Reverse leasing and power dynamics among blue agave farmers in western Mexico

Abstract

We examine changing production relations in the Mexican tequila industry to explore the ways in which large industrial firms are using ''reverse leasing arrangements,'' a form of contract farming, to extend their control over small agave farmers. Under these arrangements, smallholders rent their parcels to contracting companies who bring in capital, machinery, labor, and other agricultural inputs. Smallholders do not have access to their land, nor do they make any of the management decisions. We analyze the factors that have led some producers to participate in reverse leasing arrangements, while allowing other producers to continue farming independently. In addition, we look at the ways in which farmers are responding to these new production relations and constraints and the strategies that they are using to regain control over the production process.

Geographical indications, terroir, and socioeconomic and ecological sustainability: The case of tequila

“…First, agave production expanded into new areas, areas that are within the production zone defined in the GI for tequila, but that do not have a historic tradition of agave cultivation (Macías Macias, 2001;Bowen and Gerritsen, 2007). Second, in order to better insulate themselves from the risks associated with the cycles of surplus and shortage, the largest tequila companies expanded their control within the supply chain by becoming more self-sufficient in their supply of agave (Bowen, 2008).…”

“…The increased use of reverse leasing arrangements, 15 in which the tequila companies rent land from smallholders and take over the entire agave production process, is particularly concerning (Bowen and Gerritsen, 2007). Gonzá lez (2002) argues that because reverse leasing arrangements exclude smallholders from the productive process, they have very little positive impact on farmer incomes and fail to stimulate agricultural productivity; yet these are the arrangements that the tequila companies are overwhelmingly choosing to adopt.…”

“…15 Under these arrangements, smallholders rent their parcels to contracting companies (often affiliated or directly owned by the major tequila companies) who bring in capital, machinery, labor, and other inputs needed for agricultural production (Bowen and Gerritsen, 2007). Smallholders do not have access to their land, nor do they make any of the management decisions (Bowen and Gerritsen, 2007). The smallholder receives an annual rent for the use of his or her land and/or a percentage of the final harvest (Bowen and Gerritsen, 2007).…”

“…Smallholders do not have access to their land, nor do they make any of the management decisions (Bowen and Gerritsen, 2007). The smallholder receives an annual rent for the use of his or her land and/or a percentage of the final harvest (Bowen and Gerritsen, 2007). By transferring the management of the land and the production process from landowners to tequila companies, reverse leasing arrangements potentially allow firms to externalize environmental costs and to adopt unsustainable management techniques (e.g., intensive application of agrochemicals) (Bowen and Gerritsen, 2007;Martínez et al, 2003;Gutié rrez, 2005).…”

“…The smallholder receives an annual rent for the use of his or her land and/or a percentage of the final harvest (Bowen and Gerritsen, 2007). By transferring the management of the land and the production process from landowners to tequila companies, reverse leasing arrangements potentially allow firms to externalize environmental costs and to adopt unsustainable management techniques (e.g., intensive application of agrochemicals) (Bowen and Gerritsen, 2007;Martínez et al, 2003;Gutié rrez, 2005). 16 Of the 27 smallholders included in our study, 18 were ''agaveros libres'' who did not have any type of agreement with one of the tequila companies to buy their agave, 3 had rented out all of their land to another farmer or one of the tequila companies, and 4 had a mix of some of their land rented out and some agave cultivated independently (without any type of contract or agreement).…”