e l o p m e n t of M e x i c o , as the p r o v i d e r of the f u n d s for m y s t u d i e s i n C a n a d a . T h e years I h a v e spent a b r o a d h a v e b e e n c r u c i a l for m y career a n d for m y f u t u r e p l a n s to forge m y H o m e l a n d ; t h a n k y o u for this u n i q u e o p p o r t u n i t y . There  are v e r y m a n y w o n d e r f u l p e o p l e  that I w o u l d  l i k e to t h a n k  in  the  D e p a r t m e n t of A g r i c u l t u r a l E c o n o m i c s : to D r . G e o r g e K e n n e d y for s h a r i n g m y interest o n M e x i c o a n d D r . M a r y B o h m a n for b e i n g a s u p e r b teacher. T h a n k s to R e t h a , K a t h y a n d D o n n a for the w a r m w e l c o m e I r e c e i v e d w h e n I first a r r i v e d to U B C . A n d t h a n k s also to a l l m y peers i n R o o m 303 of the H e n r y A n g u s B u i l d i n g . T h a n k s to T o m for h i s f r i e n d s h i p a n d h e l p here i n C a n a d a . I r e a l l y appreciate the c o n t r i b u t i o n of S a m a n t h a B l o o d a n d m y dear f r i e n d T a h i r i h W a l s h i n the  correct  w r i t i n g of this p a p e r , a n d the excellent c o u n s e l i n g a n d f r i e n d s h i p of K e l l y K a v a n a g h . S p e c i a l t h a n k s to a l l the M e x i c a n c o m m u n i t y i n U B C for t r u s t i n g m e w i t h their l o v e , respect a n d for m a k i n g m e feel h o m e . M y deepest t h a n k s to m y f r i e n d s a l l across M e x i c o . T h a n k s to W e n c e s l a o H e r r e r a for t e a c h i n g m e s o m e of o u r ancestor's l a n g u a g e . T h a n k s to A n d r e s P a d i l l a a n d Esteban G o n z a l e z for l o n g a n d h e l p f u l e-mails, S o n i a L o p e z a n d B r e n d a Z u n i g a for s h a r i n g their h a p p i n e s s w i t h m e . T h a n k y o u V i a n e y for e n c o u r a g i n g m e i n the c o m p l e t i o n of m y studies a n d for b e i n g c r u c i a l i n m y life. N o w o r d s n e e d e d . I a m g r a t e f u l for h a v i n g s u c h a m a r v e l o u s f a m i l y . H e r e I t h a n k m y father  Francisco  w h o m is the strength of us a l l , to m y m o t h e r Magdalena w h o is o u r g u i d e a n d shelter, to G r a n n y Maria  Luisa, m y second m o t h e r , a n d Mariana,  Luis Ignacio a n d Maria  Fernanda  for c h e e r i n g m e u p : Gracias. A n d f i n a l l y t h a n k s to G o d for k e e p i n g a n d eye o n m e d u r i n g m y t r i p a n d let m e r e t u r n h o m e safe a n d w i t h so m a n y m a r v e l o u s experiences.  vii  Dedication  Castellano  (Spanish):  Desde aqui donde nace el viento del norte estoy mirando tu tibia silueta de mar y sierra. Y recuerdo sin cerrar los ojos tus fiestas, tu aroma y esta suave presencia. Hoy, con varias leguas tras de mi, quiero decirte que con orgullo hable de ti, cante nuestras canciones y comparti tus tradiciones. Siempre supe de tus alegrias y senti dolor con las derrotas. Y me Uene de inmensas ganas de hacer de tus penas prosperidad y guirnaldas con tus flores. A l final de un episodio de mi vida regreso con este libro bajo el brazo. Mis palabras son para dedicar este documento que inspiras y que hice para ti. Este es el legado de un hombre que solo declara con orgullo que es uno con su gente, con estas nuestras tierras y aguas. Mi Patria. Mexico.  Nauatlajtol  (Aztec) :  English:  Nikan kampa meya in ejecatl, nikitstika mokuekueyojkan Kampa ueyatl kampa tepeyojkan. Amo nikintsaua no ixtololouan uan nochi nikilnamiki, keman mo iluiyojkan uan nikan nikmachila mo ajuiyalis.  Here, up north where the wind is born, I stare at your warm sea and sierra silhouette. And without closing my eyes I recall our joy, your scent and this soft presence.  Axan, tien uejka tika onimitsili ika nouisotl seki tlajtol, oniktenkixti totlakuikal uan onikmachili nochi tlen ipati touaxka.  Today with many miles behind me, I declare that I talked with pride about you, I sang our songs and shared our traditions. You were always with me. I felt happy with your laughter and felt sad with your sorrow. I grew in my heart this craving; I wish to turn your defeats into prosperity and sew bracelets with all your flowers.  Nochipa onikmat keman mopakilis uan nimoyolkoko keman titlapoloa. Uan ika chikaualis niknekiskia nikopas motlayokolis xochikoskatl. Nikan tlami se tekichiualis uan itlan nosekak nikualika se amoxtle. Ika tlasotl ni mits ilnamik uan oualmeyak itech noyolo se ome tlajtolis. Se mokonej mitsmaktilia nin tekichiualis uan ika niyolo kijtoua mosentilia ipan nin tlalnantsin uan nin ueyapan. Nontlalnantsin. Mexico.  Francisco Miguel Salas-Romero  viii  And at the end of this chapter of my life, I return to you with a book under my arm. The words you read on these pages are only to dedicate what I've done, inspired by you. Let this be the legacy of a man who solely and proudly declares that he belongs to the people, land and sea of our homeland. Mexico.  CHAPTER 1 Introduction T h e i n t e r n a t i o n a l m a r k e t for a v o c a d o s is quite significant. T h e F o o d a n d A g r i c u l t u r e O r g a n i s a t i o n of the U n i t e d N a t i o n s ( F A O ) e s t i m a t e d  that  avocado  p r o d u c t i o n reached t w o m i l l i o n m e t r i c tonnes i n 1995 . A b o u t t w o h u n d r e d t h o u s a n d 1  m e t r i c tonnes w e r e t r a d e d a r o u n d the w o r l d , w i t h a n e s t i m a t e d v a l u e of $280 m i l l i o n U S d o l l a r s . T h e m a i n m a r k e t for a v o c a d o s is E u r o p e , w i t h i m p o r t s that account for $230 m i l l i o n U S d o l l a r s a n d a n i n c r e a s i n g d e m a n d for this f r u i t i n E u r o p e has e n c o u r a g e d m a n y d e v e l o p i n g n a t i o n s to increase a v o c a d o c u l t i v a t i o n a n d e x p o r t . M e x i c o , a c o u n t r y that accounts for a l m o s t 30 percent of the w o r l d s ' total a v o c a d o - p r o d u c t i o n , leads exports w i t h a n average of 45 t h o u s a n d m e t r i c tonnes y e a r l y . O t h e r countries s u c h as Israel, S o u t h A f r i c a , S p a i n , C h i l e a n d the U n i t e d States contribute to i n t e r n a t i o n a l s u p p l y . M a n y other countries g r o w a v o c a d o s b u t their p r o d u c t i o n is c o n s u m e d i n t e r n a l l y . I n d o n e s i a , w h i c h is the f i f t h largest  avocado  p r o d u c e r w i t h 100 t h o u s a n d m e t r i c tonnes, is a n e x a m p l e of s u c h a c o u n t r y . T h e U n i t e d States is the s e c o n d largest p r o d u c e r of a v o c a d o s a n d e x p o r t s p r i m a r i l y to C a n a d a , France a n d Japan. B u t d u r i n g the fall a n d w i n t e r , i n t e r n a l d e m a n d exceeds s u p p l y so w h i l e these seasons o c c u r the U S t u r n s i n t o i m p o r t e r of a v o c a d o s . Because of p r o x i m i t y , M e x i c o is a l o g i c a l source of a v o c a d o s for the U S .  ' F A O International Trade Report. F A O Statistics Database. 1997  1  H o w e v e r , M e x i c a n i m p o r t s h a v e b e e n b a n n e d i n the U S since 1916 to a v o i d a d d i t i o n a l sources of disease i n the p r o d u c i n g areas of C a l i f o r n i a a n d F l o r i d a . This situation changed  i n F e b r u a r y 1997  w h e n the U n i t e d States  finally  a u t h o r i s e d s o m e M e x i c a n exporters to s h i p a v o c a d o s into the N o r t h e a s t p o r t i o n of the c o u n t r y . T h e increased e m p h a s i s o n trade agreements a n d e l i m i n a t i o n of  trade  barriers b e t w e e n the U S a n d its t r a d i n g partners w a s u s e d as a l e v e r b y M e x i c a n authorities w h e n n e g o t i a t i n g the e l i m i n a t i o n of the a v o c a d o b a n . A g r e e m e n t s s u c h as N A F T A ( N o r t h A m e r i c a n Free T r a d e A g r e e m e n t ) a n d o r g a n i s a t i o n s s u c h as the W T O ( W o r l d T r a d e O r g a n i s a t i o n ) r e q u i r e s a n i t a r y bans to be b a s e d o n s o u n d scientific i n f o r m a t i o n ; M e x i c a n g r o v e s i n the state of M i c h o a c a n c o m p l i e d w i t h a l l stated r e q u i r e m e n t s a n d thus the b a n w a s t e r m i n a t e d . T h e o p e n i n g of this m a r k e t is a n i m p o r t a n t event as the M e x i c a n a v o c a d o e x p o r t i n d u s t r y is e x p e c t i n g large benefits f r o m this m a r k e t . S e v e r a l p r o d u c e r s i n the largest  avocado-producing  state  of  Michoacan  have  significant  international  experience o n s h i p p i n g a v o c a d o s i n t o E u r o p e , J a p a n a n d C a n a d a . T h e o p t i o n of s e l l i n g their c r o p i n t o a closer d e s t i n a t i o n seems v e r y attractive.  1.1  Problem Statement It is n o t s i m p l e to u n d e r s t a n d the i m p a c t of r e m o v i n g the U S b a n o n M e x i c a n  a v o c a d o s . I n t e r n a t i o n a l trade of a v o c a d o s is h i g h l y i n t e r d e p e n d e n t . F o r e x a m p l e , if M e x i c o starts e x p o r t i n g to the U S , w h e r e d o countries s u c h as F r a n c e a n d C a n a d a that p r e v i o u s l y i m p o r t e d f r o m M e x i c o get this fruit?  2  Because M e x i c o is a n active p a r t i c i p a n t i n m a n y i n t e r n a t i o n a l destinations, w e c a n n o t o n l y d e v e l o p a m o d e l w i t h M e x i c o a n d the U S . It is necessary to analyse the i m p a c t o n other destinations a n d p r o d u c e r s . In other w o r d s , a c o m p r e h e n s i v e analysis of a v o c a d o i n t e r n a t i o n a l trade is n e e d e d . T o d o so, a n e m p i r i c a l m o d e l s h o u l d be c o n s t r u c t e d , w h i c h incorporates the relative slopes of the s u p p l y a n d d e m a n d c u r v e s i n the v a r i o u s i m p o r t i n g a n d e x p o r t i n g r e g i o n s , p l u s the t r a n s p o r t a t i o n costs a m o n g p r o d u c e r s a n d c o n s u m e r s that i n f l u e n c e trade.  1.2  Research Questions M e x i c a n a v o c a d o s , w h i c h w e r e once e x p o r t e d to E u r o p e , g e o g r a p h i c a l l y  distant f r o m M e x i c o , c o u l d n o w be r e d i r e c t e d to the n e i g h b o u r i n g U S m a r k e t . T h e c u r r e n t d i s t r i b u t i o n of s h i p m e n t s of M e x i c a n a v o c a d o to other c o u n t r i e s w i l l l i k e l y be affected. W h e n the N o r t h e a s t m a r k e t opens to M e x i c o : What amount of Mexican avocados will be shipped to the United States? How will this affect other markets (i.e. Canadian, French, and Japanese)? C o n s i d e r i n g that M e x i c o is the largest a v o c a d o p r o d u c e r , i t is p l a u s i b l e that M e x i c o w i l l s i m p l y p r o d u c e a n d e x p o r t m o r e after accessing U S m a r k e t s , a n d thus m a i n t a i n s s u p p l y to e x i s t i n g m a r k e t s . B u t i f the i n c r e a s i n g s u p p l y does n o t o c c u r , How will trade flows, prices and the market share of Mexico in international markets change? C o u n t r i e s s u c h as C h i l e a n d the D o m i n i c a n R e p u b l i c e x p o r t p r i m a r i l y to N o r t h A m e r i c a a n d they c u r r e n t l y s u p p l y the U S m a r k e t . A s M e x i c a n p r o d u c t i o n is larger  3  t h a n C h i l e a n p r o d u c t i o n , M e x i c o c o u l d p o t e n t i a l l y s u p p l y a larger v o l u m e to the U S than Chile. Will Chilean avocado exports to the US be affected by Mexico's entrance?  T h e U n i t e d States m a r k e t c o u l d result i n h i g h e r prices f r o m M e x i c a n p r o d u c e r s a n d thus w o u l d encourage p r o d u c e r s f r o m M i c h o a c a n to e x p o r t to the U S . How would trade liberalisation benefit the producers in Mexico and consumers in the United States?  1.3  Purpose of the study T h e m a i n objective  of this thesis w i l l b e to f o r m u l a t e a n d estimate the  q u a n t i t a t i v e w o r l d - w i d e i m p a c t o f the l i b e r a l i s a t i o n i n the U n i t e d S t a t e s - M e x i c o a v o c a d o trade w i t h a m a t h e m a t i c a l m o d e l . I n o r d e r to i d e n t i f y the k e y factors that characterise a v o c a d o i n t e r n a t i o n a l trade, i t is necessary to describe the f r u i t itself, the w o r l d ' s a v o c a d o - m a r k e t d y n a m i c s a n d p r i n c i p a l actors that p a r t i c i p a t e i n this m a r k e t . T h i s thesis p r o v i d e s i n f o r m a t i o n about these p a r t i c i p a n t s a n d h o w p a r t i c u l a r r e g i o n s interact i n the p r o d u c t i o n a n d d i s t r i b u t i o n of a v o c a d o s . T h e t o o l c h o s e n to p o r t r a y a v o c a d o trade f l o w s is a spatial equilibrium  model,  w h i c h uses estimates f o r quantities, p r i c e s a n d elasticities to d e p i c t t h e d e m a n d a n d s u p p l y schedules f r o m m a n y regions. T h e m o d e l accounts  also f o r t h e distance  b e t w e e n r e g i o n s a n d calculates the o p t i m a l quantities t r a d e d . T h i s m a t h e m a t i c a l m o d e l w o r k s u n d e r the p r e s u m p t i o n that once the o p t i m a l quantities are o b t a i n e d , the  4  i n t e r n a l p r i c e of the i m p o r t e r s h o u l d e q u a l the i n t e r n a l p r i c e of the exporter p l u s the cost of t r a n s p o r t a t i o n to the i m p o r t e r r e g i o n , k n o w n as the law of one price.  1.4  Outline of the study T h e reader w i l l f i n d six chapters i n this thesis. I n chapter t w o a d e t a i l e d  analysis of the a v o c a d o m a r k e t is p r o v i d e d . T h i s d e s c r i p t i o n i n c l u d e s i n f o r m a t i o n about the o r i g i n s a n d uses of the a v o c a d o fruit, statistical d a t a about  principal  p r o d u c e r s a r o u n d the w o r l d a n d the major e x p o r t i n g a n d i m p o r t i n g regions. C h a p t e r three c o n t i n u e s the d e s c r i p t i o n of w o r l d a v o c a d o m a r k e t s b u t here the focus is e x c l u s i v e l y o n the N o r t h A m e r i c a n r e g i o n . T h e p o t e n t i a l to trade b e t w e e n M e x i c o a n d the U S is t h o r o u g h l y d i s c u s s e d . C h a p t e r f o u r p r o v i d e s a d e s c r i p t i o n of the hypotheses r a i s e d b y the research questions a n d s p e c i f i c a t i o n of the m a t h e m a t i c a l m o d e l c h o s e n to analyse those queries. C h a p t e r f o u r also presents the scenarios c o n s t r u c t e d a n d a data n e e d e d to test the h y p o t h e s e s . C h a p t e r f i v e p r o v i d e s a p r e s e n t a t i o n of the results a n d contains a n e x p l a n a t i o n of these results. F i n a l l y i n C h a p t e r six the results are d i s c u s s e d a n d research questions a d d e n d . C o n c l u s i o n s of the thesis are also presented.  5  CHAPTER 2 The Avocado fruit: description and market  overview.  I n this chapter the reader w i l l f i n d basic i n f o r m a t i o n about the a v o c a d o f r u i t s u c h as the o r i g i n of the a v o c a d o , basic d e m a n d a n d s u p p l y characteristics,  and  c u r r e n t i n t e r n a t i o n a l c o m m e r c i a l f l o w s . I n section 2.1 a brief d e s c r i p t i o n of the f r u i t ' s p h y s i c a l characteristics a n d the p r i n c i p a l uses of the a v o c a d o is p r e s e n t e d . Section 2.2 p o r t r a y s the i n t e r n a t i o n a l m a r k e t w h e r e a v o c a d o s are t r a d e d ; a d e s c r i p t i o n of h o w the i n t e r n a t i o n a l c o m m e r c i a l i s a t i o n of a g r i c u l t u r a l g o o d s c a n benefit exporters a n d i m p o r t e r s is also d i s c u s s e d . N e x t i n section 2.3, a d i s c u s s i o n of the major a v o c a d o p r o d u c e r s is p r e s e n t e d . P a r t i c u l a r e m p h a s i s is p l a c e d o n the countries that c a n p l a n t a v o c a d o trees, o b t a i n fertile c r o p s , s u p p l y i n t e r n a l d e m a n d and export abroad. I n section 2.4 the quantities a n d prices c o r r e s p o n d i n g to the m a i n exporters a n d i m p o r t e r s are represented. T h e g l o b a l - t r a d e interactions a m o n g i m p o r t a n d e x p o r t r e g i o n s are d i s c u s s e d i n section 2.5.  6  2.1  Background of the avocado  Persea Americana,  a tree m e m b e r of the e v e r g r e e n Lauraceae f a m i l y , y i e l d s fruits  k n o w n as avocados. N a t i v e of the m i l d forests of s o u t h e r n M e x i c o , it w a s d i s c o v e r e d b y the A z t e c s i n a p p r o x i m a t e l y 291 B C  [ 1 ] . T h e n a m e comes f r o m the e x p r e s s i o n  ahuacatl, w h i c h m e a n s testicle i n N a h u a t l , the A z t e c l a n g u a g e . It is also k n o w n i n F l o r i d a a n d the C a r i b b e a n as alligator pear; the a v o c a d o has d a r k g r e e n s k i n a n d it is s i m i l a r i n size a n d shape to a large pear (Figure 2.1). T h e avocado's flesh has the consistency of f i r m butter a n d has a faint n u t l i k e f l a v o u r [ 2 ] . A v o c a d o s are a n u t r i e n t - d e n s e f o o d source, a n d h a v e the h i g h e s t fibre content of a l l fruits. T h e y serve as a source of f o o d a n t i o x i d a n t s , folate a n d p o t a s s i u m , a n d c a n s u p p l y the d a i l y v i t a m i n r e q u i r e m e n t s . Because a v o c a d o s c o n t a i n a h i g h p r o p o r t i o n 2  of m o n o u n s a t u r a t e d fatty a c i d s , are s o d i u m a n d cholesterol-free, a n d are n a t u r a l l y l o w i n saturated fatty acids, their c o n s u m p t i o n can c o n t r i b u t e to a h e a l t h y diet . 3  T h e p a r t i c u l a r p r o p e r t i e s of this f r u i t h a v e l e d to its c u l t i v a t i o n i n temperate climates a l l o v e r the w o r l d ; also, s e v e r a l varieties of a v o c a d o s h a v e b e e n d e v e l o p e d t h r o u g h c r o s s b r e e d i n g . A n e x a m p l e of this is the Hass v a r i e t y , w h i c h w a s d e v e l o p e d b y chance i n the late 1920's b y M r . R u d o l p h H a s s , a C a l i f o r n i a n p o s t m a n . T h e m o s t common  c o m m e r c i a l varieties  today  are  Hass, Fuerte,  Bacon,  Zutano,  Gwen,  P i n k e r t o n a n d R e e d , yet H a s s r e m a i n s the m o s t i n d e m a n d . 4  Vitamin A , vitamin C, vitamin E, vitamin B1 (thiamin), vitamin B2 (riboflavin) and vitamin B6. California Avocado Commission (CAC). Only 5.0 grams of saturated fat per 250 grams serving. California Avocado Commission (CAC). About 85% of the avocados traded internationally are Hass variety. C A C 3  4  7  It has h a r d s k i n that a l l o w s easy transportation thus, i t is p r e f e r r e d for e x p o r t over other soft s k i n a v o c a d o s s u c h as Fuerte or Bacon. A v o c a d o s are harvested i n different seasons a c c o r d i n g to their t y p e . B a c o n a n d Fuerte r i p e n d u r i n g the f a l l a n d w i n t e r b u t the H a s s v a r i e t y c a n be harvested y e a r - r o u n d .  Figure 2.1 Hass avocados on the tree (a) and cross-section view (b).  O n c e p l a n t e d , a n a v o c a d o tree begins to y i e l d f r u i t b y the t h i r d or f o u r t h year a n d can c o n t i n u e to p r o d u c e f r u i t efficientiy for u p to 40 years. Some c o m m e r c i a l groves use i r r i g a t i o n to enhance a n d increase p r o d u c t i o n . D e p e n d i n g o n the c o u n t r y , a v o c a d o trees can y i e l d a n average of n i n e metric tons per hectare , whereas i r r i g a t e d 5  groves can p r o d u c e 25% m o r e [ 3 ]. A v o c a d o h a r v e s t i n g is l a b o u r - i n t e n s i v e because they are r e q u i r e d to be harvest by h a n d . W i t h the h e l p of c l i p p e r s a n d l a d d e r s u p to 10 meters h i g h , experienced p i c k e r s cut a n d catch the f r u i t i n s i d e large n y l o n bags. Subsequentiy, the avocados are c a r e f u l l y p l a c e d i n t o b i n s a n d are p r o m p t l y t r a n s p o r t e d to the P a c k i n g h o u s e .  5  Average yield of the Mexican State of Michoacan is 1 0 M T per hectare for irrigated groves. California average  yield is 8 M T per hectare.  8  T h e b i n s are stored i n c o l d r o o m s f o r 24 h o u r s i n o r d e r to r e m o v e the f i e l d heat, thus p r e s e r v i n g their q u a l i t y . N e x t , each b i n is p l a c e d o n a c o n v e y o r belt, w h i c h g e n t l y tips the b i n o v e r , a n d the a v o c a d o s are g e n t l y b r u s h e d a n d w a s h e d . T h e f r u i t is transferred to a g r a d i n g belt w h e r e graders c a r e f u l l y check a n d sort the a v o c a d o s b y size. T h e a v o c a d o s are t h e n r o l l e d i n t o p a c k i n g tubs w h e r e t h e y are p l a c e d i n t o t w o layer cartons , w h i c h h o l d different calibre a v o c a d o s . F o r e x a m p l e , a c a r t o n of size 48's 6  h o l d s 48 a v o c a d o s . Before the cartons are sealed, the a v o c a d o s are c h e c k e d once a g a i n for q u a l i t y . T h e sealed cartons are t h e n o r g a n i s e d b y size a n d stacked o n t o 60 c a r t o n pallets of f r u i t w e i g h i n g o n e m e t r i c t o n n e each. If the a v o c a d o s are b e i n g p a c k e d f o r i n t e r n a t i o n a l e x p o r t they are t h e n t r a n s p o r t e d f r o m the p a c k i n g h o u s e i n refrigerated t r u c k s , a n d m a i n t a i n e d i n a constant t e m p e r a t u r e of 4 degrees C e l s i u s a l l the w a y to the grocer o r s u p e r m a r k e t a b r o a d . A v o c a d o is a c o m m o n i n g r e d i e n t i n salads, s a n d w i c h e s a n d s o u p s . D u e to its c r e a m y texture, it c a n be u s e d as a n alternative to cheese a n d s o u r c r e a m . I n s o m e A s i a n countries, it is eaten w i t h s u g a r a n d m i l k o r b l e n d e d w i t h ice as sherbet. It is most r e n o w n e d as a n i m p o r t a n t i n g r e d i e n t of m a n y M e x i c a n dishes. O n e e x a m p l e is the t r a d i t i o n a l M e x i c a n d i p , guacamole (made w i t h a v o c a d o , o n i o n , l i m e juice a n d h o t c h i l i p e p p e r s ) , w h i c h is s e r v e d i n m a n y countries.  S o m e enterprises process the a v o c a d o i n t o f r o z e n paste o r c u t it i n h a l v e s to facilitate its h a n d l i n g a n d t r a n s p o r t a t i o n . T h i s m e t h o d m a k e s it p o s s i b l e to s e l l t h e m successfully i n t o the U S A a n d E u r o p e a n m a r k e t s ; as the f r u i t is a l r e a d y p r o c e s s e d ,  6  The United States uses two layer cartons that weight 38 to 42 pounds of fruit (average 18.7 kilograms). Generally  9  there are n o major trade b a r r i e r s to face [ 4 ]. The cosmetic i n d u s t r y uses the a v o c a d o as a r a w m a t e r i a l for several p r o d u c t s . T h e r i c h o i l extracted f r o m the f r u i t contains m a n y p r o t e i n s a n d m i n e r a l s that m a k e it quite suitable for f a c i a l treatments.  2.2  International Market B u y i n g a n d s e l l i n g a g r i c u l t u r a l p r o d u c t s across i n t e r n a t i o n a l b o u n d a r i e s is  m u c h m o r e intricate t h a n w i t h i n a s i n g l e c o u n t r y . There are m a n y p o s s i b l e barriers s u c h as t r a n s p o r t a t i o n charges, tariffs, a n d elaborate d o c u m e n t a t i o n , as w e l l as risks s u c h as the c o l l e c t i o n of i n v o i c e s , a n d c u r r e n c y f l u c t u a t i o n s , a n d e v e n c r o s s - c u l t u r a l differences a n d business practices. D e s p i t e these p o t e n t i a l b a r r i e r s , i n t e r n a t i o n a l trade has i n c r e a s e d e n o r m o u s l y i n recent years, d u e to i m p r o v e m e n t s i n c o m m u n i c a t i o n a n d t r a n s p o r t a t i o n , the g r o w t h of m u l t i n a t i o n a l c o r p o r a t i o n s a n d the d e v e l o p m e n t of i n t e r n a t i o n a l treaties. T h i s b o o m i n trade has p a r t i a l l y b e e n the result of f a v o u r a b l e g r o w i n g c o n d i t i o n s i n different r e g i o n s , w h i c h m o t i v a t e s h i p m e n t s f r o m p r o d u c t i o n areas w i t h a p r o d u c t i o n a d v a n t a g e [ 5 ]. S t u d y i n g the i n t e r n a t i o n a l a v o c a d o trade is a relevant focus of i n q u i r y because it p r o v i d e s i n s i g h t o n m a n y of the issues p a r t i c u l a r to i n t e r n a t i o n a l trade; e x a m p l e s s u c h as the w a y that t r a n s p o r t a t i o n i m p r o v e m e n t s m a k e f r u i t a v a i l a b l e to distant r e g i o n s , a n d illustrates h o w the trade of fruits a n d vegetables f a v o u r s p a r t i c u l a r producing  regions.  The  case  of  avocado  trade  also  provides  evidence  that  i n t e r n a t i o n a l treaties e l i m i n a t e u n f a i r c o m m e r c i a l practice [ 6 ]. I n this section y o u w i l l  other exporters use single layer cartons that hold 4 kilograms of avocado.  10  f i n d a d e s c r i p t i o n of the a v o c a d o ' s p r i m a r y p r o d u c e r s a n d c o n s u m e r s . It is w o r t h m e n t i o n i n g that s o m e a v o c a d o - p r o d u c i n g countries d o n o t e x p o r t a v o c a d o s because the c r o p is d e s t i n e d s o l e l y for n a t i o n a l c o n s u m p t i o n .  2.3  Major Producers A v o c a d o trees g r o w p r i m a r i l y i n temperate climates w i t h a p l e n t i f u l w a t e r  s u p p l y at a n i d e a l a l t i t u d e of 2,200 metres. These o p t i m a l c o n d i t i o n s m a k e s w a r m countries near the tropics m o s t suitable for a v o c a d o c u l t i v a t i o n ; the tree does not bear f r u i t efficiently i n c o l d climates o r i n extreme temperatures s u c h as i n h o t climates near the equator [ 7 ] . M a n y countries p r o d u c e a v o c a d o s t o d a y . A s d e p i c t e d i n F i g u r e 2.2, the total a m o u n t of a v o c a d o s p r o d u c e d i n 1996 w a s 2,093,258 m e t r i c tonnes  7  ( M T ) . O f this  a m o u n t , M e x i c o represented 38% of the total w o r l d p r o d u c t i o n w i t h a l m o s t 800,000 M T . F o l l o w i n g this w a s the U n i t e d States w i t h 173,000 M T , the D o m i n i c a n R e p u b l i c w i t h 155,000 M T a n d B r a z i l w h i c h p r o d u c e d a c o n s i d e r a b l e 110,000 M T . H i s t o r i c a l l y , large exporters s u c h as C h i l e , Israel, a n d S p a i n p r o d u c e 62,000, 50,000 a n d 40,000 m e t r i c tonnes respectively. T h e g r o u p c a l l e d the rest of the World ( R O W ) i n c l u d e s countries s u c h as C o l o m b i a , I n d o n e s i a a n d P e r u , w h e r e each p r o d u c e s o v e r 50,000 M T . T h e p r o d u c t i o n w i t h i n these countries is c o n s u m e d n a t i o n a l l y a n d exports are n u l l or v e r y s m a l l . S o u t h A f r i c a , K e n y a , a n d N e w Z e a l a n d are also i n c l u d e d here, a l t h o u g h they contribute a v e r y s m a l l share of the w o r l d ' s p r o d u c t i o n (under 2%). Together, R O W countries represent 34% of the total w o r l d p r o d u c t i o n .  11  F i g u r e 2.3 is a c o m p a r a t i v e g r a p h that represents the trade balance of the m a i n a v o c a d o p r o d u c e r s . S u r p r i s i n g l y , M e x i c o , w h i c h is the m o s t significant p r o d u c e r , o n l y exports 6.9% of their total harvest. T h i s is d u e to the h i g h i n t e r n a l c o n s u m p t i o n a n d e a t i n g habits of the M e x i c a n p e o p l e . I n contrast to this, the U n i t e d States, a c o u n t r y that p r o d u c e s p l e n t y of a v o c a d o s for i n t e r n a l c o n s u m p t i o n , s t i l l needs to i m p o r t a considerable a m o u n t i n o r d e r to satisfy their h i g h i n t e r n a l d e m a n d . B o t h the M e x i c a n a n d the U n i t e d States' c o n s u m p t i o n a n d d i s t r i b u t i o n situations w i l l be e x p l a i n e d m o r e t h o r o u g h l y i n C h a p t e r 2. F i g u r e 2.3 also s h o w s that s o m e countries s u c h as C h i l e , Israel a n d S p a i n p r o d u c e s m a l l a m o u n t s of a v o c a d o s c o m p a r e d w i t h M e x i c o , yet e x p o r t a considerable percentage of their p r o d u c t i o n , d u e to attractive i n t e r n a t i o n a l prices for the f r u i t . B r a z i l is a n e x a m p l e of w h a t occurs i n a l m o s t a l l of L a t i n A m e r i c a . T h e i r p r o d u c t i o n is e n t i r e l y for i n t e r n a l c o n s u m p t i o n a n d e x p o r t s or i m p o r t s are o n l y to satisfy a s m a l l excess s u p p l y or d e m a n d . A s w i t h m a n y other fresh p r o d u c t s , the a v o c a d o faces strict r e g u l a t i o n s for i n t e r n a t i o n a l t r a n s p o r t a t i o n . M a n y countries a d o p t s a n i t a r y a n d p l a n t - p r o t e c t i o n safeguards to protect their a g r i c u l t u r a l sectors a n d to a v o i d infestation a n d disease b r o u g h t b y f o r e i g n pests. D e s p i t e the tight s e c u r i t y c o n d i t i o n s , a v o c a d o s are t r a d e d i n t e n s i v e l y t h r o u g h o u t the w o r l d [ 8 ]. I n 1996, the total w e i g h t of a v o c a d o s e x p o r t e d a n d i m p o r t e d w a s 244,424 M T [ 9 ].  7  Data on total amounts of avocado produced is reported from the F A O Database. It is not divided by variety.  12  Share of Total World Production Source: FAO Database 1997.  Dominican 7%  Brazil 5%  Figure 2.2. Avocado Shares by country.  900,000  Main Producers Trade Balance 800,000  Quantities in metric tonnes. Source: F A O database 1997.  700,000 600,000  • Production 500,000  • Exports • Imports  400,000 300,000 200,000  6.9%  •7%  29%  0.5%  4.3%  100,000  57%  39%  3. Mexico  USA  Dominican  Brazil  Chile  Israel  Figure 2.3. Balance trade of avocado producers (percentage of exports).  