Academic year 2006 – 2007

Academic year 2006 – 2007

WHO BENEFITS FROM THE “DENOMINACIÓN

DE ORIGEN” TEQUILA ?

Report

Lucie Leclert

Promotor: Prof. Han Wiskerke, Wageningen University

Co-promotors: Dr. Hielke Van Der Meulen, Wageningen University And Prof. Guido Van Huylenbroeck, Ghent University

Supervisors: Dr. Hielke Van Der Meulen

Dr. Peter Gerritsen, Guadalajara University, CUCSUR

Thesis submitted in partial fulfilment of the requirements for the joint academic degree of International Master of Science in Rural Development from Ghent

University (Belgium), Agrocampus Rennes (France), Humboldt University of Berlin (Germany) and University of Cordoba (Spain) in collaboration with Wageningen University (The Netherlands), Slovak

University of Agriculture in Nitra (Slovakia) and the University of Pisa (Italy).

This thesis was elaborated and defended at Wageningen University within the framework of the European Erasmus Mundus Programme “Erasmus Mundus International Master of Science in Rural Development”

(Course N° 2004-0018/001- FRAME MUNB123)

3

This is an unpublished M.Sc. thesis and is not prepared for further distribution. The

author and the promoter give the permission to use this thesis for consultation and to

copy parts of it for personal use. Every other use is subject to the copyright laws, more

specifically the source must be extensively specified when using results from this thesis.

Place of Defence: Wageningen University

The Promoter(s) The Author

name(s) name

4

5

Preface

This report was prepared in collaboration with Wageningen University. It is the result of

7 months research: 4 months of field work in Guadalajara and Autlán and 3 months of

writing in Wageningen. This research is part of the SINER-GI project1, (Strengthening

International Research on Geographical Indications), and serves as a final thesis report

for the M.Sc. degree of International Master of Rural Development (Erasmus Mundus

program). This research received partial funding from the SINER-GI project, and from

the University of Guadalajara through the PROMEP research project on blue agave in

the South Coast region of Jalisco, coordinated by Dr. Peter R.W. Gerritsen and Dr. Luis

Manuel Martinez Rivera.

During my flight to Mexico, I was sitting next to a Dutch woman you had been going to

Mexico for a while now. While I was still a bit apprehensive for my stay and wondering

what I was actually doing in this plane, I will always remember what she told me:

“Don’t worry, after one week in Mexico, you will know what you came there for”. She

was right. Next to the thesis research, it was a fantastic cultural and social experience.

The title chosen for my thesis is actually the first question we had with Hielke van der

Meulen concerning the Denominación de Origen Tequila. But as my house owner

Rodolfo alarmed me the first day I arrived in Guadalajara.

Lucie, si vienes aquí para ver a quien beneficia la DOT, yo te puedo dar la respuesta. Tu informe va a ser de menos de una pagina: Son los tequileros. (If you come here to see who benefits from the DOT, I can give you the answer. Your report won’t even be a page long. They are the tequileros (distilleries)).

Even if the answer is clear, I decided to keep this title as it gives a good summary of

what I wanted to find out and how I organised my field work.

1 1 SINER-GI‘s objective is to build and share a coherent scientific basis world-wide, regarding economic, legal, institutional and socio-cultural conditions of success of GIs, in order to support their legitimacy in the framework of WTO negotiations (Source: http://www.origin-food.org; consulted the 22.05.07).

6

Thanks

Without the help of the following people I would not have been able to write this report.

I would therefore like to mention and thank their supervision and contribution: Dr

Hielke van der Meulen, who informed me about the SINER-GI project and who

supervised me during these 8 months; Thanks to the confidence he had in me and his

constructive comments and advice, I could carry out this investigation and make the

following report; Dr Peter Gerritsen for the pleasant collaboration, his enormous interest

and involvement during my field work and the writing of this thesis; Dr Ana

Valenzuela, for her supervision and help in Guadalajara.

I am also indebted to all the people I interviewed. Thanks to them, I could get part of

the information reported here. Special thanks to Salvador Maldonado, for his advice and

for showing some nice “cantinas” in Guadalajara; Benjamin Barba for helping me to

organize 2 group discussions with agave farmers (one in a very nice restaurant in

Atotonilco); Jose Maria Michel and his wife, for welcoming me in their house and the

nice meals they prepared for me; Ramon Gonzalez for his availability to meet me twice.

