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The International avocado market: Mexican entrance to the USA market illustrated with a spatial eqilibrium model

University of British Columbia

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 MT 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.

Thesis/Dissertation

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2009-05-26

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http://hdl.handle.net/2429/8255

Agricultural Economics

University of British Columbia

UBCV

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