13  Spain  2.4  M a i n Importers a n d exporters A v o c a d o s t r a v e l l o n g distances to reach i n t e r n a t i o n a l m a r k e t s . H i g h c o n s u m e r  d e m a n d for the f r u i t i n countries s u c h as France, encourages p r o d u c e r s f r o m K e n y a , M e x i c o o r S o u t h A f r i c a - w h i c h are g e o g r a p h i c a l l y v e r y distant f r o m these m a r k e t s - to s h i p their f r u i t across the w o r l d . T h i s e n d e a v o u r i n v o l v e s h i g h t r a n s p o r t a t i o n costs, w h i c h m a k e the p r i c e of the f r u i t a l m o s t p r o h i b i t i v e i n c o u n t r i e s s u c h as J a p a n , w h e r e prices c a n be t w o o r three times as h i g h as F r e n c h prices. T h e m a i n m a r k e t for this f r u i t is E u r o p e , w h e r e countries s u c h as F r a n c e , G r e a t B r i t a i n ( U K ) a n d G e r m a n y , i m p o r t considerable a m o u n t s  ( F i g u r e 2.4).  O f these  countries, France represents the biggest m a r k e t share w i t h 42% of the total w o r l d trade, about 85,000 M T , w h i l e the rest of E u r o p e b u y s half this a m o u n t .  The  N e t h e r l a n d s , E a s t e r n E u r o p e a n d S c a n d i n a v i a n countries also i m p o r t a v o c a d o s , b u t the a m o u n t is c o n s i d e r a b l y less  [10].  I n N o r t h A m e r i c a , o n l y C a n a d a a n d the U n i t e d States i m p o r t a v o c a d o s . Together they account for 28,000 M T , a considerable 14% of total w o r l d trade. Because of the h a r s h w e a t h e r i n C a n a d a , i m p o r t s f r o m other countries are the o n l y source for some  fresh fruits a n d vegetables.  Although  Canadians  are  not  large  avocado  c o n s u m e r s , the i n c r e a s i n g a v a i l a b i l i t y a n d p o p u l a r i t y of M e x i c a n f o o d are i n c r e a s i n g 8  the d e m a n d for the f r u i t . T h e U n i t e d States, h o w e v e r , is a s p e c i a l case because, w h i l e it is a g r o w e r of a v o c a d o s , it still needs to c o m p l e m e n t its i n t e r n a l s u p p l y w i t h i m p o r t s , w h i c h p e a k e d at 25,000 M T i n 1992.  According to Statistics Canada, Canadian per capita consumption of avocado is 0.32 kg, compared with Mexico that has a per capita consumption of 7.8 kg per capita.  14  Main Avocado Importers Quantities in metric tonnes. Source: F A O database 1 9 9 7 . 90,000 80,000 70,000  • France •USA -UK  60.000  - Netherlands - Germany  50,000  - Canada -Japan  40,000 30,000 20,000 10,000  1990  1989  1988  1991  1992  1994  1993  1995  Figure 2.4. Quantities imported into main avocado markets.  Main Avocado Importers Prices in thousands of US Dollars per metric tonne. Source: F A O database 1 9 9 7 .  000  500  000  .500  .000  .500  1988  1989  1990  1991  1992  1993  1994  Figure 2.5. Prices paid for avocado imports in different markets.  15  1995  I n contrast to h i g h E u r o p e a n d e m a n d , m o s t A s i a n m a r k e t s for this f r u i t are r e l a t i v e l y s m a l l . S o m e countries s u c h as I n d o n e s i a , C h i n a a n d T h a i l a n d n e e d n o i m p o r t s because their p r o d u c t i o n s u f f i c i e n t l y satisfies i n t e r n a l d e m a n d . A l s o , the c o n s u m p t i o n habits of s o m e A s i a n cultures either d o not i n c l u d e a v o c a d o , or h a v e a s s i m i l a t e d it v e r y s l o w l y . J a p a n is a n e x a m p l e of a n A s i a n c o u n t r y , w h i c h c o n s u m e a significant a m o u n t of a v o c a d o s . A n average of 3,400 M T of a v o c a d o s is i m p o r t e d i n t o J a p a n f r o m M e x i c o a n d C a l i f o r n i a e v e r y year. It is l o g i c a l to assume that the h i g h p e r capita d i s p o s a b l e i n c o m e of Japanese p e o p l e has created d e m a n d for this i m p o r t , b u t a m o r e l i k e l y e x p l a n a t i o n is the f o o d t r e n d t o w a r d s n e w S u s h i varieties [11].  Other  countries s u c h as C h i n a , I n d o n e s i a a n d the P h i l i p p i n e s p r o d u c e just e n o u g h a v o c a d o s for their i n t e r n a l d e m a n d , t h u s , i m p o r t s are s m a l l or non-existent. N o t e i n f i g u r e 2.5 that the prices p a i d b y E u r o p e a n countries s u c h as France, the U n i t e d K i n g d o m , G e r m a n y , a n d the N e t h e r l a n d s are v e r y s i m i l a r a n d h a v e c h a n g e d o v e r t i m e i n the s a m e m a n n e r . T h i s indicates that E u r o p e a n a v o c a d o m a r k e t is i n essence d r i v e n b y the s u p p l y of the exporters rather t h a n b y i n t e r n a l d e m a n d . W e can also see that Japanese i m p o r t s reach a h i g h e r p r i c e c o m p a r e d to the w o r l d i n general. It is w o r t h w h i l e to note the c o r r e l a t i o n b e t w e e n prices i n the U S A a n d Japan. It w o u l d seem that the prices of these i m p o r t e r s is i n f l u e n c e d b y the s a m e exporter: C a l i f o r n i a w h o s e s u p p l i e s b o t h r e g i o n s , d e t e r m i n e s these prices. F o r e x a m p l e , i n 1993  an  excellent y i e l d increased the a m o u n t of a v o c a d o s e x p o r t e d f r o m C a l i f o r n i a to J a p a n a n d d i m i n i s h e d the p r i c e , w h i l e the s u p p l y i n t o the c o n t i n e n t a l U n i t e d States decreased i m p o r t s f r o m other countries a n d k e p t i n t e r n a l prices l o w [12].  16  Finally,  C a n a d a p a y s a l o w p r i c e for a v o c a d o s c o m p a r e d w i t h other countries because it i m p o r t s m o s t of the f r u i t f r o m M e x i c o , w h e r e a v o c a d o s are cheaper to h a r v e s t t h a n i n California. N o t a l l a v o c a d o p r o d u c e r s e x p o r t their c r o p . O c c a s i o n a l l y i n t e r n a l d e m a n d is too h i g h to p e r m i t i n t e r n a t i o n a l s h i p m e n t s ; m o r e o v e r , p r o d u c e r s can face tight i n t e r n a t i o n a l s a n i t a r y r e g u l a t i o n s that other countries m a n d a t e  to protect  their  a g r i c u l t u r a l sector. T h e a v o c a d o does not escape f r o m these measures w h i c h i n f l u e n c e the l e v e l a n d d i r e c t i o n of trade f l o w s [ 13 ]. T h e last t w e n t y years h a v e w i t n e s s e d a n increase i n the i n t e r n a t i o n a l m a r k e t i n g of the a v o c a d o . G r a d u a l l y , countries l i k e Israel a n d S o u t h A f r i c a h a v e i n v e s t e d t i m e a n d m o n e y to e x p a n d their m a r k e t s a n d b e c a m e the t o p exporters of this f r u i t . I n 1995, the q u a n t i t y of a v o c a d o s e x p o r t e d b y these countries w a s 40,000 a n d 25,000 M T respectively. S p a i n is also a n considerable e x p o r t e r at 25,000 M T , f o l l o w e d b y C h i l e at 20,000 M T a n d the U n i t e d States at 15,000 M T . A b o v e a l l , 1995 m a r k e d the rise of M e x i c o as the strongest e x p o r t e r at 54,000 M T ( F i g u r e 2.6). A s France is the largest i m p o r t e r of a v o c a d o s , s u p p l y s h o u l d l o g i c a l l y c o m e f r o m the m a i n e x p o r t e r s ; p r i m a r i l y Israel, S o u t h A f r i c a , S p a i n a n d M e x i c o . These countries are able to s u p p l y a v o c a d o s efficiently a l l y e a r l o n g because their h a r v e s t seasons occur at different times of the year. W h i l e S o u t h A f r i c a s u p p l i e s F r a n c e f r o m A p r i l to M a r c h , Israel takes o v e r f r o m M a r c h to J u l y . S p a i n a n d some U S A e x p o r t e r s s u p p l y France f r o m J u l y to September a n d M e x i c o a p p r o p r i a t e s the m a r k e t f r o m O c t o b e r to J a n u a r y . W h i l e a l l these exporters centre their efforts a r o u n d the E u r o p e a n  17  m a r k e t , o n l y M e x i c o a n d the U n i t e d States e x p o r t to N o r t h A m e r i c a (Canada) a n d overseas to A s i a (Japan). I n contrast  to  the  above  mentioned, South  A m e r i c a n countries  produce  avocados almost e n t i r e l y for i n t e r n a l c o n s u m p t i o n . O n e e x c e p t i o n is C h i l e , the largest S o u t h A m e r i c a n exporter, w h i c h w i t h the D o m i n i c a n R e p u b l i c , exports p r i m a r i l y to the U S m a r k e t d u r i n g the C a l i f o r n i a n l o w season f r o m N o v e m b e r u n t i l F e b r u a r y . These countries r e l y h e a v i l y o n the U S to m a r k e t their exports; therefore, M e x i c o ' s p o s i t i o n as n e w s u p p l i e r threatens their shares of the m a r k e t . T h i s s i t u a t i o n is d e s c r i b e d f u r t h e r i n C h a p t e r 3. A s w i t h other a g r i c u l t u r a l crops, a v o c a d o p r o d u c t i o n a n d e x p o r t are h e a v i l y i n f l u e n c e d b y w e a t h e r c o n d i t i o n s [14]. N o t e i n F i g u r e 2.6 that quantities e x p o r t e d i n 1993 b y S o u t h A f r i c a , Israel a n d S p a i n are l o w e r t h a n i n p r e v i o u s years d u e to d r o u g h t s i n these countries. O n the other h a n d , M e x i c o is b e i n g e n c o u r a g e d  to  increase exports d u e i n p a r t to a c u r r e n c y d e v a l u a t i o n i n 1994. T h i s event t r i g g e r e d a b o o m i n exports, p a r t i c u l a r l y a g r i c u l t u r a l , w h i c h b r o u g h t t r a d i n g to h i s t o r i c levels a n d resulted i n a p o s i t i v e trade balance (more e x p o r t s t h a n i m p o r t s ) for the M e x i c a n e c o n o m y [15]. It is also w o r t h m e n t i o n i n g the i n v e r s e r e l a t i o n s h i p i n e x p o r t s b e t w e e n C h i l e a n d the U S d e p i c t e d b y this g r a p h . C a l i f o r n i a ' s o u t s t a n d i n g a v o c a d o - p r o d u c t i o n season i n 1993 r e s u l t e d i n m o r e a v o c a d o s b e i n g s o l d d o m e s t i c a l l y a n d i n t e r n a t i o n a l l y , c a u s i n g C h i l e a n i m p o r t s to d r o p substantially. T h i s p a t t e r n w a s repeated i n the season of 1995.  18  Figure 2.6. Quantities exported from major avocado producers.  1.800  Main Avocado Exporters  TT -  Prices in thousands of US Dollars per metric tonne. Source: FAO database 1997.  0.600 • Mexico - Israel - South Africa - Spain -Chile -USA  0.400 0.200  1988  1989  1990  1991  1992  1993  1994  Figure 2.7. Prices paid for avocado imports in various markets.  19  1995  A v o c a d o prices are closely related to the quantities e x p o r t e d . I n F i g u r e 2.7, w e c a n observe the p r i c e p a i d to exporters. C o m p a r i n g G r a p h s 2.6 a n d 2.7 w e c a n detect that p r i c e s for each exporter f a l l w h e n the a m o u n t s u p p l i e d increases. That is certainly true i n the case of M e x i c o a n d the U S , w h e r e prices h a v e gone d o w n since 1993, w h e n e x p o r t s h a v e increased. T h e i n v e r s e p a t t e r n also appears w h e n w e c o m p a r e the price p a i d f o r C h i l e a n a n d S o u t h A f r i c a n exports. A s p e c i a l r e m a r k is i n o r d e r to e x p l a i n the l o w p r i c e p a i d f o r S o u t h A f r i c a n a v o c a d o s . W h i l e the rest of the exporters s h i p H a s s a v o c a d o s , this c o u n t r y p r i m a r i l y e x p o r t s Fuerte a n d G w e n a v o c a d o s . These so-called green-skin varieties d o n o t reach p r i c e s as h i g h as H a s s . N o t e that the prices f r o m M e x i c o , S p a i n , Israel a n d the U S A are i n the s a m e range, f r e q u e n t l y above $1,200 U S d o l l a r s p e r M T . T h i s c a n be e x p l a i n e d b y the fact that the m a j o r i t y of these e x p o r t shares are b o u n d f o r F r a n c e o r elsewhere i n E u r o p e ; this is consistent w i t h the n a t u r e of the m a r k e t s u p p l y . Please refer to the International  Avocado Production  and Trade A p p e n d i x f o r f u r t h e r details about prices,  quantities a n d g r a p h s .  2.5  Interactions and trade balance F i g u r e 2.8 Illustrates a v o c a d o - p r o d u c i n g regions a n d their share of g l o b a l  p r o d u c t i o n o n a w o r l d m a p . B y a n a l y s i n g the e x p o r t i n g a n d i m p o r t i n g countries, a n interesting trade scenario d e v e l o p s . T h e p r i n c i p a l i m p o r t e r of a v o c a d o s is E u r o p e , s u p p l i e d b y N o r t h a n d S o u t h A m e r i c a , as w e l l as A f r i c a a n d the M i d d l e  East.  C o u n t r i e s s u c h as M e x i c o , S o u t h A f r i c a a n d C h i l e are g e o g r a p h i c a l l y distant f r o m the  20  E u r o p e a n m a r k e t ; h o w e v e r i m p r o v e m e n t s i n h a n d l i n g a n d c o l d storage, c o u p l e d w i t h r e d u c t i o n s of transportation times, h a v e  made  them  capable  to compete  with  countries s u c h as Israel a n d S p a i n , r e l a t i v e l y closer to E u r o p e . T h o u g h the U n i t e d States a n d M e x i c o are major p r o d u c e r s i n N o r t h A m e r i c a , the U S c a n n o t s u p p l y a s u f f i c i e n t q u a n t i t y to meet i n t e r n a l d e m a n d d u r i n g the w i n t e r m o n t h s . Therefore, i t r e m a i n s a substantial i m p o r t e r of avocados. Because of a b a n i m p o s e d o n M e x i c a n a v o c a d o s , the p r i n c i p a l sources of i m p o r t s w e r e C h i l e a n d the Dominican Republic. A f r i c a n nations e x p o r t s i g n i f i c a n t quantities of a v o c a d o to E u r o p e , a l t h o u g h p r o d u c t i o n i n m a n y countries tends to be c o n s u m e d l o c a l l y . T h e same pattern of l o c a l c o n s u m p t i o n c a n be o b s e r v e d i n regions s u c h as S o u t h A m e r i c a a n d A u s t r a l i a , w h e r e i n t e r n a l trade f l o w s generally decrease the p r o b a b i l i t y of trade w i t h E u r o p e . A l s o , A s i a p r o d u c e s some a v o c a d o f o r i n t e r n a l c o n s u m p t i o n . H o w e v e r , as oriental cuisine tends to e x c l u d e the a v o c a d o , p r o d u c t i o n is l o w a n d therefore trade is l i m i t e d to countries l i k e H o n g K o n g w h e r e p r o d u c t i o n is non-existent [ 1 6 ] .  Figure 2.8. Interactions of avocado producing areas around the world  21  CHAPTER 3 North American market  F r e q u e n t l y , there are circumstances i n w h i c h w o r l d regions p r o d u c e a n d trade i n t e r n a l l y ; for e x a m p l e , w i t h i n the E u r o p e a n C o m m u n i t y . T h i s r e g i o n has a s t r o n g c o m m e r c i a l trade f l o w of g o o d s a n d services,  c o u p l e d w i t h p o l i t i c a l a n d social  i n t e g r a t i o n [17]. A c o u n t r y c a n p r o d u c e a p a r t i c u l a r i t e m a n d , if d o m e s t i c s u p p l y exceeds d e m a n d , the i t e m c a n e v e n t u a l l y b e c o m e a n e x p o r t to other countries  or  regions. Y e t , s o m e t i m e s that s a m e c o u n t r y i m p o r t s the s a m e p r o d u c t to satisfy i n t e r n a l demand. T h i s latter case occurs i n the U n i t e d States w i t h the a v o c a d o . D u r i n g the s p r i n g a n d s u m m e r m o n t h s , C a l i f o r n i a p r o v i d e s a v o c a d o s for d o m e s t i c c o n s u m p t i o n a n d e v e n exports t h e m to C a n a d a , E u r o p e a n d Japan. B y the late season i n a u t u m n a n d w i n t e r , the U S i m p o r t s a v o c a d o s f r o m other countries i n o r d e r to c o m p l e m e n t  the  l o c a l s u p p l y a n d satisfy d e m a n d . T h i s is a consequence of seasonal p r o d u c t i o n , w h i c h is c o m m o n to m a n y a g r i c u l t u r a l activities. T h i s chapter contains a d e s c r i p t i o n of the N o r t h A m e r i c a n r e g i o n , c o n s i s t i n g of sections 3.1, 3.2, a n d 3.3 for M e x i c o , the U n i t e d States a n d C a n a d a respectively. A s p a r t of the trade agreement c a l l e d N A F T A , these countries m u s t g r a d u a l l y integrate their e c o n o m i c sectors [ 18 ]. It is n o t m y i n t e n t i o n to describe a g r i c u l t u r a l i n t e g r a t i o n d u e to N A F T A , b u t rather to describe a v o c a d o p r o d u c t i o n i n the U S a n d M e x i c o a n d c o n s u m p t i o n d e m a n d i n C a n a d a a n d N o r t h e a s t e r U n i t e d States.  22  The role p l a y e d b y N A F T A i n e n d i n g a n ancient sanitary r e g u l a t i o n i m p o s e d b y the U S o n M e x i c a n a v o c a d o s is d e s c r i b e d i n section 3.5. T h i s r e s t r i c t i o n o n the a v o c a d o trade has i n t e r f e r e d w i t h c o m m e r c e w i t h i n the r e g i o n , f o r c i n g M e x i c o to seek o u t E u r o p e a n a n d e v e n A s i a n m a r k e t s . M e x i c a n p r o d u c e r s conjectured that this sanitary r e g u l a t i o n w a s a b a r r i e r to trade, p o s e d b y the U n i t e d States i n o r d e r to a v o i d c o m p e t i t i o n b e t w e e n M e x i c o a n d the C a l i f o r n i a n a v o c a d o i n d u s t r y . Finally,  there  f o l l o w s a brief  discussion  i n section  3.6  of  the  process  i m p l e m e n t e d to lift the U n i t e d States' b a n o n M e x i c a n a v o c a d o s  3.1  MEXICO M e x i c o is the w o r l d ' s largest a v o c a d o p r o d u c i n g c o u n t r y w i t h a n average y i e l d  of 800,000 m e t r i c tonnes. T h e a m o u n t e x p o r t e d is o n l y 6.8%, s m a l l w h e n c o m p a r e d w i t h the a m o u n t p r o d u c e d , yet e x p o r t s h i p m e n t s h a v e s t e a d i l y increased f r o m 18,829 M T i n 1994 to 33,750 M T i n 1995 a n d to a n e w r e c o r d of 54,595 i n 1996 [ 19 ]. T h e m a i n reason for this l o w p r o d u c t i o n - e x p o r t ratio is the h i g h p e r capita c o n s u m p t i o n of this f r u i t w i t h i n the c o u n t r y : a v o c a d o is eaten d a i l y i n different f o r m s a n d e v e r y M e x i c a n is estimated to c o n s u m e as m u c h as 10 k g each y e a r  [20].  The largest a v o c a d o - p r o d u c i n g r e g i o n lies o n the v o l c a n i c axis that traverses the centre of the c o u n t r y . F i g u r e 3.1 s h o w s that this r e g i o n b e g i n s i n the east i n the state of P u e b l a , crosses t h r o u g h the states of M o r e l o s , M e x i c o , a n d ends at the P a c i f i c O c e a n i n the state of N a y a r i t . M i c h o a c a n is the state that lies i n the m i d d l e of this sector a n d b y itself accounts for 83.3% of total M e x i c a n p r o d u c t i o n , f o l l o w e d b y  23  N a y a r i t M o r e l o s , M e x i c o a n d P u e b l a . A s w e can see i n the p i e chart, total p r o d u c t i o n of the second, t h i r d a n d f o u r t h r a n k e d states accounts for o n l y 8.6% of the c o u n t r y ' s total p r o d u c t i o n ; a v e r y s m a l l ratio c o m p a r e d w i t h p r o d u c t i o n i n M i c h o a c a n [ 2 1 ] . Mexican Avocado Producing Areas  Figure 3.1. Avocado-producing regions and their shares in Mexico.  C o n s e q u e n t l y , it is clear that w i t h m o r e t h a n 80% of M e x i c a n p r o d u c t i o n , M i c h o a c a n is the largest a v o c a d o  p r o d u c i n g r e g i o n i n the w o r l d .  The  highest  concentration of a v o c a d o groves c a n be f o u n d i n the m u n i c i p a l i t y of U r u a p a n , i n the centre of the state. H e r e , groves w i t h i r r i g a t i o n systems represent 71% of the total area harvested a n d p r o d u c e about 10 M T per hectare, whereas the n o n - i r r i g a t e d l a n d p r o d u c e s o n average 7.5 M T per hectare [ 22 ] . There are a p p r o x i m a t e l y 20,000 p r o d u c e r s i n M i c h o a c a n , w h o s e  operations  v a r y a c c o r d i n g to g r o v e size. S o m e o w n e r s harvest h u n d r e d s of hectares, w h e r e a s others o n l y h a v e s m a l l b a c k y a r d p r o d u c t i o n s w i t h a d o z e n trees. T h i s d i v i s i o n of l a n d o w n e r s h i p complicates s m a l l p r o d u c e r ' s efforts to amalgamate into societies to d e f e n d their interests  [23].  24  U s u a l l y large p r o d u c e r s h a v e greater f i n a n c i a l f l e x i b i l i t y a n d invest significant a m o u n t s of m o n e y i n t o fertilisers a n d pesticides to m a i n t a i n h e a l t h y a n d p r o f i t a b l e crops. P r o d u c t i o n costs of a v o c a d o s are d i v i d e d i n t o three m a i n c o m p o n e n t s : 1) l a b o u r (35%), 2) m a n u r e a n d fertiliser (30%), a n d 3) pesticides (20%)  [ 2 4 ] . The i n v e s t m e n t i n  pesticides a n d chemicals is i n e v i t a b l e because n u m e r o u s diseases a n d insects  attack  a v o c a d o trees, yet a l m o s t a l l of these can be easily c o n t r o l l e d b y p e r i o d i c f u m i g a t i o n . Insect species s u c h as seed w e e v i l s or stem weevils  (Conotrachelus aguacatae a n d Conotrachelus perseae)  (Copturus aguacatae) d e s t r o y a v o c a d o s b y p u n c t u r i n g the f r u i t a n d  stems; f r u i t a n d leaf p l a g u e s l i k e t h r i p s a n d b r o w n m i t e s flies  (Phytoseiidae f a m i l y ) , w h i t e  (Diptera, tephritidae), leaf rollers (Amorbia cuneana) a n d o m n i v o r o u s l o o p e r s  (Boarmia Ascotis) d e v e l o p a n d r e p r o d u c e o n the tree Anthracnose  [25].  Diseases  such  as  (Golletotrichum species), f r u i t scrab a n d t r u n k cankers (Botryosphaeria)  attack the f r u i t a n d the tree d i r e c t l y . O n e of the m o s t d e s t r u c t i v e diseases is a v o c a d o root rot  (Phytophthora bohemeria), a k i n d of f u n g u s w h i c h breaks d o w n the leaves a n d  dries out the tree root s y s t e m . O n c e this f u n g u s i n v a d e s a tree it m u s t be cut d o w n a n d b u r n e d , because it c o u l d easily infect the w h o l e g r o v e [ 2 6 ] . Fertiliser a n d p e s t i c i d e use c o n c e r n i n h a b i t a n t s of the r e g i o n because of h e a l t h a n d e n v i r o n m e n t a l repercussions. S o m e large p r o d u c e r s are i n c r e a s i n g their use of b i o - s y s t e m i c fertilisers, w h i c h c o n t a i n chemicals d e s i g n e d to b r e a k d o w n after b e i n g u s e d o n the tree. I n this w a y , g r o w e r s attempt to a v o i d s o i l p o l l u t i o n a n d f i l t r a t i o n of the chemicals to u n d e r g r o u n d w a t e r s h e d  [ 2 7 ] . S A G A R , the M e x i c a n Secretary  of  A g r i c u l t u r e , d e t e r m i n e s the o f f i c i a l list of fertilisers a n d pesticides a l l o w e d i n the  25  region  each  year.  Keeping  in mind  the  potential  discordance  between  r e q u i r e m e n t s i m p o s e d b y the U n i t e d States' D e p a r t m e n t of A g r i c u l t u r e  the  (USDA),  S A G A R authorises c h e m i c a l s that are accepted b y their U S c o u n t e r p a r t . R e c e n t l y , U S D A ' s p l a g u e detection service c l a i m e d that M e x i c a n a v o c a d o s w e r e infected w i t h f r u i t f l y l a r v a e (Anastrepha  ludens, A. serpentina a n d A. striata). A l b e i t true this insect  affects that s o m e M e x i c a n f r u i t s , there is n o scientific e v i d e n c e of a v o c a d o trees o r a v o c a d o f r u i t b e i n g hosts o r carriers. T h i s lack of scientific e v i d e n c e w a s p a r t of the r e a s o n to o p e n p o r t i o n of the U S m a r k e t to M e x i c a n a v o c a d o s . A l t h o u g h a v o c a d o - p r o d u c t i o n requires c o n s i d e r a b l e a m o u n t s of m o n e y to ensure that trees r e m a i n p l a g u e - f r e e / e x p e n s e s are b a l a n c e d b y the r e g i o n s ' l o w l a b o u r cost a n d p l e n t i f u l w a t e r s u p p l y . M i c h o a c a n has o n e of the finest i r r i g a t i o n systems i n all M e x i c o , d u e to the a v a i l a b i l i t y of r i v e r s , l a g o o n s a n d w e l l s . M o r e o v e r , the s o i l i n the r e g i o n is r i c h i n m i n e r a l s f r o m ancient v o l c a n i c a c t i v i t y . Companies  i n U r u a p a n are specialised  according  to  their  role  i n the  c o m m e r c i a l i s a t i o n of the a v o c a d o . There are p r o d u c e r s , p a c k i n g h o u s e s a n d exporters. F e w exporters o w n g r o v e s as w e l l as p a c k i n g h o u s e s ; g e n e r a l l y the exporter w i l l b u y the entire c r o p f r o m a p r o d u c e r , a n d after p i c k i n g it f r o m the tree w i l l t r a n s p o r t it to the p a c k i n g h o u s e . In the p a c k i n g h o u s e , a v o c a d o s are p l a c e d o n a c o n v e y o r belt w h e r e each o n e is cleaned a n d w e i g h e d . T h e n the f r u i t is p l a c e d i n cartons a c c o r d i n g to their size a n d c a r r i e d to a f r e e z i n g c h a m b e r to reduce the t e m p e r a t u r e f o r transport. Sealed i n containers, the a v o c a d o s t r a v e l at a constant t e m p e r a t u r e f r o m the p a c k i n g to the  26  retailer. U p o n a r r i v a l , the f r u i t is u n p a c k e d a n d p l a c e d o n shelves w h e r e it r e m a i n s u n s p o i l e d for a p p r o x i m a t e l y 25 d a y s . T h e entire p r o d u c e r - c o n s u m e r c h a i n d e p e n d s o n the d e s t i n a t i o n : s h i p m e n t s to France take 21 to 25 d a y s to c o m p l e t e the j o u r n e y across the A t l a n t i c , s i m i l a r to the t i m e n e e d e d to r e a c h Japanese p o r t s . T h i s c r o p is v i t a l for M i c h o a c a n ' s l o c a l e c o n o m y ; p e o p l e i n U r u a p a n refer to the a v o c a d o as green gold a n d h o p e to g a i n vast p r o f i t s f r o m its c u l t i v a t i o n . N e v e r t h e l e s s , the larger n u m b e r s of s m a l l p r o d u c e r s i m p e d e efficient o r g a n i s a t i o n a n d c u l t i v a t i o n i n m a n y m u n i c i p a l i t i e s . A l s o , the lack of i n v e s t m e n t keeps s o m e c o m m u n i t i e s f r o m successfully t r a d i n g their p r o d u c t i o n b o t h w i t h i n the c o u n t r y a n d i n t e r n a t i o n a l l y . T h e p o s s i b i l i t y o f e x p o r t i n g i n the n e a r b y f u t u r e to the U n i t e d States m a r k e t h a s a l w a y s been a cherished dream [ 2 8 ] .  3.2  UNITED STATES I n 1994, the U S p r o d u c e d a total o f 154,448 M T of a v o c a d o . T h e state of  C a l i f o r n i a a c c o u n t e d f o r 9 5 % of that c r o p , w i t h F l o r i d a h a r v e s t i n g the r e m a i n i n g 5 % . Interestingly, F l o r i d a u s e d to b e a p r o m i n e n t p r o d u c e r w i t h 4,500 hectares; h o w e v e r , after h u r r i c a n e A n d r e w d e s t r o y e d 5 0 % o f the g r o v e s i n 1992, p r o d u c e r s h a v e n o t r e p l a n t e d a v o c a d o trees b u t h a v e s w i t c h e d to different crops i n s t e a d . H a w a i i h a s l i m i t e d p r o d u c t i o n that is c o n s u m e d i n t e r n a l l y i n the a r c h i p e l a g o ; this p r o d u c t i o n accounts for less t h a n one percent of total U S c r o p [ 2 9 ] . M o s t C a l i f o r n i a n a v o c a d o s are h a r v e s t e d o n 24,200 hectares b e t w e e n S a n L u i s O b i s p o a n d the M e x i c a n b o r d e r , w h e r e select m i c r o c l i m a t e s a l l o w f o r y e a r - r o u n d  27  p r o d u c t i o n . H o w e v e r , a v o c a d o trees h a v e different seasonal y i e l d s a c c o r d i n g to the v a r i e t y . Peak p r o d u c t i o n is registered i n M a y to J u l y , a n d consequently p r o d u c t i o n decreases d u r i n g a u t u m n a n d w i n t e r m o n t h s . Based o n m o n t h l y data f r o m the C a l i f o r n i a A v o c a d o C o m m i s s i o n for the 1988-1995 p e r i o d , F i g u r e 3.2 depicts a t y p i c a l season of a v o c a d o p r o d u c t i o n : i n 1994, p r o d u c t i o n w a s h i g h i n the first half of the year, b u t b y A u g u s t , i n c r e a s i n g i m p o r t s h a d to c o m p l e m e n t the f a l l i n g p r o d u c t i o n . Nonetheless, exports w e r e still i m p o r t a n t i n the later m o n t h s a n d r e m a i n e d h i g h . Monthly USA Avocado Production, Imports and Exports  21,000  Data from January-December 1994 in metric tonnes. Source: CAC, FAO and USDA  18,000 15,000 — - Production  12,000  Exports  9,000  -*t— Imports  6,000 3,000  +  0>  OS  as  2  ov  k  k  <  2  Figure 3.2. Example of seasonal U.S.A. avocado-production and international trade.  H i g h w a t e r costs a n d u r b a n e x p a n s i o n greatly affect p r o d u c t i o n i n S a n D i e g o c o u n t y . Because groves i n this area h a v e a h i g h water r e q u i r e m e n t , g r o w e r s face 9  excessive p r o d u c t i o n costs, p a s s i n g d o w n these expenses to consumers. I n a d d i t i o n , producers  i n some  counties  such  as S a n D i e g o  have  to contend  with  urban  d e v e l o p m e n t ; some p r o d u c e r s , f e a r i n g a decrease o n the v a l u e of the f r u i t , reduce their a g r i c u l t u r a l l a n d a n d g r a d u a l l y s e l l it for h o u s i n g [ 3 0 ] .  ' A mature 10-year-old tree needs about 60 to 100 liters of water daily depending on heat.  28  U S a v o c a d o c o n s u m p t i o n t o p p e d 0.91 k i l o g r a m s p e r p e r s o n i n 1993, the highest l e v e l since 1987 w h e n c o n s u m p t i o n reached one k i l o g r a m p e r capita. C o n s u m p t i o n rose s h a r p l y d u r i n g the 1980's, b u t has d e c l i n e d d u r i n g the e a r l y 1990's. T h i s decline w a s d u e to the 1990 freeze i n C a l i f o r n i a w h i c h l o w e r e d p r o d u c t i o n for several seasons; yet factors s u c h as a rise i n c o n s u m e r i n c o m e , p o p u l a t i o n g r o w t h , i n d u s t r y a d v e r t i s i n g a n d m a r k e t i n g ensure that c o n s u m e r d e m a n d for a v o c a d o s r e m a i n h i g h [31]. A s C a l i f o r n i a is the m a i n area for a v o c a d o - p r o d u c t i o n i n the U n i t e d States, exports f r o m this state are s i g n i f i c a n t a n d i n f l u e n c e the trade f l o w s w i t h i n the U S . A p p r o x i m a t e l y 14,000 M T w e r e e x p o r t e d i n 1994 to France, C a n a d a , J a p a n , H o l l a n d and  the U n i t e d K i n g d o m . F i g u r e 3.3 s h o w s a d e t a i l e d d e s c r i p t i o n of C a l i f o r n i a n  exports, d i v i d e d b y d e s t i n a t i o n . A s d e p i c t e d i n the g r a p h , exports i n the first quarter of the a v o c a d o season h a v e d i v e r s e destinations, m o s t l y to the E u r o p e a n countries; s u b s e q u e n t l y , exports to J a p a n p r e d o m i n a t e w h e n the season p e a k s i n M a y . N o t e that exports to F r a n c e a n d E u r o p e d e c l i n e w h e n exports to J a p a n rise: this is because shipments  into Europe from A p r i l  to J u l y compete  w i t h larger  supplies  from  destinations s u c h as Israel a n d S p a i n a n d therefore the U S m u s t redirect their exports w e s t w a r d to the Japanese m a r k e t . F i n a l l y , U S exports to C a n a d a are stable t h r o u g h o u t the y e a r w h e n c o m p a r e d to s h i p m e n t s to other destinations. A  m o r e d e t a i l e d analysis of a v o c a d o d i s t r i b u t i o n f r o m C a l i f o r n i a i n t o the  c o n t i n e n t a l U n i t e d States w i l l be p r o v i d e d later i n this section. C o m p a r i n g F i g u r e s 3.3 a n d 3.4 reveals that exports f r o m C a l i f o r n i a to J a p a n return more  d o l l a r s p e r k i l o g r a m t h a n a n y other  29  destination, thus, Californian  g r o w e r s can g a i n m o r e b y s e l l i n g their c r o p across the Pacific O c e a n . It is also i m p o r t a n t to note that the C a l i f o r n i a n p r i c e for a v o c a d o s is h i g h e r t h a n i n other countries; w i t h the e x c e p t i o n of J a p a n , p e o p l e i n the U n i t e d States p a y the highest p r i c e for their a v o c a d o s . U S a v o c a d o prices d i s p l a y a definite seasonal p a t t e r n , r i s i n g f r o m September t h r o u g h J a n u a r y as p r o d u c t i o n declines, a n d f a l l i n g a g a i n w h e n p r o d u c t i o n e x p a n d s f r o m M a r c h to J u l y . Prices are g e n e r a l l y h i g h a n d s h o w the greatest a n n u a l v a r i a b i l i t y d u r i n g O c t o b e r a n d N o v e m b e r , w h e n the v o l u m e s of s h i p m e n t s are t y p i c a l l y l o w  [32].  It f o l l o w s f r o m F i g u r e 3.4 that the p r i c e for  a v o c a d o s i m p o r t e d to the U S are g e n e r a l l y h i g h e r d u r i n g the p e a k season because there is a sufficient s u p p l y of C a l i f o r n i a n avocados. W h e n the U S total s u p p l y falls d u r i n g the a u t u m n m o n t h s , i m p o r t s f r o m C h i l e a n d the D o m i n i c a n R e p u b l i c c o m p l e m e n t the C a l i f o r n i a n p r o d u c t i o n . Together, these t w o c o u n t r i e s e x p o r t e d 18,000 M T i n t o the U S i n 1994, w i t h C h i l e s u p p l y i n g 75% of those exports. The U n i t e d States' a v o c a d o m a r k e t is c r i t i c a l for C h i l e , w h i c h has h i s t o r i c a l l y e x p o r t e d a l m o s t 90% of their c r o p to the N o r t h e a s t e r n states. The o n l y e x c e p t i o n to this came i n 1993 w h e n C a l i f o r n i a h a d a n excellent c r o p , w h i c h s h i f t e d e x p o r t s u p a n d i m p o r t s d o w n ; hence, C h i l e w a s f o r c e d to redirect exports to other countries i n E u r o p e a n d to their n e i g h b o u r s i n S o u t h A m e r i c a . I n 1961, C a l i f o r n i a n g r o v e o w n e r s f o u n d e d the California  Avocado  Commission  ( C A C ) , to be the o f f i c i a l i n f o r m a t i o n source for their i n d u s t r y . O n e of the C A C ' s objectives is to increase c o n s u m e r awareness of a n d d e m a n d for the f r u i t o n behalf of the state's 6,000 a v o c a d o g r o w e r s . T o d o so, the C o m m i s s i o n assesses g r o w e r s a  30  objectives is to increase consumer awareness of and demand for the fruit on behalf of the state's 6,000 avocado growers. To do so, the Commission assesses growers a percentage of their revenue to fund a variety of market-development programs in consumer advertising, marketing, public relations, food-service, industry affairs and production research [ 3 3 ] .  Monthly Avocado Exports of the USA Data from January to December 1994 in metric tonnes. Source: C A C , FAO andUSDA  £  2  *  g  «  Figure 3.3. Monthly distribution of exports from the United States.  Prices Paid for USA Avocado Exports and Imports  Data from January-December 1994 in US Dollars per Kilogram. Source: C A C , F A O and U S D A  $2.50  $2.00 4$1.50  $1.00 - France  $0.50  -Japan - USA Imports  0>  - • — Canada Rest of Europe  -X— California  Ot  1  5  Figure 3.4. Monthly distribution of export's prices from the United States.  31  In accordance  w i t h data p r o v i d e d b y the C A C , F i g u r e 3.5  portrays  the  d i s t r i b u t i o n of a v o c a d o s h i p m e n t s o u t of C a l i f o r n i a to each r e g i o n of the U n i t e d States . A s w e can observe, the destinations for C a l i f o r n i a n a v o c a d o s are p r i n c i p a l l y 10  the Pacific r e g i o n (PC) of the U n i t e d States a n d the S o u t h W e s t e r n r e g i o n (SW), a c c o u n t i n g for a l m o s t three quarters of total s h i p m e n t s . The r e m a i n i n g regions receive a c o n s i d e r a b l y l o w e r share of s h i p m e n t s f r o m C a l i f o r n i a . Avocado Shipments from California to USA Regions Source: California Avocado Commission andUSDA  Total Share for Shipments in 1994. 140,189 M T  Figure 3.5. Shares of avocado shipments from California into the Continental United States.  While  the  Northeast  and  East-central  regions  receive  only  14%  of  the  C a l i f o r n i a n o u t p u t , this area h o l d s 43% of the 280 m i l l i o n residents of the U S A . It is 1 1  e v i d e n t that i m p o r t s f r o m C h i l e a n d the D o m i n i c a n R e p u b l i c are necessary to satisfy d e m a n d i n this area d u r i n g the w i n t e r m o n t h s , w h e n C a l i f o r n i a cannot s u p p l y these regions efficiently. Since N o v e m b e r 1997, M e x i c o has b e e n able to e x p o r t a v o c a d o s into the E C a n d N E regions of the U n i t e d States, w h i c h c o u l d s i g n i f i c a n t l y affect C h i l e a n a n d D o m i n i c a n exports. T h i s h y p o t h e s i s w i l l be e x a m i n e d i n the next chapter.  10 11  Shipments do not consider exports, only internal sales into the United States. Please refer to the Appendix for the United States' Population by state.  32  The C a l i f o r n i a A v o c a d o C o m m i s s i o n has increased the d e m a n d for avocados i n the U S w i t h a d v e r t i s i n g a n d p r o m o t i o n a l c a m p a i g n s a n d has also m a i n t a i n e d a u n i f o r m price for the c r o p t h r o u g h o u t the U n i t e d States . The influence of the C A C , 12  as a p r o d u c e r ' s o r g a n i s a t i o n , can be d e d u c e d f r o m f i g u r e 3.6.  Avocado Prices in USA Regions Data in US Dollars per Kilogram. Source: CAC,  $1.00  1996.  +  $0.80 1988  1989  1990  1991  1992  1993  1994  1995  Figure 3.6. Average prices in the United States.  T h i s g r a p h depicts prices for d i f f e r e n t regions i n the U n i t e d States a n d also reflects exports a n d i m p o r t s f r o m 1988 to 1995. H e r e w e see that e x p o r t prices f r o m C a l i f o r n i a tend to be l o w e r t h a n i n t e r n a l prices i n the U S , w h i c h suggest that g r o w e r s ' profits f r o m U S sales are significant. I m p o r t prices are a l w a y s l o w e r t h a n i n t e r n a l U S prices b u t they f o l l o w the same pattern as i n t e r n a l prices. F u r t h e r m o r e , the t r e n d o b s e r v e d o n prices w a s i n f l u e n c e d b y the rise i n o u t p u t i n 1993 f r o m C a l i f o r n i a . The f a l l i n prices w a s a result of h i g h a v a i l a b i l i t y of the f r u i t i n the m a r k e t ; s i m i l a r l y , the 1990 season w a s u n p r o d u c t i v e for the U S p r o d u c e r s a n d therefore prices w e r e h i g h e r .  12  Paper by Hoy Carman and Roberta Cook. University of California at Davis,  33  1995.  3.3  CANADA Because C a n a d a is u n a b l e to g r o w a v o c a d o s d u e to c o l d climate c o n d i t i o n s ,  a v o c a d o s m u s t be i m p o r t e d f r o m other countries. M e x i c o a n d the U n i t e d States are the m a i n s u p p l i e r s to the C a n a d i a n m a r k e t . Statistics C a n a d a data r e v e a l that M e x i c o p r o v i d e s 75% of total i m p o r t s w h i l e the U S s u p p l i e s the r e m a i n i n g 25%; there are s o m e i m p o r t s f r o m other countries, h o w e v e r , these account for less t h a n 0.5% of the total i m p o r t s . 13  I n 1994, C a n a d i a n s c o n s u m e d a r o u n d 7,900 m e t r i c tonnes of a v o c a d o , w h i c h represents  around  0.3  kilograms  per  capita.  Compared  with  the  per  capita  c o n s u m p t i o n i n other i n t e r n a t i o n a l m a r k e t s l i k e Japan a n d France w i t h 0.012 k g . a n d 1.35 k g respectively, C a n a d a appears to be a n excellent d e s t i n a t i o n . I m p o r t s to C a n a d a v a r y a c c o r d i n g to the seasonal p r o d u c t i o n of the m a i n suppliers. A s previously explained, both Mexico and California have year-round but o p p o s i n g p r o d u c t i o n seasons w h i c h n a t u r a l l y influence their e x p o r t s . I n F i g u r e 3.7 w e see that w h i l e M e x i c a n i m p o r t s p r e v a i l t h r o u g h o u t the year, C a l i f o r n i a ' s exports rise i n the s u m m e r m o n t h s . B y O c t o b e r the s i t u a t i o n changes, as M e x i c a n a v o c a d o s reach peak  productivity  and  imports  rise  rapidly. Other  Caribbean  p a r t i c i p a t e , a l t h o u g h m i n i m a l l y , d u r i n g the s u m m e r .  13  Data collected form 1988 to 1996 in the C A N S I M database. Statistics Canada.  34  countries  also  Canadian avocado imports by origin 800.0  Data from January-December 1994 in metric tonnes. Source: Statistics Canada  600.0  400.0  f  200.0  f  81  Figure 3.7. Avocados sold in Canada by Country.  Prices i n C a n a d a are relatively stable a n d r e m a i n above o n e a n d u n d e r t w o C a n a d i a n d o l l a r s p e r k i l o g r a m t h r o u g h o u t the year. G e n e r a l l y , C a l i f o r n i a charges h i g h e r prices for avocados than M e x i c o does, as d e p i c t e d i n F i g u r e 3 . 8 . E v e n d u r i n g the s u m m e r m o n t h s w h e n i m p o r t s f r o m M e x i c o are l o w , prices d o n o t exceed $1.75 C D d o l l a r s per k i l o g r a m . N o t e the decrease of b o t h M e x i c a n a n d U S prices d u r i n g the f a l l m o n t h s ; this is caused b y the large increase of M e x i c a n i m p o r t s , w h i c h forces C a l i f o r n i a n prices d o w n as w e l l . Prices paid in Canada for avocados by origin  Data from January-December 1994 in Cnd Dollars per Kilogram. Source: Statistics Canada  I  ON a.  re  Figure 3.8. Prices paid for avocado imports into Canada.  35  T h e C a n a d i a n a v o c a d o m a r k e t p r o v i d e s a g o o d e x a m p l e for c o m p a r i s o n w i t h the N o r t h e a s t U S for m a r k e t i n g p r e d i c t i o n s about the p o t e n t i a l of this m a r k e t as a n e x p o r t d e s t i n a t i o n for M e x i c a n a v o c a d o p r o d u c e r s . Because C a n a d i a n m a r k e t s approximately  equidistant  from  both  Mexican  and  Californian  are  suppliers,  t r a n s p o r t a t i o n costs are therefore c o m p a r a b l e . F u r t h e r m o r e , these t w o regions share s i m i l a r i t y of p o p u l a t i o n w i t h a h i g h degree of d i s p o s a b l e i n c o m e . A s exports f r o m M e x i c o h a v e n e v e r reached this d e s t i n a t i o n , seems a p p r o p r i a t e to h y p o t h e s i s e about the N o r t h e a s t U S m a r k e t h a v i n g the same characteristics as the C a n a d i a n m a r k e t .  3.4  Avocado-production competitiveness: Michoacan and California A s p r e v i o u s l y d e s c r i b e d , characteristics of a v o c a d o p r o d u c t i o n differ r a d i c a l l y  i n the state of M i c h o a c a n , M e x i c o , a n d s o u t h e r n C a l i f o r n i a i n the U n i t e d States. Differences range f r o m l a b o u r cost a n d l a n d o w n e r s h i p to o r g a n i s a t i o n a n d p r o d u c e r i n t e g r a t i o n . D a t a p r e s e n t e d i n this section w e r e collected f r o m i n t e r v i e w s c o n d u c t e d w i t h p r o d u c e r s f r o m the C a l i f o r n i a A v o c a d o C o m m i s s i o n a n d a v o c a d o g r o w e r s i n U r u a p a n , M i c h o a c a n [34]. First I w i l l describe the M e x i c a n case a n d t h e n contrast it with California. Michoacan T h i s is the m o s t i m p o r t a n t a v o c a d o - p r o d u c i n g r e g i o n i n M e x i c o a n d w i l l be the o n l y state a u t h o r i s e d for exports i n t o the U S . Therefore, the scope of this section is l i m i t e d to this state. I n the m u n i c i p a l i t y of U r u a p a n , the p r i n c i p a l a v o c a d o area w i t h i n  36  the state, major p r o d u c t i o n costs for a v o c a d o p r o d u c e r s are l a b o u r (30-40%), fertiliser a n d m a n u r e (25-30%) a n d pesticides (15-20%) [ 3 5 ] . T h e l a b o u r force u s e d i n M i c h o a c a n is i n t e g r a t e d i n t o crews of expert cutters w h o harvest the a v o c a d o , h a n d l e r s a n d d r i v e r s w h o t r a n s p o r t b i n s f r o m the f i e l d to the p a c k i n g h o u s e , a n d m a n y p a c k e r s w h o h a n d - p i c k each a v o c a d o a n d p l a c e t h e m into c a r t o n boxes. E a c h job has different w a g e rates a c c o r d i n g to expertise, b u t o n average this p e o p l e receive $3.90 U S d o l l a r s d a i l y . 14  Pests a n d diseases represent the m o s t s i g n i f i c a n t p r o b l e m for M e x i c a n g r o v e s . C o m m e r c i a l p r o d u c e r s s p e n d 20% of p r o d u c t i o n costs o n pest c o n t r o l . T h e destructive pests are t h r i p s , b r o w n mites  a n d w h i t e flies. A l l these pests  most are  a d e q u a t e l y c o n t r o l l e d b y the use of pesticides, w h i c h n e e d to be certified b y S A G A R to c o m p l y w i t h e x p o r t i n g a n d i n t e r n a t i o n a l s t a n d a r d s [ 3 6 ] . Bio-systemic  pesticides  15  are u s e d b y s o m e p r o d u c e r s to r e d u c e i m p a c t o n the s o i l a n d to a v o i d f i l t r a t i o n d o w n to u n d e r g r o u n d w a t e r layers or to d r a i n i n t o r i v e r s . M a n y of the p r o d u c e r s a u t h o r i s e d for e x p o r t a t i o n i n t o the N o r t h e a s t e r U S h a v e t r a d i t i o n a l l y i n v e s t e d i n k e e p i n g their g r o v e s pest-free, t h u s the usage of pesticides o n s o m e of these M i c h o a c a n g r o v e s is low  [37].  Since the t i m e of S p a n i s h conquest a n d after the M e x i c a n R e v o l u t i o n , l a n d tenure has b e e n a c o m p l e x issue i n M e x i c a n h i s t o r y  [ 3 8 ] . I n 1992, the M e x i c a n  g o v e r n m e n t a t t e m p t e d to i m p r o v e the p r o d u c t i v e n e s s of less d e v e l o p e d areas of the c o u n t r y b y i n t r o d u c i n g major r e f o r m s to the C o n s t i t u t i o n a l A r t i c l e 27. T h i s article  Calculated in Uruapan, Michoacan based on May 1996 daily wage of $30 pesos with exchange rate of $7.7pesos per US dollar. It is not the intention of this paper to discuss fairness of wage rates in Mexico and U S A . 14  37  e n c o u r a g e d l a n d d i s t r i b u t i o n to s m a l l p r o d u c e r s , created c o m m u n a l parcels c a l l e d ejidos, w h i c h are d e s t i n e d to be u s e d i n a co-operative effort b y the c o m m u n i t y , a n d set restrictions o n the use of the ejido. T h e l o n g - t e r m objective of this r e f o r m w a s to encourage M e x i c a n a g r i c u l t u r a l p r o d u c t i v e n e s s b y r e l a x i n g the rules, w h i c h f o r b a d e p r i v a t e u t i l i s a t i o n of c o m m u n a l l a n d s Regarding  avocado  territories  [39]. i n M i c h o a c a n , 80%  of  the  total  avocado  p r o d u c i n g area is m a d e of g r o v e s w h i c h m e a s u r e less t h a n 12 hectares; these g r o v e s e q u a l 80% of the p r o p e r t y of registered a v o c a d o p r o d u c e r s [40]. T h i s is a n equitable d i s t r i b u t i o n of l a n d tenure a c c o r d i n g to p r e v i o u s M e x i c a n l e g i s l a t i o n ; h o w e v e r , the ejido as a p r o p e r t y structure has scatter l a n d to the l e v e l w h e r e p e o p l e b e c a m e reluctant to gather i n t o societies o r co-operatives to represent their interest a n d r i g h t s ; let alone organise for i n t e r n a t i o n a l e n d e a v o u r s . T h e fear of l o s i n g their l a n d o r b e i n g e x p l o i t e d b y the m a n a g e r s interferes w i t h efficient o r g a n i s a t i o n . A l t h o u g h s o m e s m a l l p r o d u c e r s h a v e successfully created associations, m o s t of t h e m lack the c a p i t a l n e e d e d to d e v e l o p t r a d i n g at the l o c a l a n d i n t e r n a t i o n a l levels. T h e m a i n challenge for M i c h o a c a n p r o d u c e r s is to create o r g a n i s a t i o n s w i t h s o u n d objectives a n d s o l i d f i n a n c i a l s u p p o r t i n o r d e r to efficiently p r o d u c e h i g h q u a l i t y c r o p s . F o r e x a m p l e , p r o d u c e r s i n three m u n i c i p a l i t i e s a r o u n d U r u a p a n h a v e created the c o m p a n y Aguacateros  de Michoacan  Mexico  (AMIMEX)  [3 9]  with  the  p u r p o s e of e x p o r t i n g to the U n i t e d States. T h i s c o a l i t i o n i n v o l v e s 61 g r o v e o w n e r s w h o s e total l a n d area equals 2,000 hectares. O p e r a t i o n sizes are d i v e r s e , r a n g i n g f r o m d o z e n s to h u n d r e d s of hectares; b u t m o r e i m p o r t a n t l y , three p r o d u c e r s h a v e b o t h  15  Bio Systemic pesticides break down into environmentally safe substances when they fall off the tree.  38  p a c k i n g h o u s e s a n d e x p o r t i n g experience.  Thus A M I M E X ' s  p o t e n t i a l for v e r t i c a l  i n t e g r a t i o n a n d i n t r o d u c t i o n i n t o the U S m a r k e t is h i g h . H o p e f u l l y , A M I M E X w i l l emerge as one of m a n y o r g a n i s e d a n d efficient enterprises i n this r e g i o n . California L a b o u r structure i n C a l i f o r n i a is s i m i l a r to that i n M i c h o a c a n i n terms of the roles of w o r k e r s i n v o l v e d i n h a r v e s t i n g . T h e m a i n difference, h o w e v e r , is that i n C a l i f o r n i a , l a b o u r - i n t e n s i v e activities s u c h as h a r v e s t i n g a v o c a d o s f r o m the tree a n d h a n d - p i c k i n g t h e m f r o m the c o n v e y o r belts, d e m a n d m u c h h i g h e r salaries. A n o t h e r difference is that C a l i f o r n i a n w o r k e r s m u s t p a y extra charges s u c h as taxes a n d u n i o n fees. O v e r a l l , the h o u r l y rate p a i d to a n a v o c a d o cutter i n S a n D i e g o C o u n t y is n e a r l y e q u i v a l e n t to the s u m p a i d to a w o r k e r i n U r u a p a n for a d a y ' s w o r k [ 4 1 ] . C a l i f o r n i a n a v o c a d o g r o v e s are susceptible to the same types of pests that threaten g r o v e s i n M i c h o a c a n . O n e d i s t i n c t i o n of s o u t h e r n C a l i f o r n i a , h o w e v e r , is the fact that pesticide use is intensely r e g u l a t e d , as h o u s i n g areas h a v e g r a d u a l l y s u r r o u n d e d a v o c a d o groves. T h e h e a l t h r i s k of pesticide use has e n c o u r a g e d g r o w e r s to seek alternatives, s u c h as i n t e g r a t e d pest m a n a g e m e n t  16  practices [42 ].  The A v o c a d o C o m m i s s i o n , a k e e n s u p p o r t e r of these practices, w o r k s to p r o v i d e i n f o r m a t i o n a n d s u p p o r t to p r o d u c e r s . A l s o , s o m e farmers h a v e p u r s u e d the organic m a r k e t b y a v o i d i n g the use of pesticides a n d fertilisers at a l l ; g r o w i n g a v o c a d o s i n this w a y is u l t i m a t e l y safer for c o n s u m e r s as the f r u i t r e m a i n s c h e m i c a l free, a l t h o u g h prices for o r g a n i c p r o d u c e is h i g h e r t h a n average.  A s international  standards  Integrated Pest Management (IPM) is a sustainable approach to managing pests by combining biological, cultural, physical and chemical tools in a way that minimizes economic, health and environmental risks. (USDAERS) 16  39  e m p h a s i s e the n e e d to r e d u c e of c h e m i c a l m e t h o d s i n f o o d p r o d u c t i o n , M e x i c a n p r o d u c e r s are g r a d u a l l y s e e k i n g o r g a n i c a n d e n v i r o n m e n t a l l y safe alternatives [43 ]. T h e C a l i f o r n i a A v o c a d o C o m m i s s i o n p r o v i d e d the data r e p o r t e d i n Table 3.1. A s w e observe i n table 3.1, M e x i c a n p r o d u c e r s ' face l o w e r o p e r a t i o n costs for a v o c a d o p r o d u c t i o n a n d h a r v e s t i n g . D e v e l o p m e n t costs s u c h as l a n d c l e a r i n g , tree p l a n t a t i o n a n d i n s t a l l a t i o n of i r r i g a t i o n systems are m u c h h i g h e r i n C a l i f o r n i a . T h e fact that i n i t i a l i n v e s t m e n t s are l o w b e c o m e s a n i n c i s i v e reason for the M e x i c a n g r o v e s to b e m o r e p r o d u c t i v e t h a n C a l i f o r n i a n [ 4 4 ] . T h u s , table 3.1 c l e a r l y d i s t i n g u i s h e s M e x i c o ' s c o m p e t i t i v e advantage o v e r C a l i f o r n i a i n the area of a v o c a d o p r o d u c t i o n . M e x i c a n e x p e n d i t u r e s total less t h a n h a l f those of C a l i f o r n i a d u e to t h e l o w e r costs of l a n d , l a b o u r a n d i r r i g a t i o n . F u r t h e r m o r e , as r e p o r t e d b y C A C , C a l i f o r n i a n g r o w e r s face a n average m a r k e t p r i c e of 76 cents p e r p o u n d , a price-cost m a r g i n of 2.05, t w i c e the b r e a k - e v e n p o i n t of 37 cents. I n M e x i c o this m a r g i n is 3.2, w h i c h i s larger w h e n compared with California. Table 3.1. Production costs reported by grove owners. Amounts in US dollars. Source: California Avocado Commission.  Mexico  California  $6,500  $20,000 - $26,000  Annual cost of bearing trees  $600 - $900  $5,200 - $5,700  Break-even point for growers (average yield of 10,000 pounds)  9 cents/lbs.  37 cents/lbs.  Average market price (1996)  25 cents/lbs.  76 cents/lbs.  3.2  2.05  Development costs  Cost-Price ratio  N e v e r t h e l e s s , C a l i f o r n i a has a c o m p e t i t i v e a d v a n t a g e o v e r M e x i c o i n the area of producer  organisation.  Previously  mentioned,  u n o r g a n i s e d as a result of heterogeneous  Michoacan  production  is  quite  l a n d o w n e r s h i p , w h i c h also causes g r o v e  40  care a n d p r o d u c t i o n to v a r y greatly. F e w M e x i c a n p r o d u c e r associations  exist,  r e p r e s e n t i n g a s m a l l percentage of the w h o l e . A s there are m a n y i n d i v i d u a l p r o d u c e r s a n d each association seeks to benefit their o w n m e m b e r s , a c o m m o n strategy to face i n t e r n a t i o n a l markets has b e e n d i f f i c u l t to d e v e l o p . I n contrast, the C a l i f o r n i a A v o c a d o C o m m i s s i o n has a m a l g a m a t e d almost 90% of a l l p r o d u c e r s i n the state. A s r e v e a l e d i n the s t u d y b y H o y a n d C o o k (1995), w i t h a d v e r t i s i n g a n d p u b l i c i t y the C o m m i s s i o n has b e e n able to increase the d e m a n d for a v o c a d o s i n the U n i t e d States [ 4 5 ] . T h i s c o m m o n f r o n t has also b e e n u s e f u l to p r o d u c e r s w h e n f a c i n g the threat of l o s i n g m a r k e t share w h e n M e x i c a n a v o c a d o s are e x p o r t e d to the U n i t e d States. C A C f i l e d m a n y concerns about a p r o p o s a l presented b y U S D A to a l l o w i m p o r t a t i o n f r o m M e x i c o ; the association successfully d e l a y e d the d e c i s i o n o v e r this p r o p o s a l w i t h m a n y actions s u c h as p o l i t i c a l l o b b y i n g p l u s r a d i o and newspaper adds [46]. A F i n a l note r e g a r d i n g the relative c o m p e t i t i v e n e s s of M e x i c a n a n d C a l i f o r n i a n a v o c a d o p r o d u c t i o n is that fact that M e x i c a n a v o c a d o s are m o r e i n t e r n a t i o n a l l y accepted t h a n the a v o c a d o s f r o m a n y other c o u n t r y . It is w e l l k n o w n that Japanese s t a n d a r d s r e g a r d i n g pest c o n t r o l a n d s u p e r v i s i o n are v e r y strict exporters  have  e x p o r t e d w i t h o u t p r o b l e m s to J a p a n  for m a n y  [47]; Mexican years,  whereas  a v o c a d o s e x p o r t e d f r o m C h i l e o r the D o m i n i c a n R e p u b l i c are n o t accepted i n Japan. M e x i c a n h i g h q u a l i t y s t a n d a r d s w e r e cited b y the M e x i c a n d e l e g a t i o n d u r i n g N A F T A n e g o t i a t i o n s a n d a p p e a r e d a g a i n i n the p r o p o s a l for M e x i c a n e x p o r t a t i o n i n t o the N o r t h e a s t U S , w h i c h is the next t o p i c of d i s c u s s i o n .  41  3.5  NAFTA  and the avocado i n d u s t r y  T h e N o r t h A m e r i c a n Free T r a d e A g r e e m e n t ( N A F T A ) has b e e n a n issue of great d i s c u s s i o n o n account of its l o n g - t e r m i m p l i c a t i o n s for the economies a n d the p e o p l e s of C a n a d a , the U n i t e d States a n d M e x i c o . N A F T A is a n agreement  which  touches a l l levels of the e c o n o m y ; h o w e v e r , I w i l l focus o n its r a m i f i c a t i o n s for the a g r i c u l t u r a l sector o n l y , p a r t i c u l a r l y for the a v o c a d o m a r k e t a n d i n d u s t r y of N o r t h A m e r i c a . T h e scope of this section w i l l concentrate o n the legislative process a n d f u n c t i o n a l i m p a c t of the agreement o n b o t h p r o d u c e r s a n d c o n s u m e r s i n M e x i c o a n d the U n i t e d States. A s M e x i c o a n d C a n a d a share large b o r d e r s w i t h the U n i t e d States a n d relations of these e c o n o m i e s i n terms of a g r i c u l t u r e is significant. T h e e x p o r t m a r k e t s of M e x i c o a n d C a n a d a are c r i t i c a l for U S farmers. S o u t h of the U S b o r d e r , the M e x i c a n m a r k e t has s i g n i f i c a n t l y e x p a n d e d e c o n o m i c a l l y since 1986, w h e n M e x i c o j o i n e d the W o r l d T r a d e O r g a n i s a t i o n ( f o r m e r l y the G e n e r a l A g r e e m e n t of Tariffs a n d T r a d e , G A T T ) . H o w e v e r , it w a s n o t u n t i l 1994 that a g r i c u l t u r a l trade b e t w e e n these countries g r e w to r e c o r d levels w i t h the i n i t i a t i o n of N A F T A [48 ]. F r o m $3.6 b i l l i o n U S d o l l a r s i n 1993, the U n i t e d States increased its a g r i c u l t u r a l exports to M e x i c o to $4.12 b i l l i o n d o l l a r s i n 1994. A f t e r the 1994 M e x i c a n peso d e v a l u a t i o n , h o w e v e r , trade w i t h the U n i t e d States fell to $3.7 b i l l i o n U S d o l l a r s . N e v e r t h e l e s s , 1996 b r o u g h t m o r e f a v o u r a b l e c o n d i t i o n s for trade w h e n the s u m of a g r i c u l t u r e trade reached $4.89 b i l l i o n U S d o l l a r s [49 ].  42  T h i s a g r i c u l t u r a l trade g r o w t h has p r o v e d b e n e f i c i a l to M e x i c o . A l t h o u g h the total v a l u e of M e x i c a n exports to the U S c h a n g e d little o v e r 1993-1994 ($2.7 to $2.8 b i l l i o n d o l l a r s ) , the peso d e v a l u a t i o n i n late 1994 p r o v o k e d a substantial e x p o r t increase, $3.7 b i l l i o n U S d o l l a r s i n 1995. B y 1996, the a m o u n t e x p o r t e d stabilised at $3.6 b i l l i o n U S d o l l a r s a n d s h o w s a n i n c r e a s i n g t r e n d since [ 50 ]. T h e increase i n trade has l e d to a n u m b e r of trade d i s p u t e s [51]. W i t h r e g a r d s to M e x i c o , the b u l k of a g r i c u l t u r a l trade-related p r o b l e m s are i n the area of sanitary a n d p h y t o s a n i t a r y r e g u l a t i o n s . N A F T A established the f r a m e w o r k for free trade i n 17  f o o d a n d a g r i c u l t u r a l p r o d u c t s for N o r t h A m e r i c a , b u t agreements are different a n d b i l a t e r a l for each m e m b e r . O n e of the roles of N A F T A is to articulate p o l i c i e s to ensure that m e m b e r s d o n o t use sanitary a n d p h y t o s a n i t a r y r e g u l a t i o n s as d i s g u i s e d trade barriers. During N A F T A  negotiations, the l o n g - s t a n d i n g U S p h y t o s a n i t a r y b a n  on  M e x i c a n a v o c a d o i m p o r t s w a s u p h e l d as a n e x a m p l e of a n u n f a i r trade b a r r i e r [52 ]. M e x i c o h a d requested a r e v i s i o n o n the b a n m a n y times, a n d i n 1994 the M e x i c a n D e p a r t m e n t of A g r i c u l t u r e ( S A G A R ) s u b m i t t e d a p r o p o s a l to p e r m i t e n t r y of its a v o c a d o s f r o m pest-free zones to a l i m i t e d r e g i o n of the U S . D e s p i t e the intent of N A F T A to p r e v e n t s u c h restrictions, M e x i c a n officials a n d p r o d u c e r s c l a i m that sanitary a n d p h y t o s a n i t a r y r e g u l a t i o n s are still b e i n g u s e d as b a r r i e r s to restrict the e n t r y of M e x i c a n a v o c a d o s i n t o the U n i t e d States. M a n y argue that the U S b a n w a s justified i n the past w h e n M e x i c a n p r o d u c e r s l a c k e d pest  43  m i t i g a t i o n techniques. Since the 1980's, h o w e v e r , s a n i t a r y c o n d i t i o n s i n M e x i c a n g r o v e s h a v e c h a n g e d to c o m p l y w i t h the U S s a n i t a r y a n d p h y t o s a n i t a r y r e g u l a t i o n s a n d the b a n is n o l o n g e r j u s t i f i e d [53]. O f f i c i a l s a n d p r o d u c e r s f r o m M e x i c o h a v e d e c l a r e d that the U S g o v e r n m e n t has m a i n t a i n e d the b a n to protect its d o m e s t i c avocado  i n d u s t r y f r o m f o r e i g n c o m p e t i t i o n . T h i s b a n has r e s u l t e d i n c o u n t e r  a g r i c u l t u r a l r e g u l a t i o n s i n t r o d u c e d b y M e x i c o , w h i c h are d e s i g n e d to restrict the e n t r y of some U S a g r i c u l t u r a l p r o d u c e , s u c h as stone f r u i t a n d a p p l e s , as r e t a l i a t i o n against the b a n o n a v o c a d o s . A s of N o v e m b e r 1997, a v o c a d o s f r o m M i c h o a c a n w i l l be p e r m i t t e d f o r sale i n certain r e g i o n s of the U S . A n analysis of the process f o l l o w e d b y M e x i c o to b r i n g d o w n this b a n w i l l be the focus of the next section.  