I lived in the house of the family Tena in Guadalajara (Ana, Rodolfo, Ana Delia, Ana

Rosa, Ana Belen), and with Laura and Ricardo in Autlán. I want to thank them for their

hospitality, for showing me their country and integrating me in their family, and for

giving me good advice about the “Mexican way of doing things”. Without Ana and her

good map of Guadalajara, I would have never arrived on time for my interviews.

Thanks also to Fabian in El Grullo for driving me around in the Amula region to visit

distillers.

I also want to express my gratitude to Pierre and Malu Pieck thanks to whom I could

experience la cata del tequila and typical Mexican food, for the nice time we spent

together (giving French courses was the excuse) and for being always there for me.

7

Table of Contents

Chapter 1: Introduction and literature review .......................................................... 11 1. Introduction ................................................................................................................ 11

1.1. Research objective............................................................................................... 12 1.2. Problem statement ............................................................................................... 13 1.3. Research questions (figure 1.3) ........................................................................... 14 1.4. Theoretical perspective........................................................................................ 15 1.5. Methodology........................................................................................................ 17

2. Tequila regulatory framework .................................................................................... 24 2.1. Towards a DO...................................................................................................... 24 2.2. Main requirements of the DOT ........................................................................... 28 2.3. Product differentiation possibilities in the scope of the DOT ............................. 29

3. Evolution of the tequila sector since the last century ................................................. 31 3.1. Land redistribution: a major setback for tequila distilleries ................................ 31 3.2. The international development of tequila and its consequences ......................... 34 3.3. From the 1990s: Change of scale and its consequences...................................... 35 3.4. Recent chance of political party and its consequences........................................ 37

Chapter 2....................................................................................................................... 39 Power relationships and internal mechanisms in the tequila sector........................ 39 1. Introduction ................................................................................................................ 39 2. How power relationships have shaped the tequila regulatory framework.................. 40

2.1. Why is the area of DOT so big? .......................................................................... 40 2.2. The evolution of the NOM, a way for distilleries to overcome crisis ................. 43 2.3. Why is it still allowed to export tequila in bulk and to bottle it abroad?............. 47

3. What does each actor think of the others?.................................................................. 49 3.1. Farmers: “what is the DOT?” .............................................................................. 49 3.2. Distilleries: Inequalities and divergent interests.................................................. 51 3.3. El CRT, a “young” certification and control body .............................................. 53

4. Conclusion.................................................................................................................. 55 Chapter 3. The cyclical price of agave:...................................................................... 59 Alternatives and solutions as proposed by actors involved...................................... 59 1. Introduction ................................................................................................................ 59 2. How does the price fluctuation affect the tequila sector?........................................... 61

2.1. Fluctuating power relationships between distilleries and farmers....................... 61 2.2. Different impacts depending on “farmers’ type”................................................ 62 2.3. The despair of small agaveros libres ................................................................... 63

3. Global crop planning, an obligatory step and its limits of.......................................... 64 implementation ............................................................................................................... 64

3.1. The registration of every farmer’s plantations.................................................... 65 3.2. Implementing a contract between farmers and distilleries: Why is it difficult ?. 66 3.3. The limits of implementation .............................................................................. 69

4. How to make a global crop planning possible?.......................................................... 70 4.1. Improving the conditions of the contracts between farmers and distilleries ....... 70 4.2. Finishing with intermediaries .............................................................................. 71 4.3. Evaluation of the potential of each region........................................................... 74

5. Conclusion.................................................................................................................. 75

8

Chapter 4....................................................................................................................... 79 Regional dynamics in the tequila sector: the case of the Amula region .................. 79 1. Introduction ................................................................................................................ 79 2. The specific context of the Amula region .................................................................. 82

2.1. General characteristics of the Amula region ....................................................... 82 2.2. Expansion to other areas in times of scarcity: the case of the Amula region...... 83 2.3. Between the “mezcalera” tradition and the crisis of blue agave ......................... 84 2.4. From mezcal to licor de agave: impact of the DOM ........................................... 85

3. What are the local consequences of the international development of tequila? Local tradition vs. tequila domination...................................................................................... 86

3.1. Mezcalera tradition difficult to maintain ............................................................. 86 3.2. Making your “own tequila”, a way not to lose 7 years of investment................. 87 3.3. The development of informal market: a survival possibility?............................. 89

