1. The importance of sugar
1.1. Mexico was the 7th largest producer of sugar in the world
1.1.1. It representes 0.5% of GDP
1.1.2. Received 8% of goverment subsidies
1.1.3. Created more tna 14.2 direct and indirect jobs
1.2. The soft drink industry is one of the most important consumers in the world
2. The challenges
2.1. low commodity plrices
2.2. national overproduction
2.2.1. Alternative energy sources are the new frontier. Mexico has a huge market to exploit
2.2.2. Mexico has an exceding production with a contracting demand. This as well as diminishing prices, causes specialization in one product. Similiar to what happen with silver in the early 30´s and crude oil with Lopez Portillo.
2.3. The trump problem
2.3.1. the recently elected President of the USA arrived with the renegotiation of NAFTA.
2.3.1.1. This could go either two ways
2.3.1.1.1. The disappearance of NAFTA causes cost of taxes to rise, therefore causing that the prices fluctuate even lower
2.3.1.1.2. Mexico realizes the production potential it has to produce, manufacture and sell raw materials
2.4. The entrance of HFCS
2.4.1. Mexico could gain benefit if instead of specializing in one product, improves in new markets like the production of energy from suga
2.5. Technological advancement to produce energy from sugar
2.5.1. According to the ISO the USA is the largest producer of ethanol using sugar
2.5.2. The production of ehtanol is beneficial for the world
2.5.2.1. Lower petroleum usage
2.5.2.2. reduces green house effect
3. The History
3.1. The history of the industry is more than 490 years old
3.2. In the Agrarian Reform was promulgated by
3.2.1. This gave birth to "Ejidos"
3.3. 1940 "los decretos cañeros" were instituted
3.4. Between 1940´s and 1980´s the sugar industry was controlled by the state
3.5. 1970 the cane fields were nationalized
3.5.1. Unionized workers took control over the production and distribution of sugar
3.6. In 1990´s sugar mills began to borrow money from FINANSA
3.7. In 1994 NAFTA was established
3.7.1. introduced Mexico to new markets
3.7.2. technological development or innovation were not considered
3.7.3. Gap between the supply of sugarcane and mill´s capacity
4. The production of sugarcane
4.1. minifindios
4.1.1. This are pieces of land so small and placed in harsh environments. This lands are extremely inproductive
4.2. output depends on:
4.2.1. Soil and climatic conditions
4.2.2. Water resources
4.2.3. Production costs
4.2.4. labour
4.3. Overprodcution of sugar
4.3.1. Increase in the harvest area
4.3.1.1. An increase of the harvest area represents an increase in the supply, which moves the supply curve to the right. This increases the quantity and lowers the equilibrum price.
4.3.2. surplus in the inventories
4.3.3. Contraction of national demand
4.3.3.1. A contraction of the national demand, moves the demand curve to the left. This results in a decrease in price and in quantity
4.3.4. Entry of HFCS into the country
4.3.4.1. HFCS acts as a substitute of sugar. It is also cheaper and faster to produce for this also contributed to decrease the demand of sugar
4.4. The market prcie were not definedby agents involved
4.4.1. Prices fluctuate
4.4.2. Low international price of Mexican sugar
5. q =f(k,m,l,c,w)
5.1. K- capital
5.2. m- raw material
5.2.1. water
5.2.2. fields