3.6  Proposal and legislative process to allow Mexican avocado imports into the United States A s p r e v i o u s l y m e n t i o n e d , M e x i c o h a s n o t b e e n able to e x p o r t fresh a v o c a d o s  i n t o the U S since 1914 d u e to a p h y t o s a n i t a r y q u a r a n t i n e . Since 1972, M e x i c a n authorities h a v e f i l e d three p r o p o s a l s to re-evaluate the v a l i d i t y of this m e a s u r e , w h i c h has b e c o m e a l o n g s t a n d i n g d i s p u t e b e t w e e n the t w o countries. T h e objective of these p r o p o s a l s  w a s to d e t e r m i n e  whether  recent  pest  mitigation procedures  p e r f o r m e d i n M e x i c o c o u l d p e r s u a d e the U S D A to revise the q u a r a n t i n e a n d a l l o w M e x i c a n i m p o r t s , w i t h o u t p o s i n g a n y r i s k to the d o m e s t i c U S groves [ 54 ].  The term sanitary refers to human and animal health; the term phytosanitary refers to plant health. These regulations are designed to protect human, animal and plant health by restricting the importation of certain products. To be valid, these regulations have to be supported by sound scientific data. W T O . 17  44  Since the 1970s, M e x i c o has a p p r o a c h e d U S D A w i t h different p l a n s to a l l o w fresh a v o c a d o e x p o r t a t i o n . A P H I S , the U S A n i m a l a n d P l a n t H e a l t h  Inspection  Service, r e v i s e d those p r o p o s a l s a n d scientific e v i d e n c e r e v e a l e d n o traces of a n y pests i n i n s p e c t e d g r o v e s ; therefore p r e l i m i n a r y a v o c a d o s f r o m M i c h o a c a n w e r e c o n s i d e r e d for e x p o r t i n t o the U n i t e d States. H o w e v e r , a scientific t e a m sent b y the C a l i f o r n i a A v o c a d o C o m m i s s i o n ( f o r m e r l y C a l i f o r n i a A v o c a d o A d v i s o r y B o a r d ) i n 1975, f o u n d some g r o v e s infested w i t h mites w h i c h c o u l d be p o t e n t i a l l y d a n g e r o u s to C a l i f o r n i a n o r c h a r d s . A s a result, U S D A d e c l i n e d the M e x i c a n p r o p o s a l i n 1976. D u r i n g the 1980's the U S D A ' s p o l i c i e s t o w a r d s M e x i c a n a v o c a d o i m p o r t s b e c a m e c o n s e r v a t i v e a n d n o M e x i c a n p r o p o s i t i o n s w e r e accepted. T h e e a r l y 1990s s a w the i n t r o d u c t i o n of the concept of a N o r t h A m e r i c a n Free T r a d e A g r e e m e n t that w o u l d create a c o n t i n e n t a l free trade z o n e b y g r a d u a l l y e l i m i n a t i n g barriers to trade ( N A F T A ) . T h e e n l i v e n e d the p r o s p e c t  of M e x i c a n a v o c a d o exports; hence,  Sanidad  concept  Vegetal,  the  M e x i c a n e q u i v a l e n t to A P H I S , d e s i g n e d a n d presented a draft i n 1994 w h i c h w a s e v a l u a t e d a n d accepted b y the U S g o v e r n m e n t . T h e Final Rule o n this matter r e q u i r e d the a p p r o v a l of several a d m i n i s t r a t i v e agencies. O n N o v e m b e r 15 , 1994, the U S D A p u b l i s h e d a n a d v a n c e notice of proposed th  rule making i n the F e d e r a l Register, a n n o u n c i n g that A P H I S h a d r e c e i v e d a request f r o m the G o v e r n m e n t of M e x i c o to a l l o w , u n d e r certain c o n d i t i o n s , the i m p o r t a t i o n of fresh H a s s a v o c a d o f r u i t g r o w n i n a p p r o v e d o r c h a r d s i n a u t h o r i s e d m u n i c i p a l i t i e s i n M i c h o a c a n , M e x i c o , into certain areas of the U n i t e d States. T h e U S D A  45  solicited  c o m m e n t s c o n c e r n i n g the M e x i c a n G o v e r n m e n t ' s request a n d p u b l i c hearings w e r e held i n November. O n J u l y 3 , 1995, U S D A p u t f o r w a r d a proposed rule to a l l o w fresh M i c h o a c a n rd  H a s s a v o c a d o f r u i t i n t o the U S , i n response to the M e x i c a n g o v e r n m e n t ' s request. T h i s d o c u m e n t i n c l u d e d a d d i t i o n a l p h y t o s a n i t a r y r e q u i r e m e n t s , w h i c h h a d b e e n expressed i n c o m m e n t s m a d e d u r i n g the 1994 h e a r i n g s . T h e legislative process r e q u i r e d another c a l l f o r c o m m e n t s d u r i n g meetings, a n d after f i v e m o n t h s , a d d i t i o n a l 2,080 c o m m e n t s c o n c e r n i n g this proposed rule w e r e r e c e i v e d b y N o v e m b e r 1995. A b o u t 60% of those c o m m e n t a r i e s w h e r e f r o m p e o p l e w h o m i d e n t i f i e d themselves  as w o r k i n g i n the  d o m e s t i c U S a v o c a d o i n d u s t r y , either d i r e c t l y as g r o w e r s , p a c k e r s , a n d s h i p p e r s , o r i n d i r e c t l y as p a r t of their w o r k i n associated fields (as a g r i c u l t u r a l consultants, pest c o n t r o l a d v i s o r s , n u r s e r y m e n , etc.). These 60% o p p o s e d the p r o p o s a l ; o n l y 30% s u p p o r t e d the p r o p o s i t i o n . T h e r e m a i n i n g 10% a r g u e d b o t h sides of the issue, a n d a s k e d o n l y that scientific m e t h o d s be the sole c r i t e r i o n f o r d e c i s i o n - m a k i n g . Those s u p p o r t i n g the p r o p o s e d r u l e g e n e r a l l y expressed their f a i t h i n the a b i l i t y of the p r o p o s e d systems approach to a l l o w f o r the safe i m p o r t a t i o n of H a s s a v o c a d o s f r o m M e x i c o , a n d also cited the n e e d f o r the U n i t e d States to l e a d the w a y i n the e l i m i n a t i o n of n o n - t a r i f f i n t e r n a t i o n a l trade b a r r i e r s  [55].  Those w h o o p p o s e d the proposed rule w e r e g e n e r a l l y sceptical of h o w closely the safeguards  w o u l d be f o l l o w e d i n M e x i c o a n d q u e s t i o n e d A P H I S ' a b i l i t y to  effectively m o n i t o r a n d enforce the safeguards c o n t a i n e d i n the systems  approach.  C o m m e n t s also s p o k e of dissatisfaction w i t h the q u a n t i t y o r q u a l i t y of the pest  46  t r a p p i n g a n d s u r v e y c o n d u c t e d i n M e x i c o , w h i c h w e r e f o r m u l a t e d b y the C a l i f o r n i a Avocado Commission. After  thoroughly  answering  a l l the  comments  expressed  during  the  a d m i n i s t r a t i v e p r o c e d u r e , the U S D A p u b l i s h e d i n the F e d e r a l Register its Final  Rule  r e g a r d i n g this matter, o n F e b r u a r y 5th, 1997. T h e U S D A d e c i d e d to p e r m i t i m p o r t s of fresh H a s s a v o c a d o f r u i t g r o w n i n a p p r o v e d o r c h a r d s i n M i c h o a c a n , M e x i c o , subject to a systems approach [ 5 6 ] . T h i s s y s t e m i s . d e s i g n e d to r e d u c e the r i s k of t r a n s p o r t i n g a v o c a d o pests into the U n i t e d States a n d w a s m o d e l l e d o n successful  programs  d e s i g n e d f o r the i m p o r t a t i o n of tomatoes, oranges, a n d p e p p e r s [ 57 ]. A  systems  approach  requires  avocados  to pass t h r o u g h a n o v e r l a p p i n g  succession of safeguards a i m e d at detecting certain pests, i n c l u d i n g : 1. H o s t resistance to f r u i t flies. 2. F i e l d s u r v e y s f o r stem a n d seed w e e v i l s a n d f r u i t flies ( O r c h a r d s w i l l receive o r b e d e n i e d o r c h a r d certification f o r e x p o r t o n the basis of a s u r v e y p e r f o r m e d b y A P H I S p e r s o n n e l . S u r v e y s m u s t s h o w m u n i c i p a l i t i e s to be free of targeted  seed  pests at a 95% confidence level.) 3. T r a p p i n g a n d f i e l d bait treatments for f r u i t flies. 4. F i e l d s a n i t a t i o n practices to decrease the chances of w e e v i l o r f r u i t f l y establishment (fallen f r u i t m u s t be p i c k e d u p a n d d i s p o s e d of at least once a w e e k , p r u n i n g a n d dead branch removal).  47  5. Post-harvest safeguards against f r u i t flies a n d other pests (cover h a r v e s t e d f r u i t , t i m e l y m o v e m e n t to p a c k i n g houses, s c r e e n i n g a n d d o u b l e - d o o r systems i n p l a c e i n p a c k i n g houses). 6. W i n t e r s h i p p i n g to p r e v e n t f r u i t flies a n d other pests (cooler temperatures d u r i n g harvest result i n l o w e r f r u i t f l y a n d other pest a c t i v i t y ) . 7. P a c k i n g h o u s e i n s p e c t i o n a n d f r u i t c u t t i n g to detect w e e v i l s o r f r u i t flies (detection of pests w i l l m e a n the s h i p m e n t c a n not be e x p o r t e d ) . 8. P o r t - o f - a r r i v a l i n s p e c t i o n to detect pests ( s a m p l i n g a n d v e r i f i c a t i o n b y a n A P H I S inspector of the p h y t o s a n i t a r y certificate a n d p a p e r w o r k m u s t specify l i m i t e d d i s t r i b u t i o n to d e s i g n a t e d States). 9. D i s t r i b u t i o n l i m i t e d to 19 N o r t h e a s t e r States a n d the D i s t r i c t of C o l u m b i a (any t r a n s p o r t e d pests w i l l n o t s u r v i v e because of c o l d w e a t h e r a n d the lack o f suitable hosts).  A s d e s c r i b e d b y the system approach, the N o r t h e a s t states presented i n F i g u r e 3.9 w e r e chosen b a s e d o n the fact that f r o m N o v e m b e r to A p r i l , the r e g i o n ' s h a r s h w i n t e r c o n d i t i o n s w o u l d m i n i m i z e pest s u r v i v a l . A l s o notice that d u e to the g e o g r a p h i c a l distance of these states f r o m C a l i f o r n i a a n d F l o r i d a , b o t h zones of d o m e s t i c a v o c a d o p r o d u c t i o n , the p o s s i b i l i t y of pest infestation is lessened  48  [58].  Figure 3.9. Northeastern United States allowed to import fresh Mexican Hass avocado  There w a s b u t one f i n a l a d d i t i o n to the proposed rule. In o r d e r to ensure that a v o c a d o s w i l l n o t be d i v e r t e d f r o m a p p r o v e d destinations or s h i p p i n g channels to C a l i f o r n i a , F l o r i d a , a n d other a v o c a d o - p r o d u c i n g areas, avocados m u s t be s h i p p e d i n sealed containers u n d e r C u s t o m s b o n d w i t h c l e a r l y l a b e l l e d N o r t h e a s t destinations. A l s o , each piece of f r u i t m u s t be i n d i v i d u a l l y l a b e l l e d w i t h a sticker d e n o t i n g its origin.  3.7  S y n o p s i s of a v o c a d o trade characteristics i n N o r t h A m e r i c a . A f t e r d e s c r i b i n g the nature of a v o c a d o p r o d u c t i o n , trade a n d p a r t i c u l a r issues  of each c o u n t r y i n N o r t h A m e r i c a , this section w i l l assemble a l i s t of p a r t i c u l a r characteristics that matter for this thesis. T h i s l i s t w i l l be later u s e d to s u p p o r t the hypotheses.  49  =>  Lets b e g i n b y d e s c r i b i n g the M e x i c a n capacity to s u p p l y a v o c a d o s u n d e r the c o n d i t i o n s d e t e r m i n e d b y the USDA  system approach d e s c r i b e d i n section  3.6.  M i c h o a c a n has factors s u c h as o p t i m u m weather c o n d i t i o n s , l o w l a b o u r w a g e s , a n d w a t e r accessibility, w h i c h p e r m i t vast p r o d u c t i o n of a v o c a d o s ; f r u i t p r o d u c e d in  this  region  can  therefore be  produced  competitively  as  compared  with  e x p e n s i v e a n d cost-intensive C a l i f o r n i a n groves. F u r t h e r m o r e , the p e r i o d f r o m N o v e m b e r to A p r i l selected b y U S D A to a l l o w i m p o r t a t i o n f r o m M i c h o a c a n coincides w i t h M e x i c a n o r c h a r d p e a k - p r o d u c t i o n , thus the a v a i l a b i l i t y of a v o c a d o s c o u l d p r o v e a g o o d c o m p l e m e n t to the C a l i f o r n i a n s u p p l y of the N o r t h e a s t . =>  T h e system approach specifies that o n l y selected g r o v e s f r o m M i c h o a c a n can export  avocados  into  the  USA . 1 8  Beginning  i n October  1997,  the  program  a u t h o r i s e d f o u r c o m p a n i e s to initiate s h i p m e n t s i n N o v e m b e r ; these c o m p a n i e s o w n 2,000 hectares of M i c h o a c a n groves. If w e consider that a hectare of a v o c a d o trees i n M i c h o a c a n y i e l d s a n average of eight m e t r i c tonnes,  the  maximum  M e x i c a n s u p p l y to the U n i t e d States c o u l d not exceed 16,000 M T . T h i s c o u l d be i n t e r p r e t e d as M e x i c a n s u p p l y to the U n i t e d States b e i n g r e g u l a t e d b y the areas a u t h o r i s e d to export. =>  O n N o v e m b e r 7 , 1997, the first a v o c a d o - s h i p m e n t entered the U n i t e d States th  t h r o u g h the Texas b o r d e r . T h e M e x i c a n e x p o r t c o m p a n i e s stated that their total exports  to the N o r t h e a s t w o u l d o n l y be 5,000 M T d u r i n g the season  [59].  A l t h o u g h a u t h o r i s e d p r o d u c e r s are able to s u p p l y u p to sixteen t h o u s a n d metric  18  Specialists from USDA-APHIS  and SAGAR-Sanidad  Vegetal authorize groves and packing facilities.  50  tonnes, restricting their exports to the U S A - N E m a r k e t indicates that it is s t i l l l u c r a t i v e for these c o m p a n i e s to participate i n other m a r k e t s . =>  C a l i f o r n i a w i l l r e m a i n a n i m p o r t a n t a v o c a d o p r o d u c e r because M e x i c a n s u p p l y w i l l be l i m i t e d . C o n t r a r y to the a p p r e h e n s i v e c l a m o u r of the C a l i f o r n i a A v o c a d o C o m m i s s i o n , M e x i c a n p a r t i c i p a t i o n of the N o r t h e a s t m a r k e t is not a threat to C a l i f o r n i a n p r o d u c e r s . P e r h a p s e x p e n s i v e C a l i f o r n i a n a v o c a d o s w i l l be g r a d u a l l y shifted out of the N o r t h e a s t m a r k e t because of p r o d u c t i o n competitiveness. M e x i c o a n d countries s u c h as C h i l e c o u l d t o t a l l y s u p p l y the N o r t h e a s t d u r i n g the w i n t e r m o n t h s . T h i s fact c o u l d p r o v e b e n e f i c i a l to C a l i f o r n i a because c o u l d  make  p r o d u c e r s able to s h i p a v o c a d o s to A s i a n o r E u r o p e a n m a r k e t s instead of the d o m e s t i c N o r t h e a s t . T h i s u n i n t e n t i o n a l s u p p o r t f r o m their M e x i c a n c o u n t e r p a r t c o u l d compensate the C a l i f o r n i a n p r o d u c e r s ' loss of U S A - N E m a r k e t w i t h better opportunities abroad. A c c o r d i n g to i n f o r m a t i o n p r o v i d e d b y the C a l i f o r n i a A v o c a d o C o m m i s s i o n a n d p o r t r a y e d i n F i g u r e 3.5, the N o r t h e a s t r e g i o n of the U n i t e d States ( U S A - N E ) is r e l a t i v e l y s m a l l i n terms of a v o c a d o s h i p m e n t s . N o n e t h e l e s s , a l m o s t 4 3 % of the U n i t e d States p o p u l a t i o n reside i n this r e g i o n . P r e s e n t l y 17% of C a l i f o r n i a ' s 19  a v o c a d o c r o p is d e s t i n e d to the N o r t h e a s t r e g i o n , a p p r o x i m a t e l y 30,000 M T . A s C a l i f o r n i a a n d U S A - N E e x h i b i t different w e a t h e r a n d e c o n o m i c characteristics, lets p r e s u m e that the U S A - N E imports those 30,000 M T f r o m C a l i f o r n i a . A l s o this r e g i o n i m p o r t s a n average of 15,000 M T of a v o c a d o s f r o m C h i l e a n d the D o m i n i c a n  19  Population estimates and distribution of the United States can be found in the appendix.  51  R e p u b l i c to c o m p l e m e n t s u p p l y . T h e aggregate size of this m a r k e t is n o w 45,000 m e t r i c tonnes. T h i s a s s u m p t i o n i m p l i e s that the U S A - N E r e g i o n c o n s u m e s a l l f o r e i g n i m p o r t s , a m a r k e t a l m o s t e q u i v a l e n t w i t h total M e x i c a n exports w h i c h average is 45,000 m e t r i c tonnes since 1992. T h e o r e t i c a l l y , the m a r k e t seems b i g e n o u g h to c o n s u m e the entire M e x i c a n a v o c a d o exports. M e x i c o represents a n i m p o r t a n t p a r t i c i p a n t of the E u r o p e a n a v o c a d o s u p p l y . France is the biggest m a r k e t w i t h m o r e t h a n 5 0 % of M e x i c a n a v o c a d o exports. H e n c e , the effect of the o p e n i n g the U S A - N E m a r k e t w h i c h is g e o g r a p h i c a l l y closer to M e x i c o , has to be t a k e n i n t o account. Israel is the second largest e x p o r t e r to France a n d the rest of E u r o p e . If M e x i c a n e x p o r t s decrease, Israeli a v o c a d o p r o d u c e r s c o u l d increase e x p o r t s a n d e v e n t u a l l y o b t a i n p a r t of the M e x i c a n market-share i n E u r o p e .  52  CHAPTER 4 Research Hypotheses, Model Description and Data  The first two chapters described many characteristics of the avocado: physical attributes, world producing regions, international importing markets, the North American case, and some bilateral trade issues. The next step is to begin specifically answering the research questions. Section 4.1 outlines the analytical process that produced the hypotheses and, as Mexican avocado shipping into the United States has specific attributes, some assumptions are described in detail. Once the hypotheses have been identified, section 4.2 begins with a theoretical explanation of the trade model. Specifically, section 4.2 contains a description of the background and characteristics of the chosen spatial price equilibrium model. Next, the empirical model is explained in section 4.3, including the reasons why the particular trade regions were chosen. The data is discussed in section 4.4. In section 4.5, the construction of the Excel spreadsheet used to solve the model is explained. Finally in section 4.6, a set of scenarios are presented which are specially designed to test the hypotheses and validate the overall performance of the model. The simulation results discussed in chapter five.  53  4.1  Development of the hypotheses. In section 1.2 a review of the research questions is presented. Specific  hypotheses corresponding to the questions that can be tested with a spatial equilibrium model will  now be specified. The principal objective of this thesis is the estimation of the  impact of liberalisation of the United States Northeast (USA-NE)  avocado market for Mexican  other Mexican avocado markets.  Based on the information gathered previously in this thesis and the characteristics outlined in section 3.7, we can now describe the hypotheses as follows: =>  Mexico observes a vast production of more than 800,000 M T and the USA-NE market holds 43% of the total United States population. Based on a calculated 45,000 MT market-size of the USA-NE and a report from the authorised Mexican avocado exporters  [ 6 0 ] , trade to the USA-NE could reach 20,000 M T  approximately. =>  The international share of Mexico in foreign avocado markets is important; this country exports to many destinations and is the main source for France, the largest importer. As said before, a probable export level of 20,000 M T to the USA-NE could require Mexico to decrease export shares in all other markets; AMIMEX producers estimate that a 10 percent decrease in these destinations is needed for Mexico to supply the new USA-NE market.  =>  If Mexico redirects avocado exports to the USA-NE instead of France and European markets, exporters such as Israel could experience an increase in their shares in those markets.  54  =>  A s for other exporters s u c h as C h i l e , a n i m p o r t a n t s u p p l i e r of the U S w i t h m o r e t h a n 15,000 M T a year, the effect of M e x i c a n c o m p e t i t i o n i n the U S m a r k e t c o u l d d r i v e C h i l e to seek other m a r k e t s . T h e C h i l e a n f r u i t association  [61]  advised  a v o c a d o p r o d u c e r s to seek n e w m a r k e t s as they c o u l d face a s i g n i f i c a n t 20 percent decrease i n exports into the U S . =>  M e x i c a n p r o d u c e r s w i l l benefit f r o m a v o c a d o exports to the U n i t e d States. T h e N o r t h e a s t m a r k e t is expected to p a y a p r i c e for a v o c a d o s s i m i l a r to the F r e n c h m a r k e t b u t w i t h l o w e r t r a n s p o r t a t i o n costs. T h i s f a v o u r a b l e s i t u a t i o n c o u l d increase w e l f a r e i n the e c o n o m y of M i c h o a c a n . T h e f i n a n c i a l v a l u e of the present M e x i c a n p r o d u c e r s u r p l u s m u s t be larger after m o d e l l i n g the entrance of M e x i c o .  =>  M e x i c a n a v o c a d o s are cheaper t h a n C a l i f o r n i a n d u e to l o w e r p r o d u c t i o n costs. Therefore, c o n s u m e r s i n the U n i t e d States w i l l p a y l o w e r prices a n d c o n s u m e r s u r p l u s s h o u l d be greater w i t h the e n t r y of i m p o r t s f r o m M i c h o a c a n .  =>  A s suggested p r e v i o u s l y , C h i l e a n p r o d u c e r s w i l l decrease o u t p u t i n t o the U S m a r k e t . Therefore it is also l i k e l y that these p r o d u c e r s ' s u r p l u s w i l l decrease.  These h y p o t h e s e s exhibit interactions a m o n g e x p o r t a n d i m p o r t countries. T o observe a n d test these connections p r e c i s e l y , the e m p i r i c a l m o d e l s h o u l d be a t o o l that effectively accounts for the i m p a c t of distances o n exporter s u p p l y a n d i m p o r t e r demand.  55  4.2  The theoretical model: selection and description. H a v i n g i n m i n d the nature of the p r o b l e m , distant i n t e r n a t i o n a l m a r k e t s a n d  m a n y exporters a n d i m p o r t e r s , it is necessary to d e v e l o p a m o d e l , w h i c h considers s e v e r a l regions a n d takes i n t o account the g e o g r a p h i c a l distances b e t w e e n E x i s t i n g literature p r o v i d e s m e t h o d s  to estimate m u l t i - r e g i o n trade m o d e l s ,  distance is the characteristic of a m o d e l k n o w n as spatial equilibrium T h e spatial equilibrium  them. but  model [ 62 ].  model w o r k s w i t h a set of d e m a n d a n d s u p p l y c u r v e s  s p e c i f i e d for N e x p o r t i n g r e g i o n s a n d M i m p o r t i n g regions. B y u s i n g n u m e r i c a l estimates for the parameters, supply a n d demand schedules are o b t a i n e d f r o m data. S p e c i f i c a l l y , the data to specify v a l u e s for the p a r a m e t e r s of these s u p p l y a n d d e m a n d schedules are: =>  Average quantity i m p o r t e d / e x p o r t e d .  =>  A v e r a g e prices i m p o r t e d / e x p o r t e d .  =>  E l a s t i c i t y estimates for each i m p o r t i n g / e x p o r t i n g r e g i o n , a n d  =>  T r a n s p o r t a t i o n cost b e t w e e n each e x p o r t i n g r e g i o n a n d the M i m p o r t i n g regions. T h e m o d e l is s o l v e d b y c h o o s i n g the v o l u m e s s h i p p e d f r o m each e x p o r t i n g  r e g i o n to each i m p o r t i n g r e g i o n s u c h that the law of one-price h o l d s . The law of one-price states that b e t w e e n a n y t w o t r a d i n g regions the p r i c e difference w i l l exactly e q u a l the t r a n s p o r t a t i o n cost b e t w e e n the t w o r e g i o n s . P o l i c y analysis  c a n be  u n d e r t a k e n b y i m p o s i n g or e l i m i n a t i n g tariffs  or  e x p o r t / i m p o r t quotas a n d t h e n r e s o l v i n g the m o d e l . T h i s characteristic of the s p a t i a l  56  e q u i l i b r i u m m o d e l w i l l be especially u s e f u l to p o r t r a y the scenario of the e l i m i n a t i o n of the b a n o n M e x i c a n avocados i n the U n i t e d States. Before p r o c e e d i n g , it m a y be h e l p f u l to r e v i e w the basic features of a p a r t i a l e q u i l i b r i u m trade m o d e l . C o u r n o t (1838) a n d later E n k e (1951) first s t u d i e d the p r o b l e m of price a n a l y s i s a n d q u a n t i t y a l l o c a t i o n over space a n d time [ 6 3 ] . T h e i r basic m o d e l consisted of t w o regions w i t h i n t e r n a l s u p p l y a n d d e m a n d functions for a g i v e n g o o d . T h e y then o b t a i n e d the a m o u n t p r o d u c e d a n d c o n s u m e d i n t e r n a l l y at certain p r i c e a n d s h o w n their d e r i v e d excess d e m a n d s a n d s u p p l y schedules. T h i s r e l a t i o n s h i p s b e t w e e n exports a n d i m p o r t s a m o n g countries a n d  the  w o r l d m a r k e t w h e r e they trade are described g r a p h i c a l l y i n f i g u r e 4.1. W e observe two  regions w i t h p a r t i c u l a r i n t e r n a l prices a n d quantities c o n s u m e d . Before they  trade w i t h each other i n the w o r l d m a r k e t , b o t h countries achieve e q u i l i b r i u m i n t e r n a l l y at price P a n d p r i c e P ; the a m o u n t c o n s u m e d i n t e r n a l l y at these prices x  m  w i l l be d e t e r m i n e d f r o m p o i n t o to Q a l o n g the h o r i z o n t a l axis. International trade: Two region model Export  World Trade  p  Figure 4.1. Two-region basic trade model.  57  Import  W h e n b o t h countries p a r t i c i p a t e i n a w o r l d m a r k e t d e p i c t e d i n the central g r a p h , e x p o r t s w i l l leave the c o u n t r y w i t h the r e l a t i v e l y l o w p r i c e P a n d enter the x  c o u n t r y w i t h the r e l a t i v e l y h i g h p r i c e P . T h e excess s u p p l y s c h e d u l e (ES) m a p s the m  a m o u n t a v a i l a b l e for exports f r o m the c o u n t r y o n the left as a f u n c t i o n of p r i c e . L i k e w i s e the excess d e m a n d s c h e d u l e (ED) m a p s the a m o u n t that w o u l d be i m p o r t e d as a f u n c t i o n of p r i c e . T h e a m o u n t t r a d e d a m o n g these c o u n t r i e s w i l l be d e t e r m i n e d b y the intersection of the excess d e m a n d a n d excess s u p p l y c u r v e s . T h e intersection p o i n t also s h o w s the c o m m o n i n t e r n a t i o n a l p r i c e P  m  a n d the a m o u n t chosen to be  e x p o r t e d b y the c o u n t r y of the left Q , w h i c h exactly equals the a m o u n t c h o s e n to be x  i m p o r t e d b y the c o u n t r y o n the r i g h t Q a n d total trade Q i n the central chart. m  w  T h i s s i m p l e m o d e l does n o t c o n s i d e r several issues faced b y i n t e r n a t i o n a l trade, s u c h as tariffs, sanitary b a r r i e r s , s u b s i d i e s , quotas or g e o g r a p h i c a l distance b e t w e e n markets  [64].  A true  spatial equilibrium model accounts for the distance b e t w e e n  traders. T h i s feature is c r u c i a l for c a l c u l a t i n g trade r e l a t i o n s h i p s i n this thesis. In F i g u r e 4.2, the  spatial equilibrium case, w e h a v e t w o r e g i o n s t r a d i n g i n the  w o r l d m a r k e t as i n the p r e v i o u s g r a p h 4.1. I n the central g r a p h w e c o n s i d e r distance b e t w e e n i m p o r t e r s a n d exporters b y i n t r o d u c i n g the v a r i a b l e T, w h i c h is the p r i c e p a i d p e r each u n i t t r a n s p o r t e d f r o m the exporter to the i m p o r t e r . O b s e r v e that the excess s u p p l y s c h e d u l e ES is s h i f t e d u p w a r d w i t h the m a g n i t u d e of v a r i a b l e T to the n e w s c h e d u l e ES . B y d o i n g this, the i n t e r n a t i o n a l p r i c e changes to P for the i m p o r t e r T  and  P  x  m  for the exporter. W e c a n see that the a m o u n t t r a d e d i n the central chart  58  previously  Q  w  decreased  to C > * a n d s t i l l  e x p o r t e d / i m p o r t e d b y countries, Q a n d Q x  m  equals  the a m o u n t s  chosen  to be  respectively.  International trade: Two region spatial equilibrium model  Px  Figure 4.2. Two-region spatial equilibrium trade model  O b s e r v e the areas i n s i d e the triangle f o r m e d b y ES, ED a n d the price axis i n the central g r a p h . I n the case w i t h o u t transportation costs p o r t r a y e d i n F i g u r e 4.1, the u p p e r triangle represented the c o n s u m e r s u r p l u s o b t a i n e d f r o m i n t e r n a t i o n a l trade; the l o w e r triangle represents the p r o d u c e r s u r p l u s . N o w i n f i g u r e 4.2 w e h a v e three s m a l l e r areas: c o n s u m e r s u r p l u s is r e d u c e d to area a, w h i l e p r o d u c e r s u r p l u s is area c. The area b denotes the transportation cost p a i d b y exporters a n d passed d o w n to i m p o r t e r s [ 6 5 ] . These areas w i l l be i m p o r t a n t to describe h o w the e m p i r i c a l m o d e l w i l l attempt trade m a x i m i s a t i o n .  