4. The future of local agave farmers and local distilleries.............................................. 91 4.1. A regulation framework that reduces the opportunities for small-scale enterprises.................................................................................................................................... 91 4.2. From “mezcal” to a nameless product: loss of tradition and prestige ................. 94 4.3. Change of land use again: return to previous situation?...................................... 96

5. Conclusion.................................................................................................................. 99 Chapter 5: conclusion................................................................................................. 103 1. Consequences of the geographical and power concentration................................... 103 2. Where do the benefits of the DOT go?..................................................................... 105

2.1. The unequal beneficiaries in the supply chain................................................... 105 2.2. The inequalities between “peripheral region” and “central region”.................. 105 2.3. The benefits relocated to the Northern countries............................................... 106

3. Recommendations .................................................................................................... 107 4. Discussion. Towards more differentiation possibilities or towards a homogenisation of product?.................................................................................................................... 109 References.................................................................................................................... 113

9

List of figures

Introduction

Figure 1.1: Localisation of Jalisco

Figure 1.2: The State of Jalisco

Figure 1.3: Representation of the problem statement and the research questions

Figure 1.4: Schematic representation of the different actors in the tequila sector

Figure 1.5: list of interviewed or visited distilleries.

Figure 1.6: Resume of the tequila regulatory framework

Figure 1.7: Principal actors of the tequila regulatory framework

Figure 1.8: Tequila categories

Figure 1.9: Different kinds of tequila depending on the time in oak barrels

Figure 1.10: Different part of a label

Chapter 2

Figure 2.1: Schematic representation of agave cycle of abundance and scarcity and its

consequences

Chapter 3

Figure 3.1: Agave inventory in the municipalities with DOT

Figure 3.2: Schematic representation of the reversing power of each group depending on

agave price

Figure 3.3: Limits of implementation of a global crop planning

Figure 3.4: Solutions that could be developed to avoid price fluctuation

Chapter 4

Figure 4.1: Location of the Amula region

Figure 4.2: Evolution of the number of distillery in the Amula region

Figure 4.3: Characteristics of the distilleries visited.

Figure 4.4: Cumulated surface of blue agave planted per municipality in the Zona Sur.

Figure 4.5: Evolution of the number of distillery per municipality

Figure 4.6: Characteristics of the distilleries per municipality

Figure 4.7: Evolution of the number of distillery in the Amula region: interpretation

Figure 4.8: The local consequences of the agave price fluctuation in the Amula region.

10

Chapter 5

Figure 5.1: Impact of the DOT and unequal repartition of benefits

Figure 5.2: International development of the tequila industry and its consequences

Figure 5.3: Different scales of solutions.

Figure 5.4: Tequila supply chain and the different entries for farmers to sell agave

Chapter 1. Introduction and literature review

11

Chapter 1: Introduction and literature review

1. Introduction Mexico is known for its distilled drinks. Historically, the art of distillation arrived with

the Spaniards, but natives’ skills and available resources had contributed to a well

developed tradition of intoxicating beverages. One kind is produced using agave juice.

Before, all distilled products of agave were called “mezcal1”.

Tequila2 is a specific sort of “mezcal”. Its production was geographically limited to

two small regions within the State of Jalisco in Western Mexico where blue agave

(Agave tequilana Weber variety blue) finds its best growing conditions: The city of

Tequila and its surroundings (called Zona Centro), and Los Altos (figure 1.2).

Figure 1.1: Localisation of Jalisco

Source: http://www.map-of-mexico.co.uk. Consulted the 22.05.07

1 The word “mezcal” comes from the Náhuatl “metl” which means maguey and “colli” which means cooked. In this report, when “mezcal” is used with “.”, it refers to distilled products of agave in general while when it is without, it refers to the mezcal according to the Denominación de Origen Mezcal (DOM), see Chapter 4, 5.1. 2 Tequila is also the name of a city. In this report, when it is about the drink, it will be written: tequila, and Tequila for the city.


12

Figure 1.2: The State of Jalisco

Source: http://www.maps.expedia.com, consulted the 22.05.07

While many “mezcales” are produced and consumed at very local scale (homebrew,

local distilleries), tequila has outgrown regional and national borders and is now a

popular drink consumed all around the world (Burman, 2000). In order to protect it

from imitation, it was granted a Denominación de Origen3 (DO; Appellation of Origin)

by the Mexican government in 1974.

