Terms of Trade of Agriculture and Food Production: Case of Mexico

This paper presents the main results of a study that proposes a methodology for studying whether or not a heterogeneous agricultural sector, such as that of Mexico, faces unfavourable terms of trade. These results are used to interpret the origins of the basic food production problems experienced by Mexico since the 1960s. The analysis takes classical economics as the theoretical framework; the study's empirical nature makes it one of the few quantitative studies on agricultural terms of trade in this tradition. Agriculture clearly faced unfavourable terms of trade during 1960 and 1970, and the terms of trade of its peasant component explain the phenomenon. This, together with government intervention in setting low basic crop prices, explains the agricultural problems of contemporary Mexico