N o w that w e h a v e d e s c r i b e d the basic t w o - r e g i o n case a n d the mechanics of a spatial equilibrium  trade model, w e c a n increase the n u m b e r o f countries i n v o l v e d . T h e  59  First, to s i m p l i f y the a n a l y s i s , w e treat d o m e s t i c d e m a n d i n e x p o r t i n g countries a n d d o m e s t i c s u p p l y i n i m p o r t i n g countries as e x o g e n o u s (i.e., u n r e s p o n s i v e to price). W i t h these a s s u m p t i o n s , w e c a n focus e x c l u s i v e l y o n the e x p o r t s u p p l y a n d i m p o r t d e m a n d schedules. I n other w o r d s , w e can calculate w o r l d trade p o r t r a y e d b y excess s u p p l y ES a n d excess d e m a n d E D i n the central chart i n F i g u r e 4.2. W e b e g i n b y b u i l d i n g i m p o r t d e m a n d a n d e x p o r t s u p p l y f u n c t i o n s f o r the t r a d i n g p a r t i c i p a n t s . There w i l l be m i m p o r t e r s w i t h i n d e x i to m a n d n-m exporters, w i t h index  = m+1 to n. A s s u m i n g that b o t h f u n c t i o n s are c o n t i n u o u s , differentiable,  and m o n o t o n i c a l l y decreasing f o r d e m a n d a n d m o n o t o n i c a l l y i n c r e a s i n g f o r s u p p l y , these f u n c t i o n s c a n be expressed b y :  Here  Import demand function  p* = dfx*)  Export supply function  p. = sfx.)  i = l,...m  {1}  j - m+l,... n  {2}  denotes the i n t e r n a l d e m a n d p r i c e , p. the i n t e r n a l s u p p l y p r i c e , x. the q u a n t i t y d  d e m a n d e d a n d x* the q u a n t i t y s u p p l i e d a m o n g regions. N o w , w e assume that exports c a n o n l y o r i g i n a t e f r o m a n exporter i c o u n t r y to lh  an i m p o r t e r f  h  c o u n t r y , thus, trade a m o n g a n y exporter a n d i m p o r t e r c o u n t r y w i l l be  d e n o t e d b y x.. I n the same m a n n e r , the u n i t cost of t r a n s p o r t i n g a n i t e m f r o m r e g i o n i to r e g i o n w i l l be d e n o t e d b y f.., a n d the cost of s h i p p i n g the a m o u n t t r e a d e d b e t w e e n those locations is f. x.. H e r e x has to be e q u a l o r greater t h a n z e r o since o n l y p o s i t i v e tj  s h i p m e n t s o r cost c a n occur. E q u a t i o n {3} presents a f u n c t i o n c a l l e d net quasi-zoelfare function. B a s e d o n the m o d e l d e v e l o p e d b y T a k a y a m a (1971) a n d u s i n g e q u a t i o n {1} a n d { 2 } , w e c a n u s e  60  this f u n c t i o n to estimate the net w e l f a r e f o r a l l i m p o r t e r s a n d exporters i n a spatial equilibrium  model.  T o better e x p l a i n e q u a t i o n {3 }, recall the central chart i n F i g u r e 4.2. T h e first t e r m i n square brackets i n e q u a t i o n {3}  measures the s u r p l u s of i m p o r t e r s , specifically it  measures the area u n d e r the excess d e m a n d s c h e d u l e ED to the left of q u a n t i t y Q ' w  m i n u s the total v a l u e of i m p o r t s . T h e s e c o n d t e r m i n square brackets measures the s u r p l u s f o r a n e x p o r t i n g c o u n t r y . H e r e w e l f a r e equals total p a y m e n t s r e c e i v e d f r o m exports m i n u s the area to the left of the e x p o r t q u a n t i t y Q ' a n d b e l o w the excess w  s u p p l y c u r v e ES (this last area represents v a r i a b l e p r o d u c t i o n costs). T h e last t e r m i n the  net quasi-zvelfare equation  measures  the total a m o u n t  paid  for transporting  s h i p m e n t s f r o m exporters to i m p o r t e r s . T h i s cost is represented b y the rectangle c o r r e s p o n d i n g to Q ' a n d T i n f i g u r e 4.2. a  F u r t h e r s i m p l i f i c a t i o n of e q u a t i o n {3} w i l l y i e l d e q u a t i o n m  r"  n  X  J  m  {4}:  n  {4}  Lets n o w a d a p t this theoretical m o d e l to the specific m o d e l at h a n d . T h e fact that q u a n t i t y d e t e r m i n e s p r i c e as m u c h as p r i c e determines q u a n t i t y , a l l o w s u s to specify inverse d e m a n d a n d s u p p l y f u n c t i o n s . W e construct those i n v e r s e f u n c t i o n s i n linear f o r m as f o l l o w s :  61  Import demand function  p.= X - cope*  Export supply function  p.= v. + r\pc.  t  i-1,...  m  {5}  j = m+l,... n  {6}  H e r e x. a n d x represent the respective i m p o r t d e m a n d a n d e x p o r t s u p p l y , A,, a n d v. ;  s  represent the i n d i v i d u a l intercept p a r a m e t e r s of the d e m a n d a n d s u p p l y schedules f o r a l l the r e g i o n s , a n d co a n d rj vectors c o n t a i n the representative d e m a n d a n d s u p p l y j  j  s c h e d u l e s l o p e parameters. W e c a n integrate the net quasi-welfare e q u a t i o n f r o m e q u a t i o n {4} i n terms of the l i n e a r f u n c t i o n s i n e q u a t i o n {5} a n d {6} . T h e f o l l o w i n g f u n c t i o n a l f o r m is the s o l u t i o n of the i n t e g r a l a n d is expressed i n terms of vectors a n d matrices as: NW(y/,<j),Q) = A y - v ' 0 - \ \ i f ' Q . \ i r - \ ^ Y { ^ - [(T- &fo\u  {7}  2  W h a t p r e v i o u s l y w a s q u a n t i t y d e m a n d e d x. a n d q u a n t i t y s u p p l i e d x. are c o n s o l i d a t e d d  i n t o vectors y/ a n d (p. V e c t o r s X a n d v represent the s u p p l y a n d d e m a n d r e s p e c t i v e l y ; l i k e w i s e , vectors  Q a n d H are the slopes  schedules. F i n a l l y , the t e r m [(T-©)u ]'u 1  2  intercepts  for s u p p l y a n d demand  indicates the total t r a n s p o r t a t i o n cost p a i d f o r  trade. I n that o r d e r , w e m u l t i p l y each element (i.e., the d o t p r o d u c t ) of m a t r i x T a n d m a t r i x 0. T h e n (T-0) is m u l t i p l i e d b y w a m x l c o l u m n - v e c t o r of ones { 1 , 1 , . . . m}. T h e n 3  the transpose o f the m a t r i x is m u l t i p l i e d b y n-mxl r o w - v e c t o r u [ 1 , 1 , . . . n ] . 2  T h i s e q u a t i o n {7} w i l l later b e c a l l e d target objective function  i n the e m p i r i c a l  m o d e l a n d h a s to f u l f i l necessary K u h n - T u c k e r c o n d i t i o n s . These restrictions are i d e n t i f i e d i n (table 4.1).  62  Table 4.1. Set of Kuhn Tucker conditions / restrictions of the spatial price equilibrium model.  >  pf,p j,y/,(j),Q > 0 Price and quantity vectors are non-negative. Observe that 0 is a S  trade matrix, which means that trade among regions must also be positive. > >  ~^ f x  -x j S  + ^xf  =  >0  0 The sum of export and imports must balance. for; =  tn+1,... n  /  Exports from a chosen region are non-negative and are  consumed only by an importer. >  xf —"^Xj > 0 for i = 1, ... n The quantity imported by a chosen importer must be noni  negative. This restricts transhipment of the item among importers (non-deflection).  4.3  Empirical Model construction T h e task n o w is to s o l v e the  Target objective function  quantities w i t h a n e m p i r i c a l m o d e l . I n o r d e r to estimate the  {7}  and find optimal  Net quasi-welfare e q u a t i o n  w e n e e d to c o m p u t e the s u p p l y a n d d e m a n d schedules f o r a l l the regions i n v o l v e d a n d t r a n s p o r t a t i o n costs a m o n g t h e m . T o better e x p l a i n the p r o c e d u r e d e v e l o p e d to s o l v e the e q u a t i o n s , a spreadsheet i n F i g u r e 4 . 3 is p r e s e n t e d to d i s p l a y a l l the relevant i n f o r m a t i o n . T h i s is a n e x a m p l e of f i v e i m p o r t i n g a n d f i v e e x p o r t i n g regions w i t h different t r a n s p o r t a t i o n costs to p o r t r a y the distance f r o m e x p o r t e r to i m p o r t e r . W e n e e d slope a n d intercept parameters i n o r d e r to s o l v e the vector f u n c t i o n s stated i n the p r e v i o u s section. I n F i g u r e  4.3  these p a r a m e t e r s are entered into  area A.  T h e slopes of the d e m a n d schedules are negative, i m p l y i n g i m p o r t d e m a n d m u s t b e downward  s l o p i n g . C o n v e r s e l y , the s u p p l y f u n c t i o n s are u p w a r d s l o p i n g . T h e  i n f o r m a t i o n entered i n  area A is c o m p i l e d i n t o f o u r sets of vectors c o r r e s p o n d i n g to  vectors V, X, Q, a n d H alone.  63  T o p o r t r a y distance f r o m a n exporter to a n i m p o r t e r , the spatial equilibrium model w o r k s b y e n t e r i n g the t r a n s p o r t a t i o n cost estimates  i n area B of F i g u r e 4.3. T h i s  i n f o r m a t i o n is i n t e g r a t e d i n t o a m a t r i x d e n o m i n a t e d Transportation  Matrix,  w h i c h is  e q u i v a l e n t to the m a t r i x T u s e d i n the Net quasi-welfare f u n c t i o n {7}. Area C i n F i g u r e 4.3 contains the a m o u n t s h i p p e d b e t w e e n r e g i o n s , as c h o s e n b y the o p t i m i s a t i o n r o u t i n e . The v a l u e s i n this area are those represented b y m a t r i x 0 . Following  the s t r u c t u r e  of e q u a t i o n  {7},  w e observe  that  t r a n s p o r t a t i o n cost i n v o l v e d i n the m o d e l is e x p r e s s e d b y [(T-0)uJ'u . 2  the total G i v e n the  choices m a d e i n area C, the Cost of international trade transportation b e t w e e n each p a i r of c o u n t r i e s is s h o w n i n area D. T h e last piece n e e d e d f o r s o l v i n g e q u a t i o n {7} is o b s e r v e d i n area E. H e r e , the o p t i m i s a t i o n r o u t i n e w i l l select the total a m o u n t i m p o r t e d a n d total a m o u n t e x p o r t e d f o r each r e g i o n . T h i s i s , i n t e r m s of e q u a t i o n  {7},  the r e s u l t i n g i m p o r t i n g a n d  e x p o r t i n g vectors are t / a n d 0 r e s p e c t i v e l y . O b s e r v e that area F is c a l c u l a t e d w i t h the vectors a n d intercepts f o r d e m a n d a n d s u p p l y schedules s p e c i f i e d i n area A a n d the p r i c e s that are consistent w i t h the c h o s e n i m p o r t s o r e x p o r t s i n area E. T h i s area also s h o w s the vectors n a m e d  impjbal  a n d expjbal, w h i c h are r e s p e c t i v e l y : the s u m of each r o w i n area C equals the c h o s e n i m p o r t a m o u n t i n area E a n d the s u m of each c o l u m n i n area C equals the c h o s e n e x p o r t a m o u n t i n area E. N o t i c e that area E c a n b e r e g a r d e d as the set of K u h n T u c k e r c o n d i t i o n s / r e s t r i c t i o n s stated i n table 4.1, necessary f o r the m o d e l to w o r k . P r i c e s are n o n - n e g a t i v e , there is n o d e f l e c t i o n of i m p o r t s o r e x p o r t s a n d there i s balance o n exports a n d i m p o r t s .  64  . I I I OQ • I ' | I  CM o  ii r  I  CO  &  |o  OS 0\  up,  -^r ^ a  _  1  .  o  CN o  o  Si*  a  *0 D  tt] 00  ;^ i  n o  a;  O; o  o;  ^* o  on : rn! a o o  ^ ! o  o  o  m o  CN CN : rn. o o o  o:  o  I  o  00  o  1  cn o  e  < CP O Q W t i , CL, n , a . P-.  < m o Q  8 u  fin  CL,  OH  § § 11  < ^ ri  SPo  ^  o, M  o ^  -« M  rn o  rn *r  o a  os *«  •  •  o  a  o —  o  o  d  —«  o >o o o  m m c-p o  CN o CN o CN •—• p p o o  ON  cn  T  .-, o o  o  o d  ci  n ci  o -  "1  53 < ffl O Q ID (x, a . pu, a . a . 2 S 2 2 2  It  Iii  v\  $ S3 £ & a S Q Q O i»  1  s  Figure 4.3. Set-up of the empirical model.  65  I o  i  (X  o O  — C,  (H  >^ -  e|  T h e s o l v i n g r o u t i n e w i l l attempt to m a x i m i s e the w h o l e v a l u e of the net quasizuelfare function  {7} inserted i n the cell c a l l e d target objective function.  N o w w e can s o l v e a n estimated m o d e l u s i n g the areas d e s c r i b e d p r e v i o u s l y i n the spreadsheet of F i g u r e 4.3. unit transportation  W e h a v e area A w i t h slopes a n d intercepts, area B f o r  cost times  t r a n s p o r t a t i o n cost [(T-0)uJ'u  2  the a m o u n t  traded  X i n area C w i l l  y i e l d the  i n t o area D , a n d f i n a l l y area E p r o v i d e s the i n f o r m a t i o n  for vectors if/ a n d <p. T h e f o l l o w i n g step is to choose a c o m p u t e r p r o g r a m to m a x i m i s e the Target objective function.  Microsoft Excel h a s a n e m b e d d e d r o u t i n e d e n o m i n a t e d Solver, w h i c h  c a n p e r f o r m the m a t r i x m u l t i p l i c a t i o n a n d s o l v e the m a x i m i s a t i o n p r o b l e m . Solver w o r k s b y u s i n g the G e n e r a l i s e d R e d u c e d G r a d i e n t code d e v e l o p e d b y L e o n L a s d o n a n d A l l a n W a r e n  20  (GRG2)  non-linear optimisation  [ 6 6 ] . T h e process is to use Solver  to d e t e r m i n e the m a x i m u m v a l u e of a d e t e r m i n e d e q u a t i o n b y c h a n g i n g a set of cells u n d e r certain c o n d i t i o n s . A f t e r c h a n g i n g a m o u n t s  t r a d e d a m o n g exporters a n d  i m p o r t e r s m a n y times, the objective f u n c t i o n w i l l reach a v a l u e w h e r e a l l c o n d i t i o n s are satisfied. T h e p r o c e d u r e n o w is to use solver a n d m a x i m i s e the c e l l c o n t a i n i n g the target objective function.  U s i n g the estimations f o r s l o p e a n d intercept i n area A f r o m F i g u r e  4.3, w e c a n generate the vectors imp_slope, exp_slope, imp_intercept  and  exp_intercept.  These vectors are m u l t i p l i e d times the vectors called imp_target a n d expjtarget area E a n d f i n a l l y subtract the total t r a n s p o r t a t i o n cost TO o b t a i n e d f r o m area D.  2 0  University of Texas at Austin and Cleveland State University respectively.  66  from  T o e x p l a i n h o w solver w i l l f i n d a s o l u t i o n f o r the Target Objective Function,  refer  to the g r a p h i c a l i n t e r p r e t a t i o n presented i n the t w o - d i m e n s i o n chart f r o m f i g u r e 4.2. T h e Net Quasi-welfare function  c a n b e i n t e r p r e t e d as the area i n s i d e the ED, ES, a n d the  v e r t i c a l axis i n central chart. T h e objective is to f i n d the o p t i m a l q u a n t i t y Q*  w  where  trade a m o n g e x p o r t e r a n d i m p o r t e r is m a x i m i s e d . Solver iterations w i l l attempt to f i n d the o p t i m a l t r a d e d q u a n t i t y Q* b y c h a n g i n g quantities e x p o r t e d a n d i m p o r t e d f r o m w  b o t h countries; i n other w o r d s , m a x i m i s i n g areas a a n d c. W e c a n p e r c e i v e that p r i c e for b o t h exporter a n d i m p o r t e r w i l l increase a n d decrease r e s p e c t i v e l y if the areas a u g m e n t . A s w e increase these areas, the central rectangle n a m e d b w i l l b e r e d u c e d . T h e latter demonstrates  the d u a l i t y of the m a x i m i s a t i o n of trade, w h i c h is the  m i n i m i s a t i o n of total t r a n s p o r t a t i o n costs. A f t e r the d e s c r i p t i o n of this m o d e l , it is t i m e to s o l v e the e m p i r i c a l m o d e l . N e x t sections w i l l describe the p r o c e d u r e to select the r e g i o n s a n d d a t a for u s i n g this f u n c t i o n a l f o r m a n d f i n a l l y present scenarios to a n s w e r p o l i c y questions.  4.4  World regions and data A v o c a d o s are c o n s u m e d a n d p r o d u c e d i n m a n y r e g i o n s a n d c a l c u l a t i n g trade  a m o n g a l l of t h e m w i l l p r o v e a n e n o r m o u s task [ 67 ] . A s this thesis p u r s u e s to analyse the case of M e x i c a n s u p p l y to i n t e r n a t i o n a l m a r k e t s a n d h o w the n e w m a r k e t i n the U S w i l l i m p a c t the M e x i c a n i n t e r n a t i o n a l a v o c a d o s u p p l y , this m o d e l considers the f o l l o w i n g e x p o r t i n g regions: C a l i f o r n i a , M e x i c o , C h i l e , Israel a n d R O W E (rest of the w o r l d exporters). A n d F r a n c e , the U n i t e d States N o r t h e a s t ( U S A - N E ) , C a n a d a , J a p a n  67  Japan a n d R O W I (rest of the w o r l d importers) to integrate the i m p o r t i n g side. The m a p i n f i g u r e 4.4 illustrates g r a p h i c a l l y the regions i n v o l v e d .  Figure 4.4. Map of the regions included in the model and their trade flows.  Importers w e r e chosen as f o l l o w s : France is the p r i n c i p a l i m p o r t e r m a r k e t a n d M e x i c o participates actively o n this m a r k e t , so its i n c l u s i o n is i m p e r a t i v e . The U S A N E is the n e w r e g i o n o p e n e d for M e x i c a n trade a n d w e w a n t to analyse the i m p a c t of this entrance o n markets such as France, so o b v i o u s l y b o t h m u s t be i n c l u d e d . It is i m p o r t a n t to notice that i n this m o d e l , the U n i t e d States is d i v i d e d into C a l i f o r n i a as p r o d u c e r a n d the U S A - N E as i m p o r t e r . A s there is n o a v o c a d o p r o d u c t i o n i n the latter r e g i o n , it can be r e g a r d e d as a n e x p o r t m a r k e t for C a l i f o r n i a a n d other countries. C a n a d a a n d Japan are b o t h i m p o r t a n t destinations for M e x i c a n a n d C a l i f o r n i a n avocados, so it is w o r t h y to evaluate c o m p e t i t i o n a n d changes i n trade. F i n a l l y R O W I integrates the r e m a i n i n g E u r o p e a n markets s u c h as G e r m a n y , U n i t e d K i n g d o m a n d  68  N e t h e r l a n d s , w h i c h also receive i m p o r t a n t a m o u n t s of a v o c a d o f r o m b o t h M e x i c o a n d California. It is clear a g a i n that M e x i c o a n d C a l i f o r n i a h a v e to be i n c l u d e d i n this m o d e l as they are the m a i n p l a y e r s i n this thesis: b o t h e x p o r t to C a n a d a , J a p a n , France a n d the U S A - N E r e g i o n . C h i l e is the m a i n f o r e i g n s u p p l i e r to the e x i s t i n g N o r t h e a s t m a r k e t and  the i m p a c t that M e x i c a n i m p o r t s w i l l h a v e o n their m a r k e t share is u s e f u l  i n f o r m a t i o n . Israel is a significant s u p p l i e r of the E u r o p e a n m a r k e t : A l m o s t h a l f of the exports generated b y this c o u n t r y are d e s t i n e d to France a n d if there is a r e d u c t i o n i n M e x i c a n a v o c a d o s u p p l y , Israel c o u l d f i l l this g a p . F i n a l l y , R O W E w i l l account for other countries l i k e S p a i n a n d S o u t h A f r i c a , w h i c h w i l l e x p o r t m a i n l y to France a n d ROWI. T h e i n f o r m a t i o n u s e d to d e v e l o p this m o d e l w a s o b t a i n e d p r i n c i p a l l y f r o m the Internet w e b site of the F o o d a n d A g r i c u l t u r e O r g a n i s a t i o n of the U n i t e d N a t i o n s [ 6 8 ] . T h i s agency c o m p i l e d a database w i t h i n f o r m a t i o n p r o v i d e d b y m e m b e r s about a g r i c u l t u r a l a n d e c o n o m i c p r o d u c t i o n . T h o u g h this can be r e g a r d e d as a reliable source, d a t a w a s cross-checked w i t h l o c a l sources s u c h as Statistics C a n a d a [ 6 9 ] , I N E G I ( M e x i c a n g o v e r n m e n t statistics agency) [ 7 0 ] , C h i l e a n a g r i c u l t u r e m i n i s t r y , a n d the m i n i s t r y of i n d u s t r y a n d trade of Israel; n o p r o f o u n d d i s c r e p a n c y w a s f o u n d . A s p r e v i o u s l y d i s c u s s e d , a v o c a d o trees y i e l d seasonally. T o calculate a p a t t e r n i n a spatial equilibrium  model is n o t feasible. T h e r e f o r e , the m o d e l uses a f i v e - y e a r average of total  i m p o r t s a n d total exports f r o m selected expressed i n m e t r i c tonnes.  69  countries as i n i t i a l quantities a n d it is  T h e o n l y e x c e p t i o n is the i m p o r t i n g r e g i o n d e n o t e d as U S A - N E . U s i n g data f r o m the C a l i f o r n i a A v o c a d o C o m m i s s i o n , it is possible to separate the imports f r o m C a l i f o r n i a to the N o r t h e a s t e r n states f r o m the total U n i t e d States s u p p l y . W e p r e s u m e that i m p o r t s f r o m C h i l e a n d the D o m i n i c a n R e p u b l i c i n t o the U n i t e d States are c o n s u m e d i n the U S A - N E r e g i o n , therefore the entire i n t e r n a t i o n a l i m p o r t s of the U S are a d d e d to C a l i f o r n i a ' s s u p p l y to the r e g i o n . Prices w e r e also o b t a i n e d f r o m the F A O database as it also gathers data o n prices p a i d for s h i p m e n t s ; these prices w e r e c o m p a r e d w i t h l o c a l agencies as w e l l a n d n o difference w a s f o u n d . T o be consistent w i t h the m e t h o d u s e d to calculate the U S A N E quantities, the i m p o r t prices r e p o r t e d b y F A O database a n d the C A C average prices w e r e u s e d . H o w e v e r , to v e r i f y the consistency of F A O p r i c e w i t h C A C p r i c e for this r e g i o n , a set of prices f r o m the U S D A M a r k e t Service w a s o b t a i n e d f r o m their w e b site [71]. T h i s U S D A i n f o r m a t i o n represented a n average of the 1996-1997 season i n the f o l l o w i n g U S A - N E locations of the N o r t h e a s t : B o s t o n , C h i c a g o , D e t r o i t , N e w Y o r k , P h i l a d e l p h i a , P i t t s b u r g h , a n d W a s h i n g t o n D C . Prices w e r e s l i g h t l y different t h a n the ones r e p o r t e d b y F A O a n d the C A C , so the latter U S D A i n f o r m a t i o n w a s u s e d i n s t e a d . A l l p r i c e s are i n U S d o l l a r s p e r m e t r i c tonne of a v o c a d o . T h e t r a n s p o r t a t i o n p e r - u n i t cost w a s r e p o r t e d b y p r o d u c e r s f r o m M i c h o a c a n , C a l i f o r n i a , C h i l e , a n d Israel a n d is expressed i n U S d o l l a r s p e r m e t r i c tonne [72 ] . A s exporters s e n d containers w i t h average capacity of 19.6 m e t r i c tonnes, the p r i c e p a i d per container w a s d i v i d e d b y the average capacity to o b t a i n the p r i c e p e r m e t r i c tonne of a v o c a d o t r a d e d i n t e r n a t i o n a l l y .  70  T h e m o s t d i f f i c u l t i n f o r m a t i o n to acquire w e r e estimates of the elasticities. A n a l y s i s of i n t e r n a t i o n a l trade of a v o c a d o has b e e n sparse. A f t e r a n i n t e n s i v e search o n d i v e r s e databases, the sole p a p e r o n a v o c a d o d e m a n d r e t r i e v e d w a s w r i t t e n i n S p a i n b y C a l a t r a v a [73]  f o r the E u r o p e a n U n i o n a n a l y s i s of d o m e s t i c  avocado  d e m a n d . O b t a i n i n g excess s u p p l i e s w a s also c o m p l e x as p r o d u c i n g countries h a v e n o t c a l c u l a t e d this i n f o r m a t i o n f o r a s i m p l e reason: a l l a v o c a d o s t h e y e x p o r t are certainly s o l d a n d they d o n o t r e q u i r e to k n o w h o w their e x p o r t i n g capacity  influences  c o n s u m p t i o n w i t h respect to p r i c e . W e n e e d to calculate the s l o p e a n d intercept f o r the l i n e a r s u p p l y a n d d e m a n d schedules f o r each r e g i o n . I n o r d e r to d o this w e n e e d data a b o u t quantities, prices a n d excess elasticities for each e x p o r t e r a n d i m p o r t e r . T h i s is d e s c r i b e d i n the f o l l o w i n g equations: imp_slope (co)  importer function d 1 Pi = \ -  1  d  d  ED  pd  exporter function p,=  i/.+  (A,)  exp_intercept  (v)  {8}  d  P, -  —  imp intercept  • i x  exp_slope (r/^  {9}  ;  T^ -ES  ?  P  It is i m p o r t a n t to m e n t i o n h o w the elasticities for each r e g i o n w e r e calculated. The  excess QD  £ ED ~ £ D  elasticity  Q ED  demand _  P  QS  elasticity  is  calculated  D  the  following  equation:  w h e r e e is elasticity of d e m a n d a n d e is  {10}  of s u p p l y , a n d Q  from  and Q  D  s  are quantities  s  demanded  and supplied  d o m e s t i c a l l y . A s d o m e s t i c p r o d u c t i o n i n a l l i m p o r t i n g r e g i o n s (i.e. C a n a d a , Japan,  71  U S A - N E ) is non-existent, the s e c o n d t e r m i n e q u a t i o n {10} can o n l y be satisfied w i t h i m p o r t s , QJQ^  is z e r o ; a n d as d e m a n d  equals one. T h i s m e a n s that  domestic  d e m a n d elasticity is e q u i v a l e n t to excess d e m a n d elasticity. T h i s m e a s u r e of elasticity is calculated to be less o r e q u a l to one, as the response to changes i n p r i c e tends to be elastic i n regions l i k e C a n a d a a n d J a p a n w h e r e d e m a n d is l o w b u t prices are h i g h . F o r other regions l i k e F r a n c e a n d the U S A - N E , w h e r e a v o c a d o s are i n greater d e m a n d e d , the elasticity is l i k e l y to be less t h a n one. D a t a o n elasticities u s e d i n the e m p i r i c a l m o d e l w a s c a l c u l a t e d b y i n v e r t i n g the d o m e s t i c d e m a n d elasticity. T h e F r e n c h a n d R O W E d e m a n d elasticities w e r e o b t a i n e d f r o m the p a p e r  f r o m C a l a t r a v a a l r e a d y m e n t i o n e d . A n d the U S A - N E  demand  elasticity w a s c a l c u l a t e d f r o m the d o m e s t i c elasticity, i n c l u d e d i n the F i n a l R u l e o n M e x i c a n a v o c a d o i m p o r t a t i o n p u b l i s h e d b y U S D A i n the F e d e r a l Register. F o r e x p o r t i n g regions the e q u a t i o n for excess s u p p l y elasticity is: e  £s ~s e  ~— QES  £  {11}  D  s i m i l a r to the d e m a n d e q u a t i o n , the elasticity of  QES  excess s u p p l y is h i g h l y i n f l u e n c e d b y the i n t e r n a l d e m a n d : if the i t e m is h i g h l y d e m a n d e d d o m e s t i c a l l y , it is less l i k e l y of it b e i n g e x p o r t e d . B u t if the  country's  p r o d u c t i o n is s i g n i f i c a n t , exports are still possible. I n the case of M e x i c o , i n t e r n a l d e m a n d is h i g h b u t the t o t a l p r o d u c t i o n is greater a n d s u p p l y is sufficient to e x p o r t to other countries. T h e M e x i c a n s u p p l y elasticity w a s calculated b y P a z a n d it is r e p o r t e d i n some p u b l i c a t i o n s the C A C y e a r b o o k calculated f r o m e q u a t i o n {11}  [74].  C a l i f o r n i a excess s u p p l y h a d to be  a n d the q u a n t i t y data a s s e m b l e d before. T h e r e s u l t i n g  excess s u p p l y elasticity is greater for M e x i c o because the largest p r o d u c e r i n the 72  w o r l d , f o l l o w e d b y C a l i f o r n i a . Israel e x p o r t s a l m o s t a l l the p r o d u c t i o n because i n t e r n a l d e m a n d is l o w e r . T h e elasticity w a s o b t a i n e d b y c o n s u l t i n g the  Israeli  M i n i s t r y of T r a d e r e p o r t o n a v o c a d o p r o d u c t i o n . T h e R O W I s u p p l y elasticity w a s a s s u m e d to be s i m i l a r to the M e x i c a n because this r e g i o n aggregates m a n y exporters. F i n a l l y , C h i l e has l o w elasticity because p r o d u c t i o n is l o w e r t h a n the rest of the p r o d u c e r s c o n s i d e r e d i n this m o d e l .  4.5  Adapting the empirical model to selected regions and data. N o w after d e f i n i n g the countries that w i l l p a r t i c i p a t e i n the e m p i r i c a l m o d e l  a n d o b t a i n i n g the d a t a to r u n the s o l v e r o p t i m i s a t i o n , w e present the trade m o d e l that, u n d e r different scenarios, w i l l p r o v i d e the a n s w e r s to the research questions. T h e i n f o r m a t i o n is c o n s o l i d a t e d i n table 4.2 a n d c a n be o b s e r v e d i n the spreadsheet i n the Result  Appendix.  73  Table 4.2. Data and countries used to generate the empirical model.  Prices Quantities (US dollars per Elasticities (in metric tonnes) metric tonne)  Regions  Countries  Importer  France  80,000  1,500  -0.78  USA-NE  45,000  1,600  -0.60  Canada  8,000  1,200  -0.70  Japan  5,000  1,800  -0.80  ROWI  62,000  1,500  -0.90  Mexico  45,000  1,000  2.00  California  50,000  1,300  1.00  Chile  15,000  1,100  1.00  Israel  35,000  1,200  1.50  ROWE  55,000  1,100  2.00  Exporter  Transportation costs (US dollars per container) to each destination.  Mexico  California  Chile  Israel  ROWE  France  5,600  5,800  7,500  4,000  4,000  USA-NE  3,800  4,000  5,000  8,000  7,600  Canada  3,900  3,800  5,500  8,200  7,800  Japan  5,800  5,600  7,000  8,500  8,600  ROWI  5,550  5,650  8,000  4,000  4,000  74  4.6  WORKING SCENARIOS  There w i l l b e three scenarios i n this thesis i n o r d e r to a n s w e r the research questions stated p r e v i o u s l y . T o present the i n f o r m a t i o n of these scenarios accurately, all of t h e m h a v e b e e n c o m p i l e d i n the Result appendix. T h e f o l l o w i n g is a d e s c r i p t i o n of each scenario a c c o r d i n g to their stage i n the s o l v i n g process. =>  Initial Scenario I n i t i a l scenario refers to the average prices a n d quantities u s e d to calculate the  spatial equilibrium  model. A s d e s c r i b e d i n the theoretical m o d e l , the  quasi-welfare  e q u a t i o n starts w i t h these averages a n d solves f o r e q u i l i b r i u m u n d e r the parameters s u p p l i e d . It is i m p o r t a n t to m e n t i o n that this e l e m e n t a r y scenario is n o t representative of the i n t e r n a t i o n a l trade m o d e l yet. O n c e this scenario is o p t i m i s e d w i t h the s o l v e r u t i l i t y u n d e r the restrictions stated i n the e m p i r i c a l m o d e , w e w i l l  observe  a  representative t r a d e scenario. =>  Scenario A T h e s o l v e r p r o g r a m y i e l d s Scenario A, w h i c h i n this thesis represents the c u r r e n t  o p t i m a l trade f l o w s o b t a i n e d w i t h average p r i c e s , quantities a n d elasticities. T h i s is the scenario that w e w i l l d e e m as the w o r l d trade s i t u a t i o n before the entrance of M e x i c o i n t o the U S A - N E m a r k e t . It is i m p o r t a n t to observe that a m o u n t s t r a d e d a m o n g some countries are s l i g h t l y different t h a n r e p o r t e d p r e v i o u s l y . T h i s is d u e to the selection of countries u s e d i n the trade m o d e l ; nevertheless, this fact does n o t affect the analysis of the h y p o t h e s e s a n d the o u t c o m e .  75  =>  Scenario B T h i s scenario refers to the outcome of the m o d e l after the o p e n i n g of the U S  m a r k e t to M e x i c o . T o reflect a p o l i c y restriction s u c h as the b a n o n M e x i c a n avocados, the m o d e l has a t o o l c a l l e d Switch Matrix.  