1.1. Research objective

Specific objective in relation to this investigation: to examine how the DOT has

influenced (directly or indirectly) the tequila sector and more specifically the farmers’

strategies.

Research objective in relation to the SINER-GI project: to contribute to a better

understanding of what impacts the legal protection of a Geographical Indication (GI)

can have at the sectoral level and at local level.

3 Abbreviations are resumed in Appendix 1 and Spanish words used in this report are in Appendix 2.

Arandas Amatitán

Los Altos

Zona Centro

Zona Sur

Atotonilco


13

1.2. Problem statement

The highway from Guadalajara to the city of Tequila offers an unusual view since the

beginning of 2007: Long stalks are pointing to the sky in the blue agave fields: agave

plants are flowering. When the quiote (name of agave flower) is growing, the agave

plant is ready for the jima (harvest4). Once the quiote is cut, farmers have roughly one

year to start the jima, otherwise the plants start rotting. The amazing thing is that many

fields are flowering and the quiotes are not being cut: sign that there is an important

abundance crisis going on. Agave farmers can not find buyers for their produce.

Besides, the price of agave is so low that it is not even worth working in the fields to

cut the quiotes. And it is not just a few months or a single years’ investment that is at

risk, as could be the case with other crops like wheat or maize; it is 7 years that are

disappearing; 7 years of work and hope that the price would be high when agave will

be ready to harvest.

Hoping is what agave farmers have always done. Since agave cultivation is

characterised by cycles of abundance and scarcity, agave farmers and in particular

agaveros libres5 can never be sure to sell their produce at a good price after 7 years.

They “estan esperando”, which in Spanish reveals their situation as it means: they are

“waiting”, but also they are “hoping”, hoping that that the future price of agave will be

higher.

As there is no other opportunity but to sell agave for tequila production, the production

sector has always been controlled by a few distilleries6, initially family owned but now

mainly owned by multinational spirit manufacturers. The long tradition of producing

tequila, the opening to international markets combined with the implementation of the

DOT in 1974 has led to reconfirming their influence: They have leadership in the

definition of the rules that govern the structure of the sector and in particular the

contents of the DOT laws. As shown by the current crisis, the international recognition

and the increase in sales at the national and international markets do not benefit the

different actors of the tequila supply chain equally. Farmers do not have control over a

4 The harvest of agave consists of cutting the leaves and keeping only the piña, centre of the plant that looks like a pineapple. 5Agaveros libres refers to free farmers who do not have any contract with distillery. 6 In the literature, tequila distilleries are also called “tequila companies”, “tequila firms”, or “industrials” as they are often involved in different “functions” in the tequila supply chain (bottling, agave plantations…).


14

?

Direct impact?

Growing power of the main Tequila

companies

DOT implementation and contents

Increasingly international tequila

market

Agreement with foreign investors

What is happening at farmer level?

? Indirect impact?

part of the production process and thus do not have access to the added value that the

DOT generates.

1.3. Research questions (figure 1.3)

Considering the context of the tequila sector, my research questions are the following:

1. What are the power relationships and the internal mechanisms in the tequila

sector that can explain why the DOT does not benefit to all supply chain’s actors

equally?

2. What ways out are being developed and what solutions are proposed to escape

the vicious cycle of price fluctuation7 and make agave farmers and small scale

distilleries benefit from the DOT implementation (or find profitable non-DOT

markets)?

3. What are the local responses of farmers and distilleries to the worldwide

recognition of tequila and, as more agave is needed, to the expansion of agave

plantations in a non-traditional region?

Figure 1.3: Representation of the problem statement and the research questions

7 See Appendix 5


15

1.4. Theoretical perspective

A sociological study can be seen from different angles depending on the scale of the

problem and the scale of analysis focused on. The very title of this report: “Who

benefits from the DOT?” has guided the theoretical approach that I used for this

research.

(i)Who?

To answer that question, the supply chain has to be analysed as well as the

relationships between each “level” of the supply chain. But in my opinion, it is not

sufficient. I consider that the actors of a food supply chain can not decide by

themselves on their future and determine how to “share” the benefits of a GI. Their

decisions are embedded in a global structure, which can be both:

- An institutional and political context and

- The international context of market globalization.

