MEXICALI, Mexico — After three tough years, Larry Cox was just getting adjusted to farming green onions, cauliflower and melons here in the lush Mexicali Valley about an hour's drive south of the border.
Cox came looking for lower costs and reduced government red tape. He says he also found corrupt officials, fickle soil and uncertain water supplies. Still, after losing huge sums, Cox was finally expecting a profit this year on the 500-acre spread he has leased since 1991.
"We thought we were running out of mistakes to make," he said.
Then in December, the peso collapsed. Like many other U.S. business people in Mexico, Cox has been trying to figure out the consequences ever since. The peso's devaluation has left him feeling out of control, doubting the wisdom of his move here and wondering how long he'll stay.
His peso-based labor and land costs are down but the reductions are relatively small, probably short-lived and outweighed by employee unhappiness over reduced spending power, Cox said. More worrisome is the uncertainty that the currency crisis has created. He's afraid that, if Mexico's political situation deteriorates, U.S. businesses could become scapegoats, even be shown the door.
Cox's story is an agricultural version of the pitfalls of investing in Mexico, despite its powerful allure. And it illustrates the chilling effect of the peso's deterioration on the kind of tangible foreign commitments that Mexico's economy sorely needs.
Just as the financial turmoil has caused some foreign-based retailers and manufacturers to put Mexican expansion plans on hold, farmer Cox has canceled plans to plant asparagus, a high-cost crop that takes a minimum of four years to profitably cultivate. Also on hold is an expensive $150,000 tile drainage system he was going to install to improve crop yield.
Cox says he has no immediate plans to leave. But he feels it would be unwise to make the big-bucks, long-term investments at his Mexico farm that are key to "doing a first-class job."
"The hardest thing is not knowing where the peso will stabilize at," Cox said as he walked down perfectly symmetrical rows laced with knee-high emerald green onions. "People like certainty, a little consistency."
Cox was part of a migration of U.S. farmers to Mexico occurring over the past two decades. With Mexican labor and water costing about half of what they do on the U.S. side of the border, Mexico has been an irresistible attraction for U.S. producers of thirsty crops that require time-consuming hand sorting, bunching and cutting, said Imperial County Farm Adviser Refugio (Cuco) Gonzalez.