Presented i n Table 4.3, the switch  matrix  forces trade b e t w e e n a n y t w o regions to z e r o b y setting the transportation cost b e t w e e n these regions e q u a l to a v a l u e ten times h i g h e r . The u n i t a r y transportation cost i n the transportation matrix is increased w h e n the m a t r i x changes f r o m one to zero. T r a d e is forced to zero because solver m a x i m i s a t i o n w i l l f i n d the transportation cost of these destinations  extremely  expensive  to trade w i t h a n d w i l l n o t allocate  any  avocados b e t w e e n b o t h regions. Table 4.3. Current trade expressed by the Switch Matrix  Switch Matrix  Mexico  California  Chile  Israel  ROWE  France  1  1  1  1  1  USA - N E  0  1  1  1  1  Canada  1  1  1  1  1  Japan  1  1  1  1  l  ROWI  1  1  1  1  l  B o t h Initial Scenario a n d Scenario A are calculated w i t h a switch matrix s i m i l a r to the one presented i n table 4.3: N o t e the sole restriction p o s e d o n trade for this m o d e l is that of M e x i c o n o t to e x p o r t to the U S A - N E . T h i s c o n d i t i o n represents the situation o b s e r v e d before N o v e m b e r 1997 w h e n M e x i c a n exports to the U n i t e d States w e r e banned. T o calculate the c o n d i t i o n of M e x i c o entering the U S A - N E market, w e s h a l l change the restriction i n the szvitch matrix f r o m zero to one i n the M e x i c o -> U S A - N E  76  cell a n d t h e n p e r f o r m the o p t i m i s a t i o n w i t h solver. W h e n the target objective function is m a x i m i s e d , the o u t c o m e of the trade matrix w i l l present the n e w trade f l o w s i n the w o r l d , the a m o u n t s h i p p e d to the U S A - N E f r o m M e x i c o , a n d w h e n c o m p a r e d w i t h p r e v i o u s m a t r i x , the changes i n trade w i t h e v e r y d e s t i n a t i o n . T h i s scenario w i l l p r o v i d e the i n f o r m a t i o n to a n s w e r the three research questions a b o u t a m o u n t s t r a d e d to the U S A - N E , w o r l d trade changes, a n d effect o n U S s u p p l i e r s . T h e reader w i l l f i n d i n C h a p t e r f i v e the results f o r the m o d e l u n d e r these scenarios.  77  CHAPTER 5 Results.  The  e m p i r i c a l m o d e l w a s executed  u n d e r the three  scenarios  a n d data  d e s c r i b e d i n chapter f o u r u s i n g the Solver r o u t i n e of Microsoft Excel. I n this chapter there is a set of c o m p a r a t i v e tables that describe the results o b t a i n e d f r o m this o p t i m i s a t i o n p r o c e d u r e , a n d a t h o r o u g h analysis of those results a n d their significance for this thesis. I n a d d i t i o n , the reader w i l l f i n d i n section 5.2 the i n f o r m a t i o n to a n s w e r the research questions f r o m section 4.1. F i n a l l y , section 5.3 of this chapter presents the details of a s e n s i b i l i t y analysis to v a l i d a t e the m o d e l . A l l the results o b t a i n e d f r o m the m o d e l u n d e r each scenario can be f o u n d i n the Result appendix.  5.1  Tables and explanation Tables 5.1 a n d 5.2 s u m m a r i s e the results. A s e x p l a i n e d earlier, scenario A refers  to the i n i t i a l c a l c u l a t i o n of the trade balance of the m o d e l f r o m average quantities a n d prices o b s e r v e d i n the Initial Scenario. T h e next c o l u m n , Scenario B, represents the o p e n i n g of the U S A - N E m a r k e t to M e x i c a n a v o c a d o exports.  78  Table 5.1 Summary of Quantities presented by the spatial equilibrium model across scenarios. Metric  Tonnes  Importer  France  80,000 40.0%  84,089 39.5%  83,889 39.4%  USA-NE  45,000 22.5%  49,599 23.3%  49,827 23.4%  Canada  8,000 4.0%  7,475 3.5%  7,523 3.5%  Japan  5,000 2.5%  5,866 2.8%  5,893 2.8%  ROWI  62,000 31.0%  65,602 30.9%  65,620 30.8% 212,752  212,629  200,000  Exporter  Scenario B  Scenario A  Initial Scenario  Mexico  45,000 22.5%  55,269 26.0%  55,663 26.2%  California  50,000 25.0%  43,028 20.2%  42,735 20.7%  Chile  15,000 7.5%  14,643 6.9%  14,399 6.8%  Israel  35,000 77.5%  34,838 76.4%  3 4 , 9 4 4 76.4%  ROWE  55,000 27.5%  64,851 30.5%  65,011 3 0 . 6 % 212,752  212,629  200,000  E  Table 5.2 Summary of Prices presented by the spatial equilibrium model across scenarios Prices per Metric Tonne expressed in U S dollars  Initial ScenarioScenario A Scenario B France  1,500  1,401.7  1,406.5  USA-NE  1,600  1,327.5  1,313.9  Canada  1,200  1,312.6  1,302.3  Japan  1,800  1,410.5  1,398.2  ROWI  1,500  1,403.2  1,402.7  1,520  1,371.1  1,364.7  Mexico  1,000  1,114.1  1,118.5  California  1,300  1,118.7  1,111.1  Chile  1,100  1,073.8  1,055.9  Israel  1,200  1,196.3  1,198.7  ROWE  1,100  1,198.5  1,200.1  1,140  1,140.3  1,136.9  avg.  avg.  79  In table 5.1 w e c a n observe the shares of total e x p o r t a n d i m p o r t m a r k e t s . T o t a l quantities e x p o r t e d t e n d to r e m a i n constant across Scenario  A to Scenario  B. F o r  e x a m p l e ; C a l i f o r n i a ' s share of total i n t e r n a t i o n a l trade i n Scenario B decreased o n l y 0.1%. I m p o r t e d quantities also w i t n e s s e d s m a l l changes. N o t i c e that the a m o u n t t r a d e d a m o n g countries increased s l i g h t l y f r o m 212,629 to 212,752 M e t r i c Tonnes. Table 5.2 is the s u m m a r y of the prices o b t a i n e d . N o t i c e that a l l prices f o r i m p o r t e r s seem to change m o d e s t l y across scenarios. France has a h i g h e r p r i c e of $1,406.5 U S d o l l a r s d u e to the decrease i n q u a n t i t y s u p p l i e d . C a n a d a a n d J a p a n e x p e r i e n c e d s i m i l a r changes w h e n the U S A - N E m a r k e t is o p e n e d . I n C a n a d a the p r i c e is r e d u c e d b y $10.3 U S f r o m a n o r i g i n a l p r i c e of $1,312.6 U S p e r m e t r i c tonne, a n d i n J a p a n the p r i c e decreased b y $12.3 U S to reach a l o w e r p r i c e of $1,398.2 U S . Prices seem to c o n v e r g e a c c o r d i n g to distance. T h i s i s , U S A - N E a n d C a n a d a are close to $1,310 U S d o l l a r s p e r M T a n d distant destinations l i k e F r a n c e a n d R O W I stabilise at prices a r o u n d $1,400 U S . Prices f o r e x p o r t e r c o u n t r i e s s u c h as M e x i c o a n d C a l i f o r n i a are n o t v e r y different f r o m Scenario A to Scenario B. C a l i f o r n i a s h o w s a decrease of i n t e r n a l p r i c e f r o m $1,118.7 to $1,111.1 U S d o l l a r s , w h i l e the p r i c e i n M e x i c o increased f r o m $1,114 to $1,118 U S d o l l a r s . F o r Israel a n d R O W I countries prices d o n o t change c o n s i d e r a b l y . C h i l e has the most i m p o r t a n t r e d u c t i o n of $17.9 U S d o l l a r s . A l t h o u g h this i n f o r m a t i o n about total quantities a n d prices is i m p o r t a n t to v e r i f y the consistency of the m o d e l , w e n e e d m o r e d e t a i l e d facts about the p r e s u m e d changes i n trade.  80  T o observe h o w trade f l o w s are affected across scenarios, table 5.3 presents the results f r o m the m o d e l ' s trade matrix.  T h i s table w i l l be u s e f u l to describe h o w  M e x i c o ' s entrance to the U S A - N E m a r k e t affects a l l other m a r k e t s . W e also present Table 5.4 a n d T a b l e 5.5 to observe the percentage of exports to a n d i m p o r t s f r o m each r e g i o n across scenario A to Scenario B. Scenario A i n Tables 5.3, 5.4 a n d 5.5 present the s o l u t i o n of the m o d e l w i t h o u t M e x i c a n e x p o r t s to the U S A . D i s t r i b u t i o n of e x p o r t s a n d i m p o r t s is b a r e l y different f r o m the Initial Scenario because the o p t i m i s a t i o n p r o c e d u r e o b t a i n e d a p a t t e r n that i m p r o v e s trade, a c c o r d i n g to the elasticities a n d t r a n s p o r t a t i o n costs i n p u t t e d i n the m o d e l . A s w e see, trade f l o w s m a k e sense w i t h i n f o r m a t i o n p r o v i d e d p r e v i o u s l y i n this thesis. M e x i c o e x p o r t s a r o u n d 27,800 M T to France, a r o u n d 50% of this c o u n t r y ' s total exports (Table 5.4) a n d also exports to R O W I countries m o r e t h a n 22,000 M T . C a l i f o r n i a a n d C h i l e are the source of the U S A - N E m a r k e t w i t h 35,000 a n d 15,000 M T . M e x i c o a n d C a l i f o r n i a s u p p l y C a n a d a 7,400 M T . J a p a n receives a v o c a d o s m a i n l y f r o m C a l i f o r n i a . F i n a l l y , Israel s u p p l i e s 23% of F r e n c h m a r k e t , c o m p e t i n g c l o s e l y i n this m a r k e t w i t h 4 3 % R O W E countries a n d 3 3 % of M e x i c o (Table 5.5).  81  Table 5.3 Trade matrices reported by the spatial equilibrium model across scenarios Unit: Metric Tonnes  Initial Scenario France  5,000  -  20,000  25,000  80,000  -  30,000 3,500  15,000  15,000  -  45,000  -  -  30,000  62,000  15,000  35,000  55,000  200,000  Canada Japan  4,500 2,500  ROW!  8,000  2,500 9,000  45,000  50,000  -  ROWE  Israel  Chile  California  Mexico  Scenario A  2 imports  30,000  USA-NE  £ exports  ROWE  Israel  Chile  California  Mexico  8,000 5,000  I imports  27,829  -  -  19,664  36,596  84,089  -  34,956  14,643  -  -  49,599  Canada Japan ROWI  4,961 307 22,172  2,513 5,559  -  -  -  7,475  -  -  -  15,174  28,256  65,602  £ exports  55,269  43,028  14,643  34,838  64,851  212,629  France  USA-NE  Mexico  Scenario B France  USA-NE Canada Japan ROWI £ exports  California  Chile  ROWE  Israel  £ imports  16,588  -  -  26,059  41,242  26,902 -  8,526  14,399 -  -  -  -  12,173  7,523 5,893 20,793  55,663  42,735  -  82  -  -  -  8,885  23,769  14,399  34,944  65,011  -  5,866  212,752  T h i s scenario is also c o m p a t i b l e w i t h the i n t u i t i o n that distances matter f o r trade. C o u n t r i e s l i k e Israel a n d R O W E countries d o n o t e x p o r t to distant regions l i k e C a n a d a o r Japan. M e x i c o a n d C a l i f o r n i a , d u e to their vast p r o d u c t i o n a n d i n c r e a s i n g e x p o r t capacity, are the r e g i o n s that s h i p a v o c a d o to F r a n c e a n d m o r e destinations. C h i l e is a distant d e s t i n a t i o n f o r E u r o p e a n m a r k e t s  distant  a n d as their  e x p o r t i n g capacity is l i m i t e d ; they d o n o t participate i n those m a r k e t s . It is i m p o r t a n t to observe that s h i p m e n t s f r o m M e x i c o to J a p a n are too f e w i n Scenario A. T h i s is d u e to the elasticities u s e d i n the m o d e l a n d the t r a n s p o r t a t i o n cost f r o m C a l i f o r n i a b e i n g less t h a n M e x i c a n . A l t o g e t h e r , trade f l o w s p o r t r a y e d b y the first s c e n a r i o - s o l u t i o n are still representative to present trade b e a r i n g s . A s w e c a n see i n Table 5.4, once the m o d e l is c h a n g e d to a l l o w M e x i c o to e x p o r t to the U S A - N E r e g i o n , the trade m a t r i x i n Scenario B, M e x i c a n e x p o r t - d i s t r i b u t i o n to i n t e r n a t i o n a l m a r k e t s changes i n a l l regions. F e w e r a v o c a d o s f r o m M i c h o a c a n are e x p o r t e d to France, w h e r e the a m o u n t t r a d e d falls f r o m 5 0 % to 30%. A l s o exports to R O W I countries f r o m M e x i c o w i l l be r e d u c e d to 22% f r o m a p r e v i o u s 40% of total exports. It is interesting to observe that M e x i c o does n o t e x p o r t to C a n a d i a n a n d Japanese m a r k e t s a n y m o r e ; f r o m a p a r t i c i p a t i o n of 66% of the C a n a d i a n m a r k e t , C a l i f o r n i a n o w d o m i n a t e s this m a r k e t a n d Japan. M e x i c o w i l l place 26,900 M T of a v o c a d o s i n t o the U S A - N E m a r k e t , a representative 48% of M e x i c o ' s total exports.  83  Table 5.4 Trade matrices expressed as percentage to exporters across scenarios  Initial Scenario France  Mexico  California 10.0%  66.7%  USA-NE Canada Japan ROWI  £ exports  60.0%  France  5.6% 17.8%  18.0%  100%  100%  California  Japan ROWI  Z exports  Scenario B France  USA-NE Canada Japan ROWI  X exports  81.2% 5.8% 12.9%  9.0% 0.6% 40.1%  100%  100%  Mexico  ROWE  57.1%  45.5%  42.9%  54.5%  100%  100%  100%  100%  Chile  50.4%  USA-NE Canada  Israel  7.0% 5.0%  10.0%  Mexico  Scenario A  Chile  California  20.0%  21.9%  17.6% 13.8% 48.7%  100%  100%  84  ROWE  56.4%  56.4%  43.6%  43.6%  100%  100%  100%  100%  Chile  29.8% 48.3%  Israel  Israel  ROWE  74.6%  63.4%  25.4%  36.6%  100%  100%  100%  100%  Table 5.5 Trade matrices expressed as percentage to importers across scenarios  Initial Scenario  Mexico  California  37.5%  6.3%  Canada Japan  56.3% 50.0%  66.7% 43.8% 50.0%  ROWI  12.9%  14.5%  France USA-NE  Mexico  Scenario A France  33.1%  USA-NE Canada Japan  66.4%  ROWI  33.8%  Scenario B  5.2%  Mexico France USA-NE  54.0%  18.6%  Israel 25.0%  100%  24.2%  Chile  Israel  48.4%  ROWE 43.5%  100%  X imports 100% 100%  29.5%  100% 100%  Chile  Israel 31.1%  17.1% 100.0% 100.0%  100% 100%  23.1%  California  31.3%  E imports  100%  23.4% 70.5% 33.6% 94.8%  ROWE  33%  19.8%  Canada Japan ROWI  California  Chile  43.1%  ROWE 49.2%  E imports 100% 100%  28.9%  31.7%  100%  100% 100%  13.5%  36.2%  100%  C a l i f o r n i a n exports to the U S A - N E m a r k e t w i l l d r o p f r o m 81% to 20% as w e can see i n Table 5.4. It w o u l d a p p e a r that a v o c a d o s , w h i c h u s e d to be d e s t i n e d to the Northeast, are n o w e x p o r t e d to C a n a d a (17%), Japan  (14%), a n d other  ROWI  countries. N o t i c e i n Scenario B that the R O W I m a r k e t , w h e r e C a l i f o r n i a d i d n o t p a r t i c i p a t e d p r e v i o u s l y , reports exports f o r 48% of total C a l i f o r n i a ' s i n t e r n a t i o n a l shipments.  85  Israel a n d R O W E e x p o r t s to France increase to 75% a n d 63% f r o m a p r e v i o u s 56% a n d 56% of total exports respectively. T h i s p a r t i c i p a t i o n i n the F r e n c h m a r k e t t u r n s Israel i n t o the biggest e x p o r t e r i n t o E u r o p e w i t h 26,059 M T . Table 5.5 presents the m a r k e t share of a l l exporters i n each i m p o r t i n g r e g i o n . F r a n c e observes a n i m p o r t a n t change i n the s u p p l y m a r k e t as M e x i c a n share falls f r o m 33% to 20%, Israel increases to 31%, a n d R O W E reaches 49%. N e v e r t h e l e s s , total i m p o r t s i n t o France fell 200 M e t r i c T o n n e s . T h e U S A - N E m a r k e t receives 54% of total s u p p l y f r o m M e x i c o , f o l l o w e d b y C h i l e w i t h 29% a n d C a l i f o r n i a s u p p l i e s o n l y 17%. There is a n increase of 228 M T o n i m p o r t s i n t o this m a r k e t . C a n a d a a n d J a p a n are t o t a l l y s u p p l i e d b y C a l i f o r n i a . T h e R O W I m a r k e t is d o m i n a t e d b y R O W E w i t h 36% f o l l o w e d b y C a l i f o r n i a w i t h 31%, M e x i c o s u p p l i e s 18% a n d Israel participates w i t h o n l y 13%. F i n a l l y , Table 5.6 s h o w s the c o n s u m e r a n d p r o d u c e r s ' s u r p l u s e s that o r i g i n a t e f r o m this spatial equilibrium  model. A g a i n , the Initial  Scenario is o n l y a n  average  e s t i m a t i o n of trade a n d s h o u l d n o t be r e g a r d e d as a r e a l c a l c u l a t i o n of w e a l t h . C o n s u m e r a n d P r o d u c e r s u r p l u s e s are c a l c u l a t e d b a s e d o n e a c h r e g i o n ' s i n t e r n a l p r i c e s a n d quantities, o b t a i n e d f r o m the m o d e l i n each scenario. It is w o r t h n o t i n g that T a b l e 5.6 is expressed i n m e t r i c tonnes, thus the table s h o u l d be i n t e r p r e t e d i n terms of k i l o g r a m s to observe accurately the c o n s u m e r a n d p r o d u c e r s u r p l u s e s . F o r e x a m p l e : 1,000 i n this table represent m i l l i o n U S d o l l a r s p e r m e t r i c tonne.  86  Table 5.6 Summary of consumer - producer surpluses and welfare across scenarios Unit: US dollars per metric tonne  Initial Scenario  Scenario A  Scenario B  AtoB Changes  France  76,923,077  84,986,598  84,583,289  - 403,309  USA-NE  60,000,000  72,889,625  73,563,776  674,151  0.9%  Canada  6,857,143  5,985,891  6,063,115  77,223  1.3%  Japan  5,625,000  7,741,317  7,813,595  72,279  0.9%  ROWI  51,666,667  57,844,392  57,876,715  32,323  0.1%  Mexico  11,250,000  16,970,392  17,213,204  242,812  California  32,500,000  24,068,673  23,741,476  -327,197  -1.4%  Chile  8,250,000  7,861,542  7,602,116  -259,426  -3.3%  Israel  14,000,000  13,870,897  13,855,278  84,381  0.6%  ROWE  15,125,000  21,028,336  21,132,281  103,945  0.5%  Consumer I  201,071,886  229,447,823  229,900,489  452,667  0.2%  Producer S  81,125,000  83,799,839  83,644,354  - 155,486  -0.2%  Total-Welfare  282,196,886  313,247,662  313,544,843  297,181  0.1%  Total Transportation Cost  46,255,102  48,596,985  48,350,433  - 246,552  -0.5%  Consumer  Producer  Observe  i n column  A  to  B  Changes  the i n c r e a s e  o r decrease  -0.5%  1.4%  of w e l f a r e  a t t r i b u t a b l e to the entrance o f M e x i c o i n t o the U S A - N E m a r k e t . W i t h the e x c e p t i o n o f F r a n c e , a l l c o n s u m e r r e g i o n s h a v e a s m a l l p o s i t i v e c h a n g e u n d e r Scenario B. T h e U S A NE  r e g i o n h a s the greatest g a i n of t h e m a l l w i t h a l m o s t 674 m i l l i o n U S d o l l a r s ; o r  e x p r e s s e d as a p e r c e n t a g e , a 0.9% i n c r e a s e f r o m p r e v i o u s w e l f a r e . U S A - N E r e g i o n i s better o f f because i n t e r n a l p r i c e i s r e d u c e d since M e x i c a n a v o c a d o s are c h e a p e r t h a n C a l i f o r n i a n , a n d t r a n s p o r t a t i o n cost to the r e g i o n are s i m i l a r to C a l i f o r n i a n . O n the other h a n d , the F r e n c h m a r k e t loses 403 m i l l i o n U S d o l l a r s d u e to the decrease of  87  M e x i c a n s u p p l y , w h i c h h a d a l o w e r p r i c e t h a n current m a j o r s u p p l i e r s s u c h as Israel do. P r o d u c e r s u r p l u s e s present different situations i n T a b l e 5.6. T h e o p e n i n g of the U S A - N E m a r k e t is p o s i t i v e f o r M e x i c o ; the c o u n t r y o b t a i n e d a benefit of 242 m i l l i o n d o l l a r s , m a i n l y because of the exports to the U S A - N E m a r k e t h a v e a h i g h e r p r i c e a n d l o w e r t r a n s p o r t a t i o n cost t h a n France. C a l i f o r n i a presents a n e g a t i v e o u t c o m e across scenarios; a loss of 327 m i l l i o n U S d o l l a r s is d u e to l o w e r a m o u n t s e x p o r t e d a n d a r e d u c t i o n i n p r i c e . T h e i n c r e a s i n g s u p p l y to the U S A - N E r e g i o n causes the prices to f a l l , w h i c h benefits M e x i c o , b u t C h i l e is w o r s e off because e x p o r t s r e m a i n e d the same. E x p r e s s e d as percentage, C h i l e a n p r o d u c e r s lose the m o s t . Israel, w h i c h increased its share of the F r e n c h m a r k e t , has o n l y a n increase of 84 m i l l i o n U S d o l l a r s . A l t h o u g h a l l these changes are significant to p r o v e the m o d e l , the percentage change is v e r y l o w a n d is different t h a n the large benefits o r loses expected f r o m p r o d u c e r s f r o m M e x i c o and California. T h e theoretical m o d e l states that the d u a l s o l u t i o n f o r this m a x i m i s a t i o n of trade is the m i n i m i s a t i o n of total t r a n s p o r t a t i o n costs. A s d e p i c t e d i n Scenario B, f r o m a total e x p e n d i t u r e of 48,596 m i l l i o n U S d o l l a r s p e r container i n Scenario A, there is a decrease of 246 m i l l i o n U S d o l l a r s . A s s a i d before i n this thesis, i n t e r n a t i o n a l trade is o p t i m i s e d w h e n total quasiwelfare increases. N o t i c e i n T a b l e 5.6 that total w e l f a r e i n Scenario B increased 297 m i l l i o n U S d o l l a r s to a g r a n d total of a l m o s t 313.5 b i l l i o n U S d o l l a r s . T h i s increase c a n  88  be i n t e r p r e t e d as the f i n a l p r o o f of the efficacy of this spatial equilibrium  model o n  p o r t r a y i n g the d y n a m i c s of i n t e r n a t i o n a l a v o c a d o trade.  5.2  Hypotheses validation. The set of results o b t a i n e d p r e v i o u s l y i n section 5.1 w i l l n o w be i n t e r p r e t e d to  address the h y p o t h e s e s stated i n C h a p t e r 4. H e r e y o u can f i n d i n each p a r a g r a p h a brief d i s c u s s i o n to v a l i d a t e the h y p o t h e s e s . =>  Mexican, exports to the USA-NE  could reach 20,000 MT  approximately.  U s i n g the i n f o r m a t i o n f r o m T a b l e 5.3, i n Scenario B w e c a n observe that the a m o u n t e x p o r t e d to the U S A - N E is c a l c u l a t e d to be almost 27,000 M T . T h i s certainly is a n a m o u n t h i g h e r t h a n e s t i m a t e d , b u t c a n be e x p l a i n e d b y the d e m a n d elasticity of the N o r t h e a s t r e g i o n . T h e expected m a r k e t size of the U S A - N E i n c l u d i n g imports f r o m C a l i f o r n i a w a s 50,000 M T ; the m o d e l reports i n Table 5.1 a n accurate m a r k e t size of a p p r o x i m a t e l y 49,800MT. T h i s indicates that the a s s u m p t i o n of this r e g i o n b e i n g elastic t o w a r d s the c o n s u m p t i o n of a v o c a d o s is correct. F u r t h e r m o r e , as this area presents 4 3 % of the total U S p o p u l a t i o n , it seems l o g i c a l that a v o c a d o c o n s u m p t i o n a u g m e n t if p r i c e decreases d u e to a n increase i n s u p p l y ; the m o r e a v o c a d o s there are i n the m a r k e t , m o r e are c o n s u m e d . =>  Entrance to the USA-NE  could cause a 10 percent decrease in Mexican  export share in  all other markets. C o m p a r i n g the trade matrix for Scenario A w i t h Scenario B p r e s e n t e d i n Table 5.4 p r o v i d e s a n a p p r o p r i a t e a n s w e r to the q u e s t i o n of the i m p a c t o n other m a r k e t s . A l l  89  the interactions presented i n the trade matrix are affected b y entrance of M e x i c o to the U S A - N E a n d M e x i c a n e x p o r t shares to a l l destinations are altered sensibly. T o t a l m a r k e t share i n France fell f r o m 50% to 30% a n d M e x i c o n o l o n g e r s u p p l i e s C a n a d a o r Japan. R O W I m a r k e t share for M e x i c o falls f r o m 40 to 22 percent. A s a l l of these changes are greater t h a n ten percent, the h y p o t h e s i s is v a l i d a t e d . =>  Exporters such as Israel could experience an increase on their share in European markets. Table 5.5 reveals that Israeli share of the F r e n c h m a r k e t rose to 3 1 % a n d to 49%  of the R O W E m a r k e t . A f t e r the entrance of M e x i c o i n the U S A - N E m a r k e t , C a l i f o r n i a t u r n e d i n t o a n e w s u p p l i e r of the R O W I m a r k e t w i t h a s u p p l y of 20,000 M T , w h i c h represents 32% of total d e m a n d . These results m a k e sense w i t h the i n t u i t i o n that M e x i c o c o u l d redirect a v o c a d o s to the U S A - N E i n s t e a d of E u r o p e a n destinations, a n d other p r o d u c e r s w i l l compensate for the r e d u c t i o n of M e x i c a n s u p p l y i n E u r o p e . T h i s h y p o t h e s i s is s u p p o r t e d . =>  Chilean exports into the US will decrease 20 percent and there will be exports to other destinations. A c c o r d i n g to the results f r o m the m o d e l r e p o r t e d i n T a b l e 5.3, C h i l e w i l l n o t seek  other a v o c a d o m a r k e t s . T h i s h y p o t h e s i s is rejected because C h i l e w i l l r e m a i n a source for the U S A - N E because the m a r k e t is still b i g e n o u g h to c o n s u m e their a v o c a d o s . N e v e r t h e l e s s , there is a s m a l l r e d u c t i o n o n exports a n d a s h a r p r e d u c t i o n i n p r o d u c e r s u r p l u s d u e to the r e d u c t i o n of p r i c e i n U S A - N E (Table 5.6). =>  The producer surplus for Michoacan producers will increase.  90  A s d e p i c t e d i n Table 5.2, M e x i c a n i n t e r n a l p r i c e h a d a s m a l l increase  from  $1,114.1 to $1,118.5 U S d o l l a r s p e r M T a n d there is a r e d u c t i o n i n U S A - N E prices. T h i s e x p l a i n s w h y i n Table 5.6 w e observe that M e x i c o has a p o s i t i v e change i n p r o d u c e r s u r p l u s . P r o d u c e r s u r p l u s f o r M i c h o a c a n g r o w e r s is calculated to increase 242,812 m i l l i o n U S d o l l a r s . T h i s is consistent w i t h this h y p o t h e s i s b u t u n e x p e c t e d to p r o d u c e r s as they a n t i c i p a t e d m o r e gains f r o m trade l i b e r a l i s a t i o n . =>  Consumers in the United States will pay lower prices; therefore consumer surplus should increase. A s m e n t i o n e d before, the decrease of prices f o r a v o c a d o s f r o m $1,327.5 to  $1,313.9 U S d o l l a r s p e r M T i n the U S A - N E w i l l benefit c o n s u m e r s . Table 5.6 depicts a p o s i t i v e change of 674,151 m i l l i o n U S d o l l a r s i n c o n s u m e r s u r p l u s , thus c o n s u m e r s are better off after the entrance of M e x i c o i n t o this m a r k e t . =>  Chilean producers will suffer a decrease in producer surplus. F i n a l l y , Table 5.6 presents a s h a r p d e c l i n e i n C h i l e a n p r o d u c e r s u r p l u s . T h i s  decrease, estimated to be $259,426 m i l l i o n U S d o l l a r s , is d u e to the r e d u c t i o n of b o t h i n t e r n a l C h i l e a n a n d U S A - N E prices. P r i c e i n C h i l e fell f r o m $1,073.8 to $1,055.9 U S d o l l a r s p e r M T . T h e U S r e m a i n s as the m a i n source f o r C h i l e a n exports of a v o c a d o s , thus the s i m u l t a n e o u s d e c l i n e i n U S p r i c e a n d C h i l e a n p r i c e affects p r o d u c e r s .  91  5.3  Sensitivity Analysis T h e m o d e l presented i n this chapter w a s tested u n d e r t w o different s e n s i t i v i t y  analysis scenarios to v e r i f y p e r f o r m a n c e . T h e reader c a n f i n d the d e t a i l e d r e p o r t of these scenarios i n the Sensitivity Analysis  Appendix.  T o test the s e n s i t i v i t y of the m o d e l , some v a r i a t i o n s to the data u s e d i n the p r o c e d u r e d e s c r i b e d i n section 4.6. Separately a n d i n d e p e n d e n t l y , the m o d e l w a s s o l v e d u n d e r the f o l l o w i n g S e n s i t i v i t y scenarios:  S  Sensitivity  1. Change the elasticities of the producer countries. Elasticities i n this  s p a t i a l e q u i l i b r i u m m o d e l denote the capacity of these c o u n t r i e s to e x p o r t a v o c a d o s . B y setting a l l e x p o r t elasticities to one, w e can o b s e r v e if the p r o d u c t i o n differences  of the p a r t i c i p a n t s i n the m o d e l c o u l d i n d u c e a  s i g n i f i c a n t change i n the a l l o c a t i o n of trade. F o r e x a m p l e , M e x i c o as the largest a v o c a d o - p r o d u c e r has a n elasticity of 2.00, b i g g e r t h a n Israel or C h i l e w h o m h a v e 1.50 a n d 1,00 r e s p e c t i v e l y . •/  Sensitivity  2. Change in transportation  to exchange,  this spatial equilibrium  matrix. T o d e t e r m i n e the o p t i m a l a m o u n t model relies o n the cost of s h i p p i n g  a v o c a d o s b e t w e e n traders as a m e a s u r e of distance. M e x i c o a n d C a l i f o r n i a are v e r y close to each other a n d h a v e m i n o r differences i n the container freight to a l l i m p o r t i n g regions. T h i s s e n s i t i v i t y analysis w i l l set a n e q u a l t r a n s p o r t a t i o n cost for M e x i c o a n d C a l i f o r n i a .  92  T h e results of the analysis are p r e s e n t e d i n Tables 5.7 a n d 5.8. T h e trade matrix, w h i c h represents the entrance of M e x i c o i n the U S A - N E m a r k e t , is d e p i c t e d i n Table 5.7. T h e first m a t r i x is the Base Result, w h i c h depicts the o r i g i n a l results p r e s e n t e d i n section 5.1. T h e m a t r i x n a m e d Sensitivity  1 presents the results o f the s e n s i t i v i t y  analysis of the change i n p r o d u c e r elasticities to o n e . T h e last m a t r i x , Sensitivity  2,  d i s p l a y s the change i n the trade f l o w s w h e n C a l i f o r n i a a n d M e x i c o h a v e e q u a l freight costs i n the transportation  matrix. Table 5.8 is d i v i d e d i n t w o parts: the s u m m a r y of  prices a n d the s u m m a r y of w e l f a r e s u r p l u s e s . T h e last t w o c o l u m n s i n this table present the change across s e n s i t i v i t y analyses. Sensitivity  1 i n table 5.7 presents  s i m i l a r trade f l o w s w i t h the Base  Results.  N o n e t h e l e s s , the total a m o u n t t r a d e d is less t h a n the o r i g i n a l e s t i m a t i o n . P a r t i c u l a r l y , M e x i c o increased t h e a m o u n t e x p o r t e d to the U S A - N E a n d C a l i f o r n i a r e d i r e c t e d trade t o w a r d s the R O W I r e g i o n ; the F r e n c h m a r k e t receives f e w e r a v o c a d o s f r o m M e x i c o because of t h e increase i n the N o r t h e a s t m a r k e t . C a l i f o r n i a ' s s u p p l y is o v e r a l l b i g g e r b u t exports to the U S A - N E decreased. It is w o r t h to m e n t i o n that w h e n t h e m o d e l w a s c a l i b r a t e d , three scenarios w i t h M e x i c a n elasticity of 1, 2 a n d 4 w e r e p e r f o r m e d . T h e results o n l y p r e s e n t e d  less  p a r t i c i p a t i o n of M e x i c o w i t h u n i t a r y elasticity a n d increase of M e x i c a n exports w i t h elasticity of f o u r . F o r the sensitivity scenario 1, the change of s u p p l y elasticities to o n e w a s p r e f e r r e d as i t addresses the p r o d u c t i o n capacity of a l l the exporters . 21  Please refer to the sensitivity analysis appendix to observe the results of the scenarios where only Mexican elasticity was changed.  