Thus, I distanced myself from the theory of social constructivism and came closer to a

Durkheimian perceptive (functional). This structural approach is relevant if one looks

at the major consequences of the recent changes in scale of tequila production,

response to the globalisation process of food products: the international context is a

structure that shapes the tequila supply chain. Besides, farmers’ initiatives are clearly

embedded in a structure, as the first thing they talk about is “the low price paid by

distilleries that control them” or “the government”. However, the concept of structure

has to be taken with precaution and should not be considered as something fixed and

invariable. Indeed, one of the biggest structural factors for farmers is the “price of

agave”. When the price is high, their bargaining power is more important and they are

less “victim” of the structure above them. In case of low price, the farmers can not do

anything; they are constrained by the structural factor “price”.

Analysing the eminent conflicts in the sector and how they can be solved was also

indispensable to understand the current situation. For that aspect, I came closer to a

Marxist approach.

(ii) Benefit

Asking the question “Who benefits” suggests by itself that there is an unequal division

of benefits. Indeed, the specific norms to follow and the delimitated production area


16

constitute a structure that can benefit the ones who are in and disfavour the ones who

are out. The concept of inclusion and exclusion is important to keep in mind when

studying a GI (Rodriguez, 2004, p171). But in the delimitated area itself there are

some inequalities, and particularly for what concerns the wide delimitated area of the

DOT. Distilleries and institutions are geographically concentrated in the Zona Centro,

which made it interesting to look at the tequila sector with the centre periphery theory.

The distinction centre and periphery is often used to describe opposition between the

two areas: the one which is commanding and benefiting (the centre) and the one that

are subjected to it (peripheries) (Hypergeo, 2004). The centre-periphery theory can be

used in many different ways (Gren, 2003). For this study, it was used at different

geographic scales:

- At the level of the supply chain, where distilleries are the “centre of decision”

excluding farmers by not considering their importance.

- At regional level, comparing what is happening in the “central region” around

Guadalajara (Zona Centro and Los Altos) with a peripheral area,

- In a less extend, at international level, as more multinationals are buying

tequila companies, which are relocating the DOT benefits from Mexico to the

“North” countries (the “centre”).

To think in terms of centre(s) and periphery(ies) allows thinking on interactions

between places (Hypergeo, 2004): In the tequila sector, farmers are dependant on

distilleries as they are the only buyers of their produce. Reciprocally, distilleries, even

if they keep farmers down, also need them. At the regional level: the centre region

needs the peripheries to expand agave plantations in time of plague (for example) and

the periphery depends on the “central region” for selling their produce and receiving

information. Between the two, there are asymmetrical flows (capital, information,

decision…). The centre is central precisely because it benefits from this inequality and,

in turn, the periphery(ies) is(are) characterised by a deficit which maintains its (their)

dominated position (Gren, 2003, p2). Whereas some peripheries may become

abandoned, others may benefit from their situation. The tequila domination does not

mean that all marginal other traditions are being eradicated. As Murdoch et al stated

(2000, in Renting et al 2003), the alternatives strategies found in “marginal areas”

(peripheries) is catching the attention of researchers in “alternative” or “quality” or/and

“local” food network.


17

1.5. Methodology

To integrate all structural factors, more than a supply chain analysis (which consists of

studying all actors involved in the production of a product and their relations), I carried

out a sectoral analysis, which is broader and which integrates “secondary actors” such

as governmental institutions, control body... But I also consider that current facts are

determined by what had been done before: The current situation of the tequila sector is

a result of historic facts and a result of how the sector and the relations between actors

have evolved in time. Understanding the history of the sector was then an

indispensable step before to start talking about possible solutions. According to the

theoretical perspective chosen and the research questions, my field work followed 3

main steps:

Step 1: Understanding how the tequila sector has evolved over the past century

(and why) and how that has structured the current situation.

Step 2: Once the context is understood (and particularly the cyclical character of

the crisis), analysing actors’ perspectives on the situation and their solution for the

future.

Step 3: Studying a particular “peripheral region” by looking at how the centre has

an impact on it and how they adapted.

To start with, a literature review of the tequila sector history was necessary (for step

1). By looking at how problems were solved in the past, one can have an idea of what

should be done in case of a similar problem in the present. Reversely, sometimes,

some attempts were made but did not work out: that could show which mistakes

should not been done again. It enabled me to conduct my field work while being

already aware of some difficulties and limits.

For step 1. and 2., I stayed 3 months in Guadalajara (the “central region”). Interviews

were conducted between February, March and May 2007 with different actors


18

3. Big distilleries Medium

6. CRT

5. Mexican Government

SEDER (State)

SAGARPA (Federal)

SE (secretaria de economia)

1. Farmers

NOM

Register the new brands

control

COYOTES 2. Farmers associations

Influence

IMPI PROFECO

4.

Small

presented in figure 1.4. During the month of April, I carried out my field work in the

Amula region8 to answer step 3 (What I call a “peripheral region”).

Multinational Companies

* The meaning of the abbreviation is explained in Appendix 1 and the role of each actor is further

explained in Appendix 5 and the list of distilleries according to their size in Appendix 6.

Figure 1.4: Schematic representation of the different actors in the tequila sector

8 I use Amula region as well as Zona Sur to talk about the south coast region of Jalisco (see Chapter 4 for a detailed map).


19

Different data collection tools were used in the two regions:

- Focus group method (group discussion) with agave farmers

- Individual interviews with actors of the tequila sector (distilleries, Regulatory

Council, governmental institutions…)

The Focus group (FG) is a survey qualitative method appropriate to collect opinions or

attitudes of a group (of 7 to 10 participants) concerning a particular situation (IOWA

State University, 2004).

Collecting data from farmers via the FG method appeared to be appropriate as:

- It was relatively easy to gather 6 to 10 farmers to talk about a theme that

concerns them,

- The fact that they are all sharing the same problem facilitated the discussion,

- None of them was “scared” to talk or pressured by any hierarchical

relationships (as the groups were only constituted of farmers).

As far as other actors were concerned, individual semi-structured interviews were

conducted. This way, each actor could express his “real” opinion concerning the

current situation and the responsibility of other actors without having to take the

“institutional hat”. The detailed list of all the persons interviewed is in Appendix 7.

Bellow, the research process is further explained.

1.5.1. Getting information from distilleries and “institutional” actors

When I first arrived to Mexico, I had in mind the actors I wanted to interview but did

not know who exactly as it depends a lot on the willingness of each person to talk and

his availability. What I did first is get an interview with the director of the Consejo

Regulador del Tequila (Tequila Regulatory Council: CRT), Ramon Gonzalez, to get an

overview of the sector and its problematic. The CRT being in contact with every

distillery and with the governmental institutions, he could tell me who to interview

first and give me some names. Asking for a meeting saying that Ramon Gonzalez

advised me do to so, opened a lot of doors. At the end of my field work, I met Ramon

Gonzalez again to present him my findings and ask him some clarifications on certain

points.


20

In total, 25 interviews were conducted with actors from:

- Distilleries9 (3. in figure 1.4)

- Agave farmer associations (2. in figure 1.4)

- Tequila institutions (4. and 6.)

- Governmental institutions (5.)

- Academics

- Consumer representatives, tequila connoisseurs and liquor sellers

During each interview, different themes were raised (see Appendix 8 for the

questionnaire):

1. Organisation of the tequila sector in order to:

- Make clear who are the important actors

- Identify the relationships between them (In case of an interview of

distillery manager, questions relating to distillery’s strategy and its

relationships with farmers)

- Who determines the norm to follow to use the name tequila

- What are the current issues of the sector

2. Visions and opinions concerning:

- The cause of the crisis

- The solutions that could be developed against price fluctuation

- The solutions proposed by other actors (in order to confront different

perspectives and make people criticize each other)

- The product and local differentiation possibilities

3. To conclude:

- The impact of the DOT for the sector

- Perception of the future

Concerning the distilleries, the idea was to interview a representative sample of

distilleries in terms of size (total production) and strategy (focused on export or on

national market; type of product made: see Chapter 1, 2.3). According to the

classification of the Confederación Nacional de la Industria Tequilera (CNIT;

9 See Appendix 6; for the list of distilleries per size according to the production data from 2007.

Step 1

Step 2


21

National Confederation of the tequila industry), I interviewed or visited the distilleries

listed in the following table (figure 1.5). It would have been good to have interviewed

more micro distilleries to compare with the situation of micro-distilleries in the Amula

region (see Chapter 1, 5.3)

Big distilleries Medium distilleries Small distilleries Micro distilleries

Cuervo (V) La Cofradia (V) Tequila Partida Hacienda de Oro (V)

Sauza Cascahuin

Herradura

Casco Viejo

(V): only visited.