93  Table 5.7 Trade matrices of Scenario B reported by the Sensitivity Analysis Results. Unit: Metric Tonnes Mexico  Base Result  California  France  16,588  -  USA-NE  -  26,902 -  8,526  14,399  12,173  7,523 5,893  -  20,793  55,663  42,735  Canada Japan ROWI £ exports  Sensitivity 1  |  Mexico  California  ROWE  Israel  Chile  £ imports  41,242  83,889  -  -  49,827  -  -  7,523  -  8,885  23,769  65,620  14,399  34,944  -  26,059  65,0111 |  ROWE  Israel  Chile  12,068  -  -  26,822  43,637  USA-NE  32,992 -  1,225 7,317 5,816  14,934  -  -  -  -  -  9,164  18,166  35,985  61,803  ROWI £ exports  Sensitivity 2  7,034  29,840  -  52,095  44,198  14,934  Mexico  California  ROWE  Israel  Chile  212,752  £ imports  France Canada Japan  5,893  209,015  £ imports  France  16,068  13,546  -  19,660  34,724  83,999  USA-NE  20,720  18,204  11,104  5,025 2,681 11,132  2,480 8,794  3,192  -  50,028  Canada Japan ROWI  -  -  -  15,337  30,308  65,570  £ exports  55,627  43,024  14,296  34,997  65,032  212,9751  94  -  7,505 5,873  Table 5.8 Prices and welfare changes reported by the Sensitivity Analysis Results. Price Changes (US dollars per Metric Tonne)  Change  Base  Sensitivity 1  Change Base - » 1  Sensitivity 2  France  1,406.5  1,439.3  2.3%  1,403.9  -0.2%  USA-NE  1,313.9  1,354.0  3.0%  1,302.1  -0.9%  Canada  1,302.3  1,346.4  3.4%  1,306.0  0.3%  Japan  1,398.2  1,432.9  2.5%  1,406.9  0.6%  ROWI  1,402.7  1,440.8  2.7%  1,404.0  0.1%  Base  Sensitivity 1  Base - » 1  Sensitivity 2  Base ->• 2  1,118.5  1,157.7  3.5%  1,118.1  0.0%  California  1,111.1  1,149.2  3.4%  1,118.6  0.7%  Chile  1,055.9  1,095.2  3.7%  1,048.4  -0.7%  Israel  1,198.7  1,233.8  2.9%  1,199.9  0.1%  3.0%  1,200.3  0.0%  Consumer  Producer Mexico  ROWE  1,200.1  1,236.1  Welfare Changes (million of us dollars)  Base  2  Change  Base  Sensitivity 1  Change Base - » 1  Sensitivity 2  Base - » 2  France  84.58  81.86  -3.2%  84.80  0.3%  USA-NE  73.56  71.58  -2.7%  74.16  0.8%  Consumer  Canada  6.06  5.74  -5.4%  6.04  -0.5%  Japan  7.81  7.61  -2.6%  7.76  -0.7%  ROWI  57.88  55.40  -4.3%  57.79  -0.2%  Base  Sensitivity 1  Base - » 1  Sensitivity 2  Base -> 2  Mexico  17.21  30.15  75.2%  17.19  -0.1%  California  23.74  25.40  7.0%  24.06  1.4%  7.60  8.18  7.6%  7.49  -1.4%  Israel  13.96  22.20  59.1%  14.00  0.3%  ROWE  21.13  38.20  80.7%  21.15  0.1%  313.54  346.32  10.5%  314.44  0.3%  48.35  47.54  -1.7%  47.89  -1.0%  Producer  Chile  Total Welfare Total Trans. Cost  N o w , o b s e r v e that Sensitivity  1 i n T a b l e 5.8 e x h i b i t s m o r e i n t e r e s t i n g changes  t h a n the trade matrix. C o m p a r e the c o l u m n w i t h the o r i g i n a l results f r o m the m o d e l w i t h this s e n s i t i v i t y scenario. P r i c e s increase b e t w e e n 2.3 a n d 3.7 percent,  95  consumer  s u r p l u s decreased a r o u n d 3 % a n d p r o d u c e r s u r p l u s increased u p to 80%. These changes  are d u e to the change  i n the m o d e l ' s elasticity. Prices g o u p because  elasticities c h a n g e d the slope a n d intercept of the s u p p l y s c h e d u l e that the net quasiwelfare e q u a t i o n uses to calculate the e q u i l i b r i u m . T h i s change increases i n t e r n a t i o n a l p r i c e s , a fact that influences c o n s u m e r s u r p l u s n e g a t i v e l y b u t benefits p r o d u c e r s . F u r t h e r m o r e , as the elasticity c h a n g e d the slope a n d intercept of the s u p p l y schedule, the areas are b i g g e r t h a n i n the p r e v i o u s scenario. F o r e x a m p l e , w h e n M e x i c o h a d a n elasticity of 2.00, the slope of the s u p p l y c u r v e w a s flatter a n d the p r o d u c e r s u r p l u s area w a s s m a l l e r . W o r k i n g w i t h a n elasticity of 1.00 for M e x i c o causes the w e l f a r e to increase 75%. I n the Sensitivity  a p p e n d i x , the reader c a n f i n d a n a n a l y s i s of the  changes to the trade m a t r i x w h e n M e x i c a n elasticity changes f r o m o n e to f o u r percent. F o r the second scenario c a l l e d Sensitivity  2, Table 5.7 presents a s i g n i f i c a n t  change i n the trade f l o w s . T h i s scenario p o r t r a y s a c o m m o n t r a n s p o r t a t i o n cost for M e x i c o a n d C a l i f o r n i a . C o m p a r i n g w i t h the o r i g i n a l result, b o t h r e g i o n s increased e x p o r t s a n d c h a n g e d the d i s t r i b u t i o n of trade. I n this scenario M e x i c o e x p o r t s f e w e r a v o c a d o s to France, participates n o w i n the C a n a d i a n a n d Japanese m a r k e t , a n d leads exports  i n t o the U S A - N E  r e g i o n . C a l i f o r n i a exports  a considerable  a m o u n t of  a v o c a d o s a n d enters the F r e n c h m a r k e t , b u t loses s o m e of the C a n a d i a n a n d R O W I m a r k e t . It is i m p o r t a n t to observe that C h i l e , w h i c h u s e d to b e a constant a n d e x c l u s i v e exporter to the U S A - N E r e g i o n , n o w is the m a i n source of Japanese i m p o r t s . O v e r a l l , total trade increased i n this s e n s i t i v i t y scenario.  96  The changes i n prices a n d w e l f a r e b e t w e e n the base scenario a n d Sensitivity 2 are s h o w n i n Table 5.8. Prices for France a n d U S A - N E fell less t h a n one percent a n d Japanese p r i c e increased 0.6 percent. C o n s u m e r s seem to be better off i n those countries w h e r e prices decreased. M e x i c a n a n d C a l i f o r n i a n p r i c e s c h a n g e d to m a t c h a l m o s t exactly $1,118 U S d o l l a r s p e r M T , s i m i l a r to Israel a n d R O W E w h i c h present a steady p r i c e of $1,200 U S d o l l a r s p e r M T . A l t h o u g h C h i l e a n a v o c a d o s enter the Japanese m a r k e t , the p r i c e fell o n l y 0.7 percent. T h e changes i n prices a n d trade f l o w s m o d i f y w e l f a r e too: T h e U S A - N E r e g i o n a n d France are better off i n this scenario, w h e r e a s C a n a d a a n d J a p a n e n d u r e h i g h e r prices that affect c o n s u m e r s u r p l u s . O n the other h a n d , C a l i f o r n i a has a p o s i t i v e change i n p r o d u c e r s u r p l u s , as w e l l as Israel. A g a i n , C h i l e a n p r o d u c e r s are n o t better off w i t h this scenario because their i n t e r n a l p r i c e fell a n d so the s u r p l u s . T h e results of the s e n s i t i v i t y analysis are i n t e r p r e t e d as f o l l o w s . Scenario 1 demonstrates equilibrium  Sensitivity  that changes i n the elasticity of p r o d u c e r s i n this spatial  model y i e l d a s i m i l a r p a t t e r n of trade f l o w s c o m p a r e d w i t h the o r i g i n a l  case. C h a n g i n g the elasticity of this t o o l p r o v i d e reliable a n s w e r s to the  amounts  t r a d e d b e t w e e n each p a i r of countries, b u t the measures of p r i c e a n d w e l f a r e seem to change c o n s i d e r a b l y . A l t h o u g h this scenario p r o v i d e s the larger changes that M e x i c a n p r o d u c e r s expected, the analysis a n d i n t e r p r e t a t i o n of w e l f a r e repercussions of trade l i b e r a l i s a t i o n cannot be a c c o m p l i s h e d w i t h u n i t a r y elasticities s u c h as these. T h e s t u d y of s u p p l y elasticities is v e r y i m p o r t a n t for the accurate e s t i m a t i o n of e m p i r i c a l m o d e l s .  97  S e n s i t i v i t y Scenario  2 sets e q u i v a l e n t t r a n s p o r t a t i o n costs f o r M e x i c o a n d  C a l i f o r n i a . T h i s scenario indicates that m i n o r changes i n the transportation change the o u t c o m e of the spatial equilibrium scenario  indicate c o m p a r a b l e  e x p o r t patterns  matrix  model. T r a d e f l o w s o b t a i n e d i n this f o r the largest a v o c a d o - p r o d u c i n g  r e g i o n s i n the w o r l d . T h e o n l y difference is g i v e n b y the p r o d u c t i o n capacity i n t r o d u c e d b y elasticities. F i n a l l y i s i m p o r t a n t to assert the i m p o r t a n c e of the c a l i b r a t i o n of this e m p i r i c a l m o d e l . T o use this spatial equilibrium  model as p o l i c y - a n a l y s i s t o o l requires t i m e a n d  s e v e r a l iterations to o b t a i n s o u n d results. T h e m o r e v a l u a b l e results w i l l b e those o r i g i n a t e d f r o m data collected f r o m reliable sources o r data o r i g i n a t e d f r o m t h o r o u g h a n a l y s i s of a l l the r e g i o n s i n c l u d e d i n the m o d e l .  98  CHAPTER 6 Conclusions  T h i s chapter is the c u l m i n a t i o n of this thesis. T h e reader w i l l f i n d i n section 6.1 the m a i n p u r p o s e of the thesis, a s u m m a r y of the process f o l l o w e d to s o l v e the research questions a n d the results o b t a i n e d f r o m the e m p i r i c a l e s t i m a t i o n . The section 6.2 c o m m e n t s o n the l i m i t a t i o n s of the e m p i r i c a l m o d e l . It contains m e a n i n g f u l facts about the scope of the m o d e l , s u c h as the k i n d of issues that the m o d e l is u n a b l e to s o l v e . A n d f i n a l l y , section 6.3 details some issues that w e r e d e e m e d as significant a n d are w o r t h y of f u t u r e s t u d y .  6.1  Conclusions and comments T h e p u r p o s e of this thesis is to assess the i m p a c t o n i n t e r n a t i o n a l a v o c a d o  m a r k e t s d u e to the recent entrance of M e x i c a n a v o c a d o s i n the U n i t e d States. T h e process o b s e r v e d to a n s w e r these questions a d v a n c e d as f o l l o w s . First w e p e r f o r m e d a c a r e f u l e x a m i n a t i o n of the characteristics  of a v o c a d o -  p r o d u c t i o n . A v o c a d o s are g r o w n i n m a n y countries a n d are a representative e x a m p l e of the i n t e r n a t i o n a l trade of fresh f r u i t . T o d a y , m a n y countries e x p o r t a v o c a d o s to distant destinations w h e r e c o n s u m e r s p a y attractive prices; p o r t r a y a l of the structure of a v o c a d o i n t e r n a t i o n a l - t r a d e w a s essential. T h e k n o w l e d g e of the i n t e r n a t i o n a l m a r k e t d i r e c t e d the analysis t o w a r d s N o r t h A m e r i c a , w h e r e M e x i c o is the largest a v o c a d o p r o d u c e r a n d exporter of the w o r l d , f o l l o w e d b y the U n i t e d States as a n i m p o r t a n t p r o d u c e r a n d a v o c a d o i m p o r t e r as w e l l .  99  T h e s i n g u l a r case of the o p e n i n g of U S m a r k e t after b e e n b a n n e d to M e x i c a n exports for m a n y years r a i s e d questions about h o w this n e w m a r k e t w o u l d affect other M e x i c a n destinations. I n f o r m a t i o n about the p a r t i c u l a r case of N o r t h A m e r i c a w a s necessary. W i t h m o r e i n f o r m a t i o n about the m a r k e t c o m p i l e d , h y p o t h e s e s w e r e d e v e l o p e d based o n the characteristic of m u l t i p l e i m p o r t i n g a n d e x p o r t i n g m a r k e t s i n f l u e n c e d b y distance. T h i s p r o v i d e d the i n t u i t i o n to d e v e l o p a spatial equilibrium  model. B y i n s e r t i n g  the m a i n exporters a n d i m p o r t e r s i n t o a m a t h e m a t i c a l p r o g r a m m i n g p r o g r a m , w e o b t a i n e d the necessary d a t a to a n s w e r the p o l i c y questions. A s a l r e a d y p r e s e n t e d , hypotheses stated i n section 5.2 w e r e accepted a n d there are relevant changes i n a l l M e x i c a n destinations. A c c o r d i n g to the m o d e l , w e c a n b r i e f l y s u m m a r i s e the results f r o m the o p e n i n g of the U S m a r k e t as f o l l o w s : P r o d u c e r s : M e x i c o w i l l be able e x p o r t 27,000 M T of a v o c a d o s f r o m a p p r o v e d o r c h a r d s i n M i c h o a c a n to the 19 states i n the U n i t e d States N o r t h e a s t ; the i n t e r n a l p r i c e of M e x i c o w i l l increase a n d p r o d u c e r s w i l l be h a r d l y better off t h a n the p r e v i o u s scenario. It is w o r t h to m e n t i o n that p e o p l e i n M e x i c o a n t i c i p a t e d i m p o r t a n t benefits for p r o d u c e r s w i t h the entrance of M i c h o a c a n a v o c a d o s i n t o the U S . T h e results of the thesis p r o v e that there is i n d e e d a n i m p o r t a n t p a r t i c i p a t i o n of M e x i c o i n the U S m a r k e t a n d prices i n M e x i c o rose u p . N e v e r t h e l e s s , the increase i n p r o d u c e r s u r p l u s is moderate. C a l i f o r n i a w i l l s u p p l y C a n a d a a n d J a p a n i n s t e a d of M e x i c o ; the m a r k e t share of C a l i f o r n i a i n the U S A - N E r e g i o n w i l l decrease to 8,500 M T a n d p r o d u c e r s w i l l redirect  100  e x p o r t c r o p to R O W I , a r e g i o n w h e r e they d i d not p a r t i c i p a t e d before. C a l i f o r n i a ' s i n t e r n a l p r i c e w i l l decrease a n d p r o d u c e r s w i l l h a v e a m o d e s t n e g a t i v e i m p a c t o n w e l f a r e . C h i l e w i l l r e m a i n a n exporter i n t o the U S A - N E w i t h 14,400 M T w i t h a l o w e r p r i c e a n d therefore p r o d u c e r s w i l l be n e g a t i v e l y affected b y the p o l i c y change. A m o n g i m p o r t e r s , France receives f e w e r a v o c a d o s f r o m M e x i c o a n d p r o d u c e r s s u c h as Israel a n d R O W E w i l l increase exports to compensate; the i n t e r n a l F r e n c h p r i c e w i l l increase a n d c o n s u m e r s u r p l u s w i l l be negative. The U S A - N E m a r k e t w i l l receive s u p p l y m a i n l y f r o m M e x i c o , f o l l o w e d b y C h i l e a n d C a l i f o r n i a ; total i m p o r t s increase to 49,800 M T a n d the p r i c e i n the r e g i o n decreases, thus c o n s u m e r s i n the 19 states w i l l experience a p o s i t i v e s u r p l u s . It is i m p o r t a n t to stress that, a l t h o u g h the results of the m o d e l i n d i c a t e d that changes i n s u r p l u s h a p p e n e d w i t h i n the expected  context, changes i n p r i c e a n d  w e l f a r e are quite s m a l l . These w e r e u n e x p e c t e d results because p r o d u c e r s i n M e x i c o had  great expectations  about the benefits  f r o m e x p o r t i n g to the U n i t e d States.  H o w e v e r , the s w i t c h i n trade patterns is v e r y s i g n i f i c a n t a n d w a s d e p i c t e d accurately b y the m o d e l . It is p r o b a b l e that changes i n trade patterns i n v o l v e m a n y costs t h a n s i m p l y p a y i n g for t r a n s p o r t a t i o n . In the case of the entrance of M e x i c a n a v o c a d o s i n the U n i t e d States N o r t h e a s t m a r k e t , the spatial equilibrium  model u s e d i n this thesis p r o v e d to be a u s e f u l t o o l to  d i s p l a y p o l i c y restrictions. B y c o n s t r u c t i n g the r e s t r i c t i o n to trade c a u s e d b y the b a n o n M e x i c a n a v o c a d o s , the m o d e l w a s able to present the s i t u a t i o n of the m a r k e t before  101  a n d after the r e m o v a l of the b a n . T h e u s e of the net quasi-welfare e q u a t i o n to m a x i m i s e the m a r k e t gains p r o v i d e d suitable m e t h o d to c o m p u t e trade. A s r e p o r t e d b y the s e n s i t i v i t y analysis, changes i n t r a n s p o r t a t i o n costs a n d elasticities c o u l d change the results o r the i n t e r p r e t a t i o n of t h e m . P o l i c y - m a k e r s to d e c i d e o n this issue c a n u s e the i n f o r m a t i o n p r o v i d e d b y the m o d e l about w e l f a r e changes. A n d y e t they s h o u l d analyse the data a n d q u e r y about the o r i g i n of the results.  6.2  L i m i t a t i o n s of t h e m o d e l W e c o n s i d e r l i m i t a t i o n s to the spatial equilibrium  model u s e d i n this thesis as  a s s u m p t i o n s that c o n s t r a i n the scope of the m o d e l a n d c o n f i n e the i n t e r p r e t a t i o n of the results. T h e m o d e l assumes that the i t e m b e i n g a n a l y s e d is h o m o g e n e o u s a n d is t r a d e d i n a perfect c o m p e t i t i v e m a r k e t . G i v e n that there are several a v o c a d o varieties (the H a s s v a r i e t y b e i n g the m o s t c o m m o n l y traded) these are not h o m o g e n e o u s g o o d s . M o r e o v e r , Spatial  equilibrium  models are e x t r e m e l y  data-intensive  since the  elasticities a n d t r a n s p o r t a t i o n costs of the r e g i o n s i n v o l v e d are v a r i a b l e a n d change f r e q u e n t l y . L i k e w i s e , a n y m i n o r change i n the parameters c a n affect the o u t c o m e because the m o d e l is c a l c u l a t e d b a s e d o n m a t h e m a t i c a l p r o g r a m m i n g [ 7 5 ] . D a t a o n s u p p l y elasticities w a s v e r y d i f f i c u l t to acquire as there are f e w studies d o n e o n the m a r k e t structure of a v o c a d o - p r o d u c e r s ; the c a l i b r a t i o n of the m o d e l r e q u i r e d m a n y attempts to o b t a i n a m o d e l p e r f o r m i n g closer to reality. A n d f i n a l l y , as a v o c a d o  102  p r o d u c t i o n is seasonal, the spatial equilibrium  model cannot describe the trade patterns  accurately w i t h o u t f u r t h e r restrictions that m a y t a m p e r w i t h the p e r f o r m a n c e of the p o l i c y analysis. T h e m o d e l s h o w n that M e x i c a n a v o c a d o - p r o d u c t i o n seems theoretically capable of s u p p l y i n g the entire U S A - N E m a r k e t . H o w e v e r , as e x p l a i n e d i n section 3.6, the U S D A a n d Secretaria de Agricultura  authorise the g r o v e s a n d n u m b e r of hectares that  are a l l o w e d for e x p o r t i n g i n t o the U S . T h i s p r o c e e d i n g constrains p r o d u c i n g areas a n d therefore, s u p p l y w i l l r e m a i n u n d e r c o n t r o l . T h e m o d e l c a n n o t p o r t r a y this k i n d of restriction because the trade matrix u t i l i s e d to evaluate the f l o w s b e t w e e n p r o d u c e r s a n d c o n s u m e r s , changes w h e n o p t i m i s a t i o n occurs. E v e n if w e attempt to set a f i x e d a m o u n t to trade b e t w e e n a n y p a i r of r e g i o n s , solver w i l l use the s u p p l y a n d d e m a n d schedules to resolve the m o d e l . S i m i l a r l y , M e x i c a n p r o d u c e r s a u t h o r i s e d to e x p o r t a v o c a d o to the N o r t h e a s t m a r k e t h a v e the p r o d u c t i o n capacity to e x p o r t 16,000 M T of a v o c a d o s d u r i n g the w i n t e r . N e v e r t h e l e s s , the a m o u n t d e s t i n e d for the U S A - N E is o n l y 5,000 M T  [76].  P r o d u c e r s w i l l n o t g i v e u p their m a r k e t shares o n d o m e s t i c a n d E u r o p e a n m a r k e t s . T h i s v o l u n t a r y restriction to e x p o r t to a d e t e r m i n e d r e g i o n c a n n o t be i n c l u d e d i n the m o d e l because trade is allocated b y u s i n g data o n elasticities, e x p o r t s a n d prices.  103  6.3  Recommendations for further study I n this section  we  w i l l b r i e f l y describe  some  a d d i t i o n a l ideas  that  were  u n c o v e r e d d u r i n g the research a n d w r i t i n g of this thesis. T h e case of the a v o c a d o t u r n e d out to be a quite interesting topic w i t h p l e n t y of r o o m for m o r e e m p i r i c a l analysis. It w a s a d d r e s s e d i n the p r e v i o u s section that elasticities a n d d y n a m i c s of this f r u i t h a v e not b e e n s t u d i e d i n d e p t h . A v o c a d o d e m a n d e s t i m a t i o n , c a l c u l a t i o n of s u p p l y a n d d e m a n d elasticities, a n d the a n a l y s i s of p r o d u c t i o n c o m p o n e n t s ,  are  c r u c i a l t o w a r d s the g e n e r a t i o n of accurate m o d e l s for e c o n o m i c a n d p o l i c y analysis. R e l i a b l e estimates of t o p i c s s u c h as d e m a n d a n d s u p p l y schedules are necessary. There is a section i n this thesis about the c o m p e t i t i v e n e s s  of the  avocado  p r o d u c t i o n i n M i c h o a c a n a n d C a l i f o r n i a . These a v o c a d o - p r o d u c i n g regions  face  frequent changes i n p r o d u c t i o n t e c h n o l o g y , p r o b l e m s w i t h w a t e r use, lack of p r o p e r g r o v e m a i n t e n a n c e , o r e v e n pressure f r o m i n c r e a s i n g h o u s i n g areas; w e lack of u p - t o date assessment of the relevant topics that affect a v o c a d o p r o d u c t i v e n e s s . M o r e o v e r , the s t u d y of other p o t e n t i a l a v o c a d o - p r o d u c i n g r e g i o n s i n the w o r l d is i m p o r t a n t too. T h e i n t e r n a t i o n a l trade a n d m a r k e t i n g of this f r u i t is i m p o r t a n t because there are v e r y p r o f i t a b l e m a r k e t s i n the w o r l d . The case of F r a n c e is a g o o d e x a m p l e of a u n i q u e n a t i o n that i m p o r t s a v o c a d o s a b u n d a n t l y . I n this age w h e n exotic fruits are m o r e a v a i l a b l e i n o u r countries, the structure of m a r k e t s a n d p e o p l e s ' preferences s h o u l d be understood.  104  T h e u n e x p e c t e d l o w change i n prices a n d s u r p l u s b u t considerable v a r i a t i o n i n trade flows indicates that there m i g h t be other costs besides t r a n s p o r t a t i o n i n v o l v e d i n this m a r k e t . P e r h a p s e x p o r t c o m p a n i e s i n n e w m a r k e t s , s u c h as the U S m a r k e t for M e x i c o , face the t r o u b l e of c o n s t r u c t i n g a n e w customer-base, e s t a b l i s h i n g offices a n d acquire credit lines, etc. F u r t h e r research of these p a r t i c u l a r costs a n d other issues c o u l d generate m o r e accurate m o d e l s to u n d e r s t a n d the d y n a m i c s of this i n d u s t r y i n the f u t u r e . C o n s i d e r i n g that the state of M i c h o a c a n c o u l d allocate m o r e a v o c a d o s i n t e r n a t i o n a l destinations, the d o m e s t i c s u p p l y of M i c h o a c a n m a y decrease.  for It is  p r o b a b l e that other r e g i o n s w i t h i n M e x i c o c o u l d experience g r o w t h i n p r o d u c t i o n a n d i m p r o v e groves. A s selected r e g i o n s i n M i c h o a c a n are a l l o w e d to e x p o r t i n t o the U S , s t u d y i n g the response of other regions i n M e x i c o , w h i c h c o u l d substitute s o m e of the d o m e s t i c s u p p l y of M i c h o a c a n , c o u l d p r o v i d e u n d e r s t a n d i n g about s u p p l y a n d demand on a national level in Mexico.  105  LIST O F R E F E R E N C E S [l]  G a l l e g o s , E . R . Algunos Aspectos del Aguacate y su production U n i v e r s i d a d A u t o n o m a C h a p i n g o , M e x i c o , 1993.  [2 ]  A v o c a d o D e f i n i t i o n b y T h e R a n d o m H o u s e D i c t i o n a r y of the E n g l i s h L a n g u a g e . R a n d o m H o u s e , 1988.  [3]  G a l l e g o s , Algunos Aspectos del Aguacate y su production 1993  [4]  S a l g a d o , R i c a r d o . H e a d of the Michoacan U r u a p a n , M i c h o a c a n . M a y , 1996.  [5]  H o w , R . B r i a n . Marketing U S A , 1991.  [6]  S A G A R C e n t r o d e Estadistica A g r o p e c u a r i a . Sistema National de Information Agropecuaria. Secretaria d e A g r i c u l t u r a , G a n a d e r i a y D e s a r r o l l o R u r a l . 1997 Source: h t t p : / / w w w . s a g a r . g o b . m x / c e a . h t m .  [7]  A g r i f r u t S A d e C V , Interview with Mr. Jaime Roman, p a c k i n g h o u s e m a n a g e r . U r u a p a n , M i c h o a c a n . M a y , 1996.  [8]  C a l a t r a v a , Javier. Demand elasticity on the European avocado market. D e p a r t m e n t of A g r i c u l t u r a l E c o n o m i c s , C I D A . G r a n a d a , S p a i n . 1988  [9]  F A O F o o d a n d A g r i c u l t u r e O r g a n i z a t i o n of the U n i t e d N a t i o n s . On-line Databases and time-series records. Source: h t t p : / / a p p s . f a o . o r g / F A O S T A T . 1996  [10]  F A O On-line Databases and time-series records.  Avocado  en  en Michoacan  Commission  Michoacan.  Mexico,  Interviewed i n  Fresh Fruits and Vegetables. V a n N o s t r a n d R e i n h o l d .  [ 11 ]  R a i n e y , C . et a l Nutrition  Today, V o l u m e 29, N u m b e r 3, M a y / J u n e 1994.  [ 12 ]  C A C . California Avocado Commission 1997. S o u r c e : h t t p : / / w w w . a v o i n f o . c o m /  [ 13 ]  B r e d a h l , M a u r y E . a n d H o l l e r a n , E r i n . Technical Regulations and Food Safety in the NAFTA. C e n t e r f o r International T r a d e E x p a n s i o n of the D e p a r t m e n t of A g r i c u l t u r a l E c o n o m i c s at the U n i v e r s i t y of M i s s o u r i , 1997.  [14]  P a z - V e g a , R a u l . Mexican m a g a z i n e n o . 14, 1989.  [15]  S A G A R C e n t r o d e Estadistica A g r o p e c u a r i a . Reporte Anual sobre exportation Horti-fruticola 1996-1997. Secretaria d e A g r i c u l t u r a , G a n a d e r i a y D e s a r r o l l o R u r a l . 1997 Source: h t t p : / / w w w . s a g a r . g o b . m x / c e a . h t m .  Avocados:  Threat of opportunity?  106  California Grower  [16]  G l o b a l A g r i b u s i n e s s N e t w o r k . Information http: / / w w w . m i l c o m . c o m / f i n t r a c /  [ 17 ]  H o w , Marketing Fresh Fruits and Vegetables. 1991.  [18]  Effects of the N o r t h A m e r i c a n Free T r a d e A g r e e m e n t o n U S a g r i c u l t u r a l C o m m o d i t i e s . W a s h i n g t o n D C : U . S . D e p a r t m e n t of A g r i c u l t u r e .  [ 19 ]  F A O On-line Databases and time-series records  [20]  G a l l e g o s , Algunos Aspectos del Aguacate y su produccion en Michoacan, 1993.  [21]  I N E G I Atlas Agropecuario de los Estados Unidos Mexicanos. Instituto N a c i o n a l d e Estadistica, G e o g r a f i a e I n f o r m a t i c a . M e x i c o 1996.  [22]  I N E G I Base de Datos en linea. source: h t t p : / / w w w . i n e g i . g o b . m x N a c i o n a l d e Estadistica, G e o g r a f i a e I n f o r m a t i c a . M e x i c o 1997.  [23]  Salcedo, S. et a l . Politica Agricola y maiz en Mexico: Norteamerica.no. C o m e r c i o exterior. V o l 43, M e x i c o 1993.  [24]  Salter S A d e C V , Interview with Mr. Francisco }. Cardenas g r o v e a n d P a c k i n g h o u s e a d m i n i s t r a t o r . T i n g u i n d i n , M i c h o a c a n , 1996.  [2 5 ]  P a z - V e g a Mexican Avocados: Threat of opportunity? C a l i f o r n i a G r o w e r , 1989.  [26]  Salter, Interview with Mr. Francisco }. Cardenas. M i c h o a c a n , 1996.  [27 ]  Salter, Interview with Mr. Francisco f. Cardenas. M i c h o a c a n , 1996.  [28]  S a l g a d o , h e a d of the Michoacan Avocado Commission. M a y , 1996.  [2 9]  U S D A R i s k M a n a g e m e n t A g e n c y Research a n d E v a l u a t i o n D i v i s i o n , Economic assesment of avocados. E x c e u t i v e s u m m a r y . 1995.  [30]  H o y , C a r m a n a n d C o o k R o b e r t a . An assessment of the potential economic impacts of Mexican avocado imports on the Californian industry. D e p a r t m e n t of A g r i c u l t u r a l E c o n o m i c s , U n i v e r s i t y of C a l i f o r n i a at D a v i s . J u l y 1995.  [31]  H o y a n d C o o k . An assessment of the potential economic impacts of Mexican imports on the Californian industry. J u l y 1995.  avocado  [32]  U . S . D e p t . of A g r i c u l t u r e : A g r i c u l t u r a l M a r k e t i n g http://www.usda.gov/ams  Source  [33 ]  C A C . California Avocado Commission 1997. Source: h t t p : / / w w w . a v o i n f o . c o m /  107  on  avocado  market,  hacia el libre  Service,  1997  source:  Instituto  comercio  An  [ 34 ]  A g r i f r u t & Salfer Interviews with Mr. Francisco J. Cardenas and Mr. Jaime Roman.  [35]  A g r i f r u t Interview with Mr. Jaime Roman, p a c k i n g h o u s e manager.  [36]  A g r i f r u t Interview with Mr. Jaime Roman, p a c k i n g h o u s e m a n a g e r .  [37 ]  Salter, Interview with Mr. Francisco J. Cardenas. M i c h o a c a n , 1996.  [38]  Salcedo Politica Agricola en Mexico: hacia el libre comercio Norteamericano.  1993.  [39]  Salcedo Politica Agricola en Mexico: hacia el libre comercio Norteamericano.  1993.  [40]  I N E G I Base de Datos en linea. source: h t t p : / / w w w . i n e g i . g o b . m x . M e x i c o 1997.  [41]  A M I M E X . Interview and e-mail communication with Rogelio Martinez, Grove o w n e r a n d m e m b e r of A g u a c a t e r o s d e M i c h o a c a n M e x i c o , S A d e C V , M o r e l i a , M i c h o a c a n , 1997.  [42]  U S D A - E R S , Integrated Pest M a n a g e m e n t I P M Practices o n 1991 F r u i t s a n d N u t s , R T D U p d a t e s : Pest M a n a g e m e n t , 1994.  [43]  California Avocado Commission http: / / w w w . a v o i n f o . c o m /  [44]  G a l l e g o s , Algunos Aspectos del Aguacate y su production 1993  [45]  H o y a n d C o o k . An assessment of the potential economic impacts of Mexican avocado imports on the Californian industry. J u l y 1995.  [46]  C A C Mexican Avocado Alert, 1997  [47]  S c h r a m m , R. Health, sanitary and phytosanitary barriers to free trade. Increasing u n d e r s t a n d i n g p u b l i c p r o b l e m p o l i c i e s . O a k B r o o k , I L : F a r m F o u n d a t i o n . 1991.  [48]  R e p o r t of the i n t e r n a t i o n a l A g r i c u l t u r a l T r a d e Research C o n s o r t i u m W o r k i n g  [49]  'BICO' Report on imports and exports to the United States. D e v e l o p e d b y T r a d e & M a r k e t i n g A n a l y s i s B r a n c h T E I D - I T P - F A S - U S D A , presented to U . S . B u r e a u of the C e n s u s . W a s h i n g t o n , 1996.  [50 ]  'BICO' Report on imports and exports to the United States. W a s h i n g t o n , 1996.  [51]  A g r i c u l t u r a l T r a d e Research C o n s o r t i u m , The implications Free Trade area for agriculture. 1991.  108  1997.  Mexican  Avocado  Alert.  Source:  en Michoacan  Mexico,  of a North  American  [ 52 ]  C o l i n , S. Current status of avocado growing in Mexico. C a l i f o r n i a A v o c a d o Society, R e p o r t n o . 71, 1987.  [53]  H a n s e n - W a l i s z e w s k i , V a n e s s a A i d a . Issues affecting agricultural trade in the NAFTA: The US ban on fresh Mexican Avocado Imports. Thesis. D e p a r m e n t o f A g r i c u l t u r a l E d u c a t i o n , O h i o State U n i v e r s i t y , 1995.  [54]  U S D A - F A S , Foreign Agricultural Service Report on Mexican Avocados, U S D e p t a r t m e n t of A g r i c u l t u r e - F o r e i g n A g r i c u l t u r a l Service, 1997. Source h t t p : / / ffas.usda.gov  [55]  F o r s y t h e , K & L y n c h L . Effects of a free trade Agreement on US and Mexican sanitary and phytosanitary regulations. U S D e p a r t m e n t of A g r i c u l t u r e B u l l e t i n N o 69. W a s h i n g t o n D C . 1992.  [ 56 ]  F e d e r a l Register, F e b r u a r y 5,1997, Importation of Fresh Hass Avocado Fruit in Michoacan, Mexico. F i n a l R u l e . V o l . 62, N o . 24.  [ 57 ]  F e d e r a l register 7 C F R p a r t 319 J u l y 3 , 1 9 9 5 . Importation of fresh Hass avocado fruit grown in Michoacan, Mexico. W a s h i n g t o n D C g o v e r n m e n t p r i n t i n g office, 1995.  [58]  F e d e r a l register. Importation Mexico. 1995.  [59]  A M I M E X . Interview with Rogelio Martinez, Grove owner and member A g u a c a t e r o s d e M i c h o a c a n M e x i c o , S A de C V , M o r e l i a , M i c h o a c a n , 1997.  of  [60]  AMIMEX.  of  Interview  of fresh Hass avocado fruit grown  with Rogelio  Martinez,  Grove owner  in  Grown  Michoacan,  and member  A g u a c a t e r o s d e M i c h o a c a n M e x i c o , S A d e C V , M o r e l i a , M i c h o a c a n , 1997. [61]  Department of Agricultural Information, Agriculture Ministry of Chile, m a i l c o m m u n i c a t i o n w i t h A i d a G u e r r e r o L o p e z , September 15,1997.  [ 62 ]  H o u c k , James P . Elements of agricultural  [63]  T a k a y a m a , T . a n d J u d g e , G . G . Spatial and Temporal Prices and Allocation N o r t h H o l l a n d P u b l i s h i n g C o m p a n y , A m s t e r d a m , N e t h e r l a n d s , 1971.  trade policies. M a c m i l l a n 1986.  [ 64 ] H o u c k , Elements of agricultural  trade policies. 1986.  [ 65 ]  H o u c k , Elements of agricultural  trade policies. 1986.  [66]  E x c e l M i c r o s o f t 1995 s o l v e r p r o g r a m .  109  electronic  Models.  [67]  G a l l e g o s , Algunos 1993.  Aspectos del Aguacate  y su produccion  [ 68 ]  F A O On-line Databases and time-series records.  [69]  Statistics C a n a d a 1996. CANSIM databases on Canadian Imports from Source: h t t p : / / w w w . s t a t c a n . c a /  [70]  I N E G I Atlas Agropecuario  [71]  U S D A M a r k e t Service. Source: http: / / w w w . a m s . u s d a . g o v / m a r k e t n e w s . h t m  [72 ]  A g r i f r u t & Salter Interviews with Mr. Francisco J. Cardenas and Mr. Jaime Roman.  [13]  C a l a t r a v a , Javier. Demand elasticity on the European avocado market, 1988.  [74]  C A C . California Avocado Commission 1997. Source: h t t p : / / w w w . a v o i n f o . c o m /  [75]  H o u c k , James P . Elements of agricultural  [7 6]  A M I M E X . Interview and e-mail communication with Rogelio Martinez, Grove o w n e r a n d m e m b e r of A g u a c a t e r o s d e M i c h o a c a n M e x i c o , S A d e C V , M o r e l i a , M i c h o a c a n , 1997.  de los Estados Unidos Mexicanos.  110  en Michoacan  Mexico,  destination.  1996.  trade policies. M a c m i l l a n 1986.  Appendices Page >  >  Avocado international production and trade. Source: F A O database 1997 World production in metric tonnes  112  Main avocado producers  113  Main avocado exporters (quantities)  114  Main avocado exporters (prices per tonne)  115  Main avocado importers (quantities)  116  Main avocado importers (prices per tonne)  117  Canadian avocado imports. Source: Statistics Canada 65-007 Monthly quantities in metric tonnes and prices in Canadian dollars  >  >  118  California Avocado Commission. Avocado shipments to the USA in metric tonnes and US dollars  122  USA exports and imports in 1994 and 1995 by destination (quantities)  123  USA exports and imports in 1994 and 1995 by destination (prices)  124  Israeli avocado exports. Source: Israel's Central Bureau of Statistics. Exports by destination (quantities in metric tonnes)  125  Exports by destination (prices in US dollars per metric tonne)  126  >  Chilean avocado exports and prices. Source: Chilean Customs Service.  127  >  Population of the United States. Source: US Bureau of Census  128  >  Spatial equilibrium model. Results  >  Initial Scenario printout  129  Scenario A printout  131  Scenario B printout  133  Sensitivity analysis of the Spatial Equilibrium Model.  Sensitivity One (unitary export elasticities) Initial Scenario printout  135  Scenario A printout  137  Scenario B printout  139  Sensitivity Two (equal transportation cost for Mexico and California) Initial Scenario printout  141  Scenario A printout  143  Scenario B printout  145  111  Source: Food and Agriculture Organization of the United Nations. FAO Databases, 1997  Production Metric Tons  WORLD  1996 1994 1995 1992 1993 1989 1990 1988 1991 1,503,664 | 1,611,314 | 1,918,620 | 2,056,320 | 2,130,370 | 2,006,930 [ 2,061,140 | 2,033,640 | 2,093,258 334,741 175,100 124,890 114,372 62,520 76,166 28,000 48,863 35,800 44,000 60,000 33,000 45,866 36,000 42,992 41,352 21,594 21,500 21,850 21,000 19,000 16,312 11,082 16,376 6,181 5,700 5,300 3,000 2,000 3,000 1,977 1,300 4,990 2,000 941 1,552 2,400 358 4,000 550 2,322 510 470 300 480 300 173 670 300 56 202 100 37  473,156 126,100 137,150 114,923 61,302 81,075 39,000 52,188 20,000 44,900 58,000 34,000 49,031 37,000 46,222 34,089 22,000 22,000 22,000 23,000 20,000 16,296 11,414 13,432 8,753 5,800 5,250 3,200 2,600 3,000 2,174 1,188 4,264 2,000 727 1,6002,400 803 3,000 750 1,809 520 470 330 480 310 104 670 400 50 202 100 57  _  _  _  1 12  3 12  686,301 141,500 162,620 118,635 84,592 57,064 37,580 52,487 48,000 45,000 57,000 35,000 50,765 38,000 44,880 46,085 21,500 22,500 23,000 26,000 21,000 15,847 12,005 18,655 9,000 5,900 5,410 3,200 2,800 3,000 2,671 2,477 4,286 2,000 812 1,700 1,800 280 2,280 250 1,066 520 470 330 480 310 86 670 350 50 202 100 57  -  20 3 12  780,403 167,800 141,622 111,340 91,420 72,102 39,000 46,831 52,700 46,000 57,000 38,000 53,351 39,000 52,144 49,134 22,000 23,000 23,000 29,000 21,000 15,407 11,542 18,083 9,000 6,000 5,550 3,500 3,000 3,100 2,697 3,208 4,264 2,000 1,100 1,700 1,800 380 2,513 830 1,202 510 470 350 480 310 246 500 260 50 202 100 61 16 20 12 12  724,523 264,535 145,000 111,742 100,000 73,815 48,000 59,427 74,880 46,500 45,000 40,000 51,648 40,000 53,197 42,234 22,500 23,500 23,200 22,477 21,500 14,978 12,925 16,083 8,500 6,100 5,695 3,500 3,200 3,200 2,724 2,030 3,768 2,000 600 1,800 1,700 430 2,486 950 419 510 470 350 490 310 268 400 325 69 202 100 40 22 30 5 12  112  754,000 130,362 150,000 115,000 110,000 74,000 42,000 55,113 47,590 47,000 45,000 42,000 51,811 40,000 51,745 37,750 23,000 24,000 23,300 23,000 22,000 14,678 12,925 17,668 8,500 6,200 5,835 4,000 3,500 3,300 2,700 2,500 3,677 2,000 1,300 1,800 1,700 380 797 800 342 520 470 350 490 310 270 400 300 132 182 100 50 30 30 13 12  772,000 154,448 150,000 115,000 105,000 74,000 55,000 53,112 50,000 47,000 45,000 44,000 52,376 41,000 35,100 48,783 23,500 24,500 23,400 23,000 20,000 14,825 13,000 24,063 8,500 6,200 5,960 4,000 3,800 3,400 2,750 2,550 3,087 2,000 1,600 1,850 1,700 390 797 750 342  799,000 167,800 155,000 110,000 74,000 100,000 60,000 53,145 50,000 47,000 45,000 45,000 52,376 41,000 40,000 36,000 23,500 24,500 23,500 23,000 20,000 14,825 13,000 25,794 7,500 6,300 5,960 4,000 4,000 3,400 2,750 2,500 2,724 2,000 600 1,850 1,700 400 797 900 342  530 470 350 490 310 270 200 250 147 100 100 62  540 470 350 490 310 270 200 150 150 100 100 70 30 20 13 12  30 20 13 12  790,000 173,000 155,000 110,000 100,000 74,000 62,000 52,000 50,000 47,000 45,000 45,000 43,000 41,000 40,000 40,000 26,000 25,500 24,000 23,000 22,000 14,825 13,000 12,568 7,500 6,300 5,960 4,000 4,000 3,500 2,750 2,500 2,111 2,000 1,900 1,850 1,700 1,000 800 750 580 540 470 350 329 310 270 200 200 150 100 100 70 30 20 13 12  average  s  -  a  x < B N 3 S3 S 3 Q CQ  1»Z  — u  113  Source: Food and Agriculture Organization of the United Nations. FAO Databases, 1997.  EXPORTS  Metric Tones 1988 1989 101,587  112,285  1990  1991  1992  1993  1994  1995  141,333  160,855  165,262  163,949  204,596  244,424  Mexico  11,857  13,101  17,427  14,314  15,676  18,829  33,750  54,595  22,444  Israel  19,750  22,924  34,908  42,445  39,951  28,654  29,266  40,993  32,361  USA  13,384  7,299  6,849  6,829  8,011  16,593  14,259  28,878  12,763  31,595  26,587  26,100  37,200  25,000  29,115  22,297  27,896  36,226  29,028  24,134  22,894 2,451 10,833  South Africa  20,904  35,046  30,485  Spain  16,818  12,223  14,529  379  481  500  293  460  928  2,435  14,131  Chile  4,634  3,593  11,555  15,040  16,655  4,560  18,719  11,911  Netherlands  2,308  3,047  3,456  3,532  3,403  5,685  8,673  10,792  5,112  14  44  8  6  15  3,161  7,148  8,264  2,333  Dominican Rp  2,371  2,195  2,841  2,709  7,200  5,800  5,000  6,600  4,340  France  2,244  4,930  11,764  15,258  11,735  6,971  7,317  5,203  8,178  2,612  2,080  1,486  747  500  1,816  1,816  4,850  1,988  1,714  1,677  2,056  2,191  1,447  Bel-Lux  Italy  Guatemala Venezuela New Zealand Ecuador  308  1,224  1,221  1,181  1,041  1,086  713  1,476  2,525  1,310  1,904  1,813  1,484  11  26  211  1,120  1,120  1,600  511  -  -  5  11  1  10  70  640  640  640  252  Dominica  107  190  250  338  373  461  505  505  341  UK  424  590  450  481  168  107  1,121  327  459  Germany  115  132  219  123  98  128  283  236  167  345  351  1,090  509  705  629  506  174  539  -  -  -  278  1,392  251  Cote Divoire  Brazil Honduras China  -  -  -  114  23  -  38 205  Source: Food and Agriculture Organization of the United Nations. FAO Databases, 1997.  EXPORTS  Price per Ton (Dollars per Kilogram)  1988  1989  1990  1991  1992  1993  1994  1995  average  1.06  1.01  1.00  0.98  1.05  1.25  1.27  0.99  0.88  0.63  0.942  1.29  1.14  1.24  1.26  1.00  1.305  1.47  1.35  0.99  1.14  0.90  1.271  WORLD  1.11  1.03  1.12  1.09  Mexico  0.83  0.84  0.85  Israel  1.62  1.46  1.43  USA  1.39  1.44  1.49  South Africa  0.62  0.55  0.56  0.59  0.60  0.54  0.52  0.72  0.587  Spain  1.17  1.32  1.29  1.14  1.22  1.18  1.38  1.42  1.264  Bel-Lux  2.02  1.73  1.92  1.78  1.75  2.04  1.35  1.70  1.786  Chile  0.82  0.98  0.95  0.85  0.72  0.68  0.78  0.92  0.837  Netherlands  1.94  1.63  1.88  1.64  1.79  1.60  1.58  1.69  1.717  Italy  2.57  1.20  5.75  2.33  1.53  1.53  1.48  1.47  2.234  Dominican Rp  0.26  0.28  0.31  0.31  0.33  0.37  0.35  0.38  0.322  France  2.03  1.71  1.84  1.40  1.57  1.62  1.45  1.60  1.654  Guatemala  0.25  0.29  0.37  0.40  0.40  0.10  0.10  0.05  0.246  Venezuela  0.39  0.37  0.48  0.52  0.48  0.48  0.47  0.31  0.438  New Zealand  1.75  2.72  2.76  2.08  2.12  2.18  1.95  3.21  2.346  -  -  0.36  0.31  0.12  0.06  0.06  0.06  0.121  Cote Divoire  1.00  0.82  1.00  1.00  0.36  0.20  0.20  0.20  0.598  Dominica  0.60  0.49  0.64  0.39  0.70  0.73  0.36  0.36  0.535  UK  1.80  1.68  1.96  1.84  2.09  2.20  1.16  1.47  1.775  Germany  2.11  1.93  2.06  1.74  2.27  1.65  1.57  1.64  1.871  0.83  0.485  Ecuador  Brazil Honduras China  0.47  -  0.43  -  0.38  -  0.45  0.45  -  -  115  0.41  0.26  0.46 0.01 0.22  -  0.001 0.060  Source: Food and Agriculture Organization of the United Nations. FAO Databases, 1997.  IMPORTS Metric Tons 1988  1990  1991  1992  1993  1994  WORLD  114,167  126,271  150,036  173,773  190,021  152,276  181,746  206,616  France  51,607  62,607  77,869  88,526  84,661  72,781  78,495  86,353  75,362  5,649  4,694  13,377  17,036  24,149  8,229  23,932  18,576  14,455  1,891  2,522  2,333  2,579  3,583  16,394  4,130  11,403  12,564  7,844 14,355  USA Bel-Lux Netherlands  1,848 3,867  1989  1,890 4,914  6,756  6,150  9,138  7,957  1995  average  13,012  14,403  14,227  15,657  15,985  14,041  15,240  12,277  Germany  5,954  6,703  8,436  9,405  10,012  7,963  9,768  11,235  8,685  Canada  6,817 -  5,614  5,953  6,667  7,737  7,916  9,695  7,162  Colombia  6,896 -  -  1,336  4,219  6,338  2,473  3,370  2,694  2,163  2,665  4,190 3,559  3,698  Japan  4,574  3,741  4,726  3,437  Sweden  3,474  3,328  3,267  3,810  4,394  4,200  4,147  4,441  3,883  1,935  2,222  2,719  2,400  2,632  2,910  3,087  2,504  1,908  2,330  810  UK  Switzerland Spain  2,123 392  214  303  312  305  719  200  35  12  1,106  3,382  2,150  1,916  1,916  1,340  1,369  1,196  1,295  1,362  1,283  1,716  2,129  1,617  1,496  Australia  885  1,257  727  1,667  2,140  1,243  2,413  1,600  1,492  Denmark  1,463  1,514  2,118  2,786  2,768  2,368  1,854  1,562  2,054  Qatar  400  618  1,483  1,436  1,436  1,113  1,113  1,413  1,127  Austria  596  556  658  723  776  807  921  883  740  343  385  477  536  543  554  700  487  611  639  497  392  Saudi Arabia Italy  Norway  360  Finland  551  583  679  681  720  641  643  Ireland  336  326  372  317  282  506  496  Hong Kong  206  249  194  200  290  337  429  397  288  9  6  55  146  33  413  380  348  174  Argentina  Main Avocado Importers  100.000 ,  Quantities in metric tonnes. Source: FAO database 1997.  90,000 80,000 70,000  — • — France  — O — USA  60,000  —©—UK  —H— Netherlands  50,000  —  40.000  —A—Japan  1988  1989  1990  1991  116  1992  Germany  #  1993  Canada  1994  1995  Source: Food and Agriculture Organization of the United Nations. FAO Databases. 1997.  IMPORTS  Price per Ton (Dollars per Kilogram)  1988  1989  1.653 1.309  1.241  average  1.493  1.447  1.513  1.581  0.823  1.281  0.991  1.228  1.406  1.628  1.640  1.353  1.420  1.513  1.361  1.789  1.391  1.006  1.468  1.815  France  1995  1.532  1.750  1.707  1994 1.390  1.382  1.530  1993 1.372  1.432  1.627  USA  1992  1991  1990  WORLD  1.479  Bel-Lux  1.869  1.684  1.867  1.527  1.642  1.496  Netherlands  1.716  1.459  1.672  1.435  1.615  1.433  UK  1.849  1.581  1.783  1.512  1.644  1.452  1.391  1.476  1.586  Germany  1.767  1.675  1.741  1.454  1.584  1.480  1.483  1.540  1.590  Canada  0.982  1.062  1.325  1.272  1.115  0.876  0.995  0.885  1.064  -  -  0.056  0.072  0.059  0.057  0.230  0.059 2.354  -  Colombia Japan  2.520  2.412  2.825  2.456  2.178  1.648  2.547  2.247  Sweden  2.061  2.076  2.072  1.775  1.680  1.511  1.608  1.574  1.795  Switzerland  2.308  1.872  2.128  1.960  1.927  1.746  1.777  1.606  1.915  Spain  2.638  2.593  2.726  1.925  1.763  1.847  1.767  1.905  2.145  Saudi Arabia  0.795  0.857  0.833  0.588  0.496  0.577  0.552  0.552  0.656  Italy  1.908  1.651  1.792  1.671  1.795  1.593  1.484  1.528  1.678  Australia  1.799  2.438  2.740  2.115  2.161  2.158  1.528  2.711  2.206  Denmark  1.785  1.731  1.816  1.482  1.560  1.383  1.435  1.488  1.585  0.979  0.999  0.891  0.891  0.672  0.988  Qatar  1.408  1.118  0.948  Austria  1.700  1.754  1.833  1.761  1.782  1.675  1.657  1.586  1.718  Norway  2.136  2.026  2.003  1.717  1.631  1.659  1.807  1.817  1.849  Finland  2.129  2.122  2.087  1.771  1.582  1.552  1.703  1.702  1.831  Ireland  1.607  1.436  1.965  1.498  1.401  1.328  1.502  1.596  1.542  Hong Kong  3.102  3.213  3.753  3.555  2.579  2.691  2.730  2.577  3.025  Argentina  0.889  1.000  1.400  1.233  1.000  0.804  1.305  1.540  1.146  Main Avocado Importers Prices in thousands of US Dollars per metric tonne. Source: FAO database 1997.  3.000  2.500  2.000  h  1.500  A  1.000 — • — France -O-UK  0.500  —  Germany  —O—USA  —H— Netherlands —•—Canada  —A—Japan  1988  1989  1990  1991  117  1992  1993  1994  1995  ON oo T t 0 0 so T t ©• ©•  0 0  V i Vi  Vi  Vi  Tt  © o so r o  t--  Os r o o ©  so  ro sq  U~t r o  ro  t-;  Vi  VI  Vi  Vi  C N  o  oo SO  o  vi  V i <s> Vi  Vi  C N  C N C N  oo o Tt  C N C N  C N  Vi  VI  Vl  Vi  Vi Vi Vi Vi Vi Vi  Tt  r—  o  C N  C N  C N  ro  C N  —  Vi  Vi  OS T t  Tt  0 0  :  O  ro  so  0 0  0 0  o  r—  ©  Vi Vi Vi Vi  Vi  Os r o OS Os C N o  Tt  C N  C N  —  so p~ ©  C N  C N  —  —  —  —"  —  Vi  Vi Vi Vi Vi Vi Vi Vi  p~ Tt  C N C N  o  C N  Vi Vi Vi ©  Tt  Tt  C N  Vi Vi Tt  p - SO SO SO © SO Os Os so V\ T t 0 0  OS OS ©  o o  Tt Tt  Tt  Vi Vi Vi Vi Vi Vi Vi  —  ro OS OS  p-  so Tt  —'  —  —  so © 0 0 ©  C N C N  C N  C N  V i V i V i Vi  Os OS C N  so pSO s o  ro P-  Vi  >/-) Os p oo OS C N  o o  "o Q c •a o  Vl  © © OS C N >o T t p - Vi  © © © o oo v s r o so Os P - SO C N <r> P - SO  V i Vi  Vi  Vi vi  © © co —  o o OS oo  V i Vi  V i Vi  © Tt  r-  1  o  Tt  ©  © Os oo <o >o  S  a ' n o H u  S  V~i  •£  o a  © a 2 8  et  u  9  SO  i  M  C N  C N  o  Vi Vi Vi Vi Vi  ©  o  C N  C ^  o o  O o so r o Os  VI  Vl  V i Vi  i  •  OS r o  0 0  oo  0 0 0 0  Vl  © o r»  Csl u-i v i so T t so Tt SO «o T t  JO u u.  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OC NO  rN CN  q pi  CN  o —'  Tf  NO ON  NO  OC  NO  —  ON  —  r—•  Tf CN  ON  Tf  CN  oo m o NC  c-l  — CO  d un CM  Tf  CM ON  Tf ON  CN  OO NO OO  ON  ul , un ro- C rn rTf  NC NC  '  CN  oc  trn rn ON NC  CN NO*  Tf Tf  OC  un Tf  Tf  Tf CN  Tf  r -  un  ON  r -  CN  CN  —  NO  ON  0C  ON  NO  OO  CN  oo o T~ f m  NO ON  m* T f  OO  Tf  rn Tmf  r-'  q  1  un  1  NO  Tf  '  OC ON  Tf  m  ON ON  NO  NO* CN  NO  od un  ™*  r -  oo r-'  ON OC  Tf O-'  m NO OC ON  , Tf ON ON CN CN) OC NC rN o un r-N un r - — ON_ NO O OC OC Tf NO* d m * d Tf m N O un m CN  r--  Tf  NO  NO OC  un m u-> _ o un 0 0 OT f m un q oo rn od oc rn*  Tf o m m o NO'  OC  ON  o —d  ON  d rn rn  —  O ON  r- ,  CN  Tf  ' —  NO  NO  m m  NO OO  NC NC OC  m  —* —  —  o  Tf CN  _  CN  c NO rn rn  CN  CN  —  in  —  ~ ON  o t> NC CN  OC  ON  '  _  NO  CN  „  o m C N OO NN OC NO Tf rn N C rn O N rn — ' o o * 0C  NO —  o CN — j q r-m CN* CN od oo' d 1 '  TT  Un  OC  r -  OO  CN  r- un d 00 oS fN O  CN  oo  NC  un Tf  ON  d  q —'•  NC  ,  un — —  ON  Tf  un  OC CN  CN  CN Tf Tf  CN NO  CN  00 oo m CN T f  Tf  ON ON  CN ON  cn oo  ^_  Tf OC  oo Tf  CN  ON  m  rn r- T f OC r-* 0 rn0 C N CN u-i m cn  „ m , un un rn Tf CN NO rn rn Oun m N un r- O N NC NC CN un* oc"  NO  Tf Tf  NO  OC  —  ©  un m Tf ON' NO NO* NO 0C m un e-  rn TT m rn  ON  r-~  1  NC NC  un  d  NO  Tf Tf  ON  NO*  rm ON  r-'  un u-j  —•  ON  m — un od  m ir. ONo 00 0 O0 NO ON NO ON NO ON NO ON NO ON NC ON N —  CN  Tf  W V} W  ao O N o — rn 0 0 0 CN C0 NO CN NO CN N rN ON  CN  C N  ON  T  «  un  ON CN  ON  ON  122  United States Trade Balance Calculatedfrom:USDA Foreign Agricultural Service. California Avocado Commission and FAO Databases. 1997. Month / Year  Ene-94 Feb-94 Mar-94 Abr-94 May-94 Jun-94 Jul-94 Agc-94 Sep-94 Oct-94 Nov-94 Dic-94 Ene-95 Feb-95 Mar-95 Abr-95 May-95 Jun-95 Jul-95 Ago-95 Sep-95  Total USA  Quantities in Metric Tons  Production  France Canada Japan  12,999 12,854 16,343 17,254 18,917 18,798 16,634 18,078 11,064 4,221 2,110 5,177 13,300 13,728 18,758 21,122 27,016 25,645 26,269 24,889 17,119  104 51 128 64 1 49 98 972 549 135 54 675 563 1,378 502 251 25 49 1,094 659  89 91 39 115 190 268 345 182 126 187 237 127 244 68 196 174 152 137 121 107 154  114 148 101 226 350 323 296 71 66 66 68 33 33 16 116 273 429 354 278 195 50  Nether- United Others lands Kingdo  25 36 69 35  29 58 514 409 191 87 157 300 160 20 17 13 7 197 105  50 51 134 69 4 5 5 159 174 55 84 111 199 212 166 112 58 34 9 160 134  10 28 191 96 13 26 4 11 39 20 2 19 59 38 17 13 9 22 21  Total Total Export Import s s  392 405 662 603 544 686 828 1.902 1.335 673 530 1,123 1,341 1,853 1,059 864 669 568 466 1,775 1,123  Monthly USA Avocado Production, Imports and Exports Data from January-December 1994 in metric tonnes. Source: C A C , F A O and USDA  Monthly Avocado Exports of the USA  Data from January to December 1994 in metric tonnes. Source: C A C , F A O and USDA  123  939 197 98 98 80 264 566 649 5,886 4.991 7,951 2,213 1.341 500 13 133 252 381 264 545  Calculated from: USDA Foreign Agricultural Service. California Avocado Commission and FAO Databases. 1997.  Prices in US Dollars per Kilogram Rest of France Canada Japan $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $  0.79 0.90 1.30 1.30 1.65 1.13 1.13 0.97 0.71 0.66 1.06 0.86 0.75 0.85 0.89 1.77 5.47 2.73 0.72 1.44  $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $  1.19 1.11 1.38 1.51 1.54 1.49 1.46 1.09 1.06 0.82 0.83 0.91 0.75 1.07 0.80 1.42 1.18 1.89 1.39 1.32 0.77  $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $  0.84 1.03 1.25 2.18 2.45 2.52 2.60 2.00 2.64 1.41 1.57 1.39 1.27 1.25 2.46 2.50 1.84 2.63 1.93 2.04 0.52  $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $  0.75 0.92 1.00 1.21 1.58 1.26 1.15 1.00 0.84 0.75 0.98 0.88 0.78 0.88 1.82 2.67 2.53 7.44 2.09 1.77  USA $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $  0.95 1.45 1.72 1.72 1.44 1.01 1.18 1.07 1.42 1.35 1.37 1.20 0.47 0.35 0.38 0.54 0.51  $ $  0.62 0.61  Californi a $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $  1.01 1.32 1.50 1.41 1.48 1.46 1.38 1.37 1.30 1.45 1.48 1.25 0.84 0.81 0.78 0.75 0.72 0.69 0.66 0.63 0.60  Prices Paid for U S A Avocado Exports and Imports DatafromJanuary-December 1994 in US Dollars per Kilogram. Source: CAC, FAO and USDA  124  Israel Exports  Source: Israel's Central Bureau of Statistics. 1997.  Metrjc Tones 1989 1990 Total  22,763  34,905  1991  1992  1993  1994  1995  1996  42,420  39,934  27,983  29,380  40,639  45,953  average  13,566  19,042  25,745  23,166  14,229  15,930  23,094  25,648  20,053  Germany  2,431  4,102  5,084  5,229  4,348  4,394  5,986  6,731  4,788  UK  2,060  3,019  3,363  3,727  2,823  2,618  3,939  3,793  3,168  Netherlands  711  964  1,567  947  1,209  1,692  2,285  2,501  1,485 1,418  France  Sweden  597  1,606  1,418  1,957  1,612  1,096  783  2,272  Bel-Lux  537  958  872  714  628  778  935  978  800  Check Rep  876  1,577  1,213  1,064  844  889  884  898  1,031  Italy  706  1,298  851  500  698  673  643  692  758  Austria  287  510  424  496  477  439  550  546  466  Finland  184  338  369  334  280  280  318  530  329  324  371  456  740  176  219  410  240  40  511  343  149  27  53  45  42  14  22  30  27  18  24  Denmark  600  1,097  1,193  1,339  543  Norway  149  192  232  310  235  21  22  20  88  Spain Turkey Greece  38  46  zaf asn  33  31 161  103  36  10  20  16  32  37  Malta  6  16  17  54  3  14  15  11  12  12  8  13  unc USA  3  32  16  5  ruf 2  EUN  7  9  3  2  2  3  1  2  1 1  afh  9  9  Portugal Other  10  3,022  5,217  4,396  4,228  3,135  2,872  3,617  4,030  Avocado exports from Israel Quantities in metric tonnes. Source: Israel's Central Bureau of Statistics, 1997. 30,000  f  1989  1990  1991  1992  125  1993  1994  1995  1996  Israel Export Price per ton 1989 1990  1991 1.28  $  1.16  $  1.46  1.22  1.58  $ $ $ $ $ $ $ $ $  1.12  1.35  $ $ $ $ $ $ $ $ $ $ $ $ $  1.26  $  1.17  $  1.07  1.44  France  1.47 1.40  UK  $ $ $  1.29  $  1.37  Netherlands  S  1.56  1.53  Sweden  $  1.76  Bel-Lux  $  1.56  Check Rep  $  1.66  Italy  $ $ $ $ $ $  1.41  1.61  $ $ $ $ $ $ $ $ $  1.52  $  Austria Finland Denmark Norway Spain  $  1.57 1.49 1.41  1993  $  $  Germany  1992  1.35  Total  1.40 1.60 1.58 1.49 1.53 1.28 1.09 1.29 0.95  1994  1.25  $  $  1.22 1.36  1.48  $ $ $ $ $ $ $  1.06  $ $ $ $ $ $ $ $ $  $  0.98  1.22  $  1.02  1.05  $  0.97  1.36 1.30 1.42 1.27 1.38 1.46 1.51  1.18 1.31 1.06 1.27 1.30 1.39 1.44  $  Greece  $  1.34  asn  $  0.59  $  1.50  $  1.52  $  0.61  $ $  1.39  $  1.30 1.25  0.75  $ $  $  1.22  1.08  2.00  $  3.31  $  $  1.54  1.00  $  1.19  $  1.10  $  1.26  $  1.02  $  1.16 1.35  1.35  $ $ $  1.07  $  1.17  $  1.25  $ $ $  $  1.67  $  1.07  $  1.00 1.00  0.80  $ $ $  1.33  $  1.50  1.00  $  1.00  1.03 1.35  $ $  1.23 1.41 1.22 1.36 1.42 1.36  1.26  1.11  $ $ $ $ $  1.18  $  0.98  1.16  1.18  1.53  $ $ $  1.10  $  0.84  1.15  $  1.16  $  1.25  $  1.08  1.11  $  1.02  1.32  1.33  1.20 1.11 1.25  1.17  0.94  0.76  $  1.72  $  0.50  $  1.60  ruf EUN  $ $  am  $  Portugal  1.08  1.44  1.45  1.30  unc  $  $  1.57  1.24  Malta USA  1996  1.20  $ $ $ $ $ $ $ $ $ $ $ $ $ $ $  Turkey zaf  1995  1.28  1.00  1.00  $ $ $  0.97 1.06 0.96 1.12 0.86  1.13 1.40 1.16 0.86  1.28 1.06  0.88 0.86  1.56  Other  Avocado exports from Israel Prices in thousands of US dollars per metric tonne. Source: Israel's Central Bureau of Statistics. 1997.  1989  1990  1991  1992  126  1993  1994  1995  1996  Source: ODEPA, National Customs Service and Central Chilean Bank 1997.  C H I L E A N A V O C A D O EXPORTS  Total  Metric Tons 1992 1993 16,654 | 4,561 324 1,786 1,350 1,101 0  Argentina 32 16,199 USA France 90 333 Europe South America 0  Price per Kilo 1992 1993 0.59 Argentina USA France Europe South America  $ $ $ $ $  0.86 0.58 1.29 1.08 0.36  I  0.39 $ $ $ $  1.38 0.18 1.70 1.06 $ 0.36  1994 18.719  1995 11,911  1996 average 16,744 |  313 18.397 -  338 11,566  463 16,267  -  -  6 3  2 6  1994  I  083  1995 0.32  $ 0.45 $ 0.91  $ 0.56 $ 0.31  $ 0.82 $ 0.67  $ 0.88  $ 0.54  294 12,843 288 288 5  0 14  1996 0.71 S 0.60 $ 0.72  $ 0.46  average  I 0.77 0.54 1.50 0.96 0.48  127  Thousands of US Dollars 1994 1992 1993 28,319 | 11,818 | 22,470 j 37 27,952 70 309 1  235 9,748 793 1,041 1  695 20,167 1,253 7 4  1995 37,758 |  1996 23,707  606 36,908  766 22,704  2 10  31  United States Population  United States Alabama Alaska Arizona  Source: US Bureau of the Census http://www.census.gov/population/estimates/state/  l-Abr-90  l-Jul-90  l-Jul-91  l-JuI-92  l-Jul-93  l-Jul-94  l-JuI-95  l-JuI-96  248.718.291  249.403,447  252,137,973  255,038,739  257,800,487  260,349,838  262,755,270  265,283,783  4,040,389  4,048,368  4,086,715  4,130,843  4,181,248  4,220,178  4,252,982  4,273,084  550,043  553,118  569,485  587,485  598,127  602,723  603,617  607,007  3,665,339  3,678,757  3,746,535  3,835,366  3,944,181  4,078,567  4,217,940  4,428,068  Arkansas  2,350.624  2,354,282  2,371,014  2,395,263  2,424,835  2,453,351  2,483,769  2,509,793  California Colorado  29,758,213  29,904,481  30,416,268  30,914,370  31,220,145  31,408,473  31,589,153  31,878,234  3,294,473  3,304,042  3,370,605  3,465,033  3,568,218  3,661,665  3,746,585  3,822,676  Connecticut  3,287,116  3,289,128  3,290,599  3,279,241  3,278,134  3,274,599  3,274,662  3,274,238  Delaware  666.168  669,067  680,253  689,605  699,095  707,961  717,197  724,842  {strict of Columbia  606,900  603,618  594,301  585,794  578,127  567,013  554,256  543.213  Florida  12,938,071  13,019,115  13,293,762  13,512,127  13,721,655  13,957,508  14,165,570  14,399,985  Georgia  6,478,149  6,506,247  6,623,502  6,764,133  6,900,764  7,057,510  7,200,882  7,353,225  Hawaii  1,108,229  1,112,932  1,133,559  1,152,979  1,165,708  1,178,279  1,186,815  1,183,723  Idaho  1,006,734  1,011,836  1,038,719  1,066,134  1,100,540  1,134,492  1,163,261  1,189,251  Illinois  11.430,602  11,448,345  11,525,177  11,611,445  11,689,879  11,759,259  11,829,940  11,846,544  Indiana  5,544,156  5,555,144  5,603,536  5,652,562  5,706,867  5,754,670  5,803,471  5,840,528  Iowa  2,776,831  2,779,620  2,791,313  2,807,574  2,821,506  2,830,779  2,841,764  2,851,792  Kansas  2,477,588  2,480,582  2,491,407  2,514,839  2,532,458  2,550,897  2,565,328  2,572,150  3,686,891  3,692,528  3,715,080  3,752,385  3,793,389  3,827,891  3,860,219  3,883,723  4,220,164  4,217,357  4,241,001  4,272,942  4,288,686  4,316,281  4,342,334  4,350,579  Kentucky Louisiana Maine  1,227,928  1,231,326  1,235,781  1,236,313  1,238,551  1,239,342  1,241,382  1,243,316  Maryland  4,780,753  4,797,992  4,859,419  4,909,316  4,952,331  4,999,864  5,042,438  5,071,604  Massachusetts  6,016,425  6,018,527  6,000,589  5,998,536  6,017,658  6,041,352  6,073,550  6,092,352  Michigan  9,295,277  9,311,187  9,368,733  9,422,081  9,457,372  9,491,836  9,549,353  9,594,350  Minnesota  4.375,665  4,387,166  4,428,858  4,473,662  4,523,631  4,567,695  4,609,548  4,657,758  Mississippi  2,575,475  2,577,258  2,592,041  2,612,297  2,638,732  2,670,425  2,697,243  2,716,115  Missouri  5.116,901  5,126,320  5,157,211  5,192,400  5,235,169  5,279,423  5,323,523  5,358,692  Montana  799,065  799,827  808,238  823,251  841,033  856,242  870,281  879,372  Nebraska Nevada  1,578,417  1,580,670  1,591,478  1,603,649  1,613,775  1,624,272  1,637,112  1,652,093 1,603,163  1,201,675  1,218,641  1,285,189  1,332,969  1,384,724  1,462,026  1,530,108  New Hampshire  1.109,252  1,111,920  1,107,549  1,114,352  1,122,797  1,135,382  1,148,253  1,162,481  New Jersey  7,730.188  7,740,164  7,765,633  7,811,381  7,859,237  7,902,523  7,945,298  7,987.933  1,515,069  1,519,908  1,547,307  1,581,481  1,616,427  1,655,172  1,685,401  1,713,407  17,990,778  18,002,453  18.039,028  18,094,222  18,152,890  18,152,701  18,136,081  18,184,774  6.632,448  6,656,659  6,751,088  6,837,008  6,952,587  7,069,739  7,195,138  7,322,870  638,800  637,374  634,123  635,286  636,842  639,145  641,367  643,539  Ohio  10,847,115  10,862,279  10,930,786  11,002,315  11,061,351  11,104,005  11,150,506  11,172,782  Oklahoma Oregon Pennsylvania Rhode Island  3,145,576 2,842,337  3,147,046  3.167,589  3,256,890  3,277,687  3,300,902  2,919,269  3,206,740 2,974,499  3,232,264  2,858,435  3,035,036  3,087,141  3,140,585  3,203,735  11,882,842  11,895,735  11,946,720  11,989,576  12,031,393  12,061,661  12,071,842  12,056,112  New Mexico New York North Carolina North Dakota  1,003,464  1,004,646  1,004,413  1,001,433  998,850  994,313  989,794  990,225  South Carolina  3,486,310  3,498,928  3,555,336  3,593,980  3,627,190  3,642,903  3,673,287  3,698,746  South Dakota Tennessee  696.004  696.608  702,054  709,396  716,841  723,246  729,034  732,405  4,877,203  4,890,644  4,949,510  5.019,629  5,092.762  5,176,214  5,256,051  5,319,654  16,986,335  17,045,646  17,361,703  17,687,466  18,049,371  18,413,094  18,723,991  19,128,261  1,722,850  1,729,755  1,767,022  1,811,296  1,860,002  1,908,543  1,951,408  2,000,494  Vermont  562,758  564,518  568,583  571,537  575,917  580,204  584,771  588,654  Virginia  6,189,197  6,213,836  6,286,654  6,389,114  6,474,955  6,551,380  6,618,358  6,675,451 5,532,939  Texas Utah  4,866,669  4,901,224  5,017,782  5,145,782  5,254,653  5,338,173  5,430,940  West Virginia  1,793,477  1,792,450  1,798,866  1,807,041  1,818,466  1,823,623  1,828,140  1,825,754  Wisconsin  4,891,769  4,902,317  4,948,549  4,996,563  5.044,383  5,083,152  5,122,871  5,159,795  453,589  453,421  458,041  464,048  469,735  476,061  480,184  481.400  110,543,056  110,707,180  111,270,249  111,914,812  112,551,642  113,052,731  113,542,382  113,918,671  Washington  Wyoming Total of Selected State!  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