Figure 1.5: list of interviewed or visited distilleries.

Depending on the person that I interviewed, I adapted the questions. As much as

possible, I tried to make people talk about the others to understand the power

relationships (step 1). To do so, I could ask them to explain me again what I heard

from someone else or ask their opinion about the solutions proposed by other people.

Over the years, the norm to comply with in order to call the product tequila evolved. I

compared the different versions of the norm since 1949 and resumed the modifications

step by step in Appendix 12. The changes made have several “non rational” elements;

I enjoyed the interviews to ask the reasons for certain modifications or additions that I

considered “not logical”. When I got vague and variable answers, like “it’s political”

(what I often heard), it meant that I was on the right way to discover an interesting

element that would help understanding the “internal mechanisms” of the tequila sector.

After the individual interviews, I could have a clearer picture of how the sector

functions and its limits. That was an indispensable step before to start with farmers

interviews: the context had to be known to understand farmers’ perception and

strategies.

1.5.2. Getting information from farmers

As far as agave farmers were concerned, it was chosen to focus on the perception of

agaveros libres, independent farmers who sell agave on the open market (in opposition

to farmers who have signed a contract with a distillery that assures that their agave


22

plants will be bought). Indeed, they are the most hit by agave price fluctuation and are

the actors who need that a solution is found most urgently. It could have been

interesting to interview also farmers that have a contract with a distillery, but it would

have required some more time.

The idea was to interview agaveros libres from the 3 regions with most agave (Zona

Centro, Los Altos, Zona Sur). Before to start with a group interview, data concerning

the number of hectares and the experience in planting agave was asked, in order to

avoid bias. Indeed, farmers depending on these factors could respond differently to the

decrease in agave price and propose different solutions.

In total, 5 FGs were conducted:

- One with a group of 8 small agaveros libres from Tequila (Zona Centro)

- One with a group of 8 small agaveros libres from Amatitán (Zona Centro)

- One with 9 representatives of regional farmers association, all part of the

Confederación Nacional de Productores de Agave Tequilero (National

Confederation of Blue Agave Producers: CNPAT) in Guadalajara

- One with 4 agaveros libres of San Ignacio Cerro Gordo (Los Altos), all members

of the Consejo Nacional de Productores de Agave (farmers association of Los

Altos)

- One with 6 agaveros libres from the Zona Centro and Los Altos in Atotonilco

(Los Altos)

- One with 7 agaveros libres from La Cienega (Zona Sur)

Each FG lasted between 1 hour and 1 ½ hour, and the discussion subjects followed the

steps described underneath (the detailed questionnaire is in Appendix 9)

- Questions concerning the abundance crisis and the role of each actor in finding a

solution,

- Questions regarding their opinion about regional differentiation possibilities,

- Questions relating to their perceptive of the future and possible alternatives.

The discussions were recorded and transcribed in order to keep the exact words and

expressions of each participant. When possible, 2 persons10 organized the FG, one

10In the Zona Centro, 3 FG were conducted by Dra Ana Valenzuela and myself. The other 2, I organized them by myself. The FG in Autlán was organized by Dr Peter Gerritsen and myself.


23

responsible for leading the discussion and the other responsible for writing down each

detail that could not be recorded (like group reactions to a particular question, facial

expressions…). Unfortunately, at the date of writing this report, only 1 focus group

had already been transcribed. However, I could remember the key ideas of the other

FGs and use the findings (not optimally though) for this report.

1.5.3. Getting information from micro distilleries and “mezcal” traditional

distilleries

To respond to step 3, some local distilleries in a region with a mezcalera tradition

were interviewed. In total, eight individual interviews were conducted. The idea was to

meet a representative sample11 of regional distilleries depending on their size, types of

product, and time in the industry. Contrary to the methodology used for the tequila

distilleries in the “central region” (referring to 1.5.1.), I chose to do fewer but more in

depth interviews. Out of the eight distilleries visited, I spent more time with 3 of them.

By building a friendly relationship, I could collect more detailed information and grasp

their “sincere” opinions. I selected these 3 persons depending on their willingness to

talk and to share their experience with me, the specificity of their story, and their

geographical proximity.

After collecting this data, I interviewed a representative of the local office of

Secretaría de Agricultura, Ganadería, Desarrollo Rural, Pesca y Alimentación

(Ministry of Agriculture, Breeding, Rural Development, Fisheries and Food supply;

SAGARPA) and the CRT (for the second time). These 2 interviews enabled me to

confront them with my findings and to avoid risk of having a “one sided” analysis.

Extrapolation

My aim is to present some answers and visions of people and in that sense, these local

results can not be used to draw general conclusions about local consequences of the

recent evolution of the tequila sector, but can enable to assess deeper understanding of

what can be the impact of a (large) GI protected area.

11 To choose the sample, I was helped by Rodolfo Gónzalez, assistant researcher of Peter Gerritsen, who had visited each distillery and collected general data (year of creation of enterprise, number of litre produced, type of product…). He also advised me on whom to interview preferentially.


24

Tequila regulatory framework

1949 The first norm for tequila is published in the Diario Oficial 1958 Mexico signs the Lisbon agreement 1974 Tequila become a Denominacion de origen 1977 The name tequila became an intellectual property and is inscribed in the international register of denominations of origin in Geneva, Switzerland. 1994 The CRT is created 1994 DOT is recognized by Canada and the U.S. via the NAFTA 1997 Europe recognizes the DOT

The following section aims at presenting the context, regulatory in a first time and

historical, in a second time, in which the strategies of agave farmers as well as the

decisions of every actor are embedded.

2. Tequila regulatory framework

Figure 1.6 resumes the main step of the tequila regulatory framework.

Figure 1.6: Resume of the tequila regulatory framework

2.1. Towards a DO

Definition of GI and DO

The World Trade Organization (WTO), in its Agreement of Trade-Related Aspects of

Intellectual Property Rights (TRIPS), defines GIs as

“Indications which identify a good as originating in the territory of a Member, or a region or locality in that territory, where a given quality, reputation or other characteristic of the good is essentially attributable to its geographic origin.” (Art. 22.1)

The 31st of October 1958, 25 countries from the “Union for the protection of the

industrial property” (Mexico is part of it) met to come to a definition of “appellation of

origin” (Denominacion de Origen in Spanish). In Article 2, an appellation of origin

was defined as follows:

The “geographical name of a country, region, or locality, which serves to designate a product originating therein, the quality and characteristics of which are due exclusively or essentially to the geographic environment, including natural and human factors”


25

Such a name has to be registered by the WIPO (World Intellectual Property

Organization) in Geneva.

A DO is a specific kind of geographical indication used on products that have a

specific quality “exclusively or essentially due to the geographical environment”. It

constitutes a “legal framework” that regulates the supply chain of a geographically

embedded product and brings the security of the product origin.

From the 1970s, tequila started to be known worldwide. Its growing popularity made it

interesting for illegal opportunists to try to imitate the Mexican drink: There were

more than 30 brands of “tequila” from Spain, trying to give it an image as “Mexican”

as possible (Brands like “Taxco”, “Cuate”, and “Pachuca”…) (Blomberg, 2000, p127).

It happened also in Japan, where a company started to sell a drink made of rice and

maize under the name “Tequila Morozoff”. In order to protect tequila from worldwide

competition by imitation, tequila distilleries started to claim the right to a DO as

tequila corresponded with the definition established since:

- Tequila is the name of the volcano and the village where people have been

planting blue agave for decades,

- There is a tradition of producing a distilled drink from agave only in this

specific region,

- This drink is embedded in local culture, in costumes, in music, in folklore…

(Blomberg, 2000, p127).

Nevertheless, it is interesting to note that none of the arguments justify the

“characteristics of which are due exclusively or essentially to the geographic

environment”. That is one of the main weaknesses of the DOT. It is further explained

in Chapter 2, 2.1).

Declaración General de la Protección a la Denominación de origen “tequila”

Mexican tequila finally became a DO in 1974. For being an Appellation of Origin, the

name “Tequila” belongs to the Mexican State who grants its use to those persons or

companies involved in the production of this beverage, through clearly defined

regulations to protect its prestige. The Declaración General de la Protección a la

Denominación de Origen “tequila” (Declaration of Protection of the Appellation of

Origin Tequila) was published in the Diario Oficial de la Federación (Official Federal


26

Journal) the 9th of December 1974. The 13th of October 1977, the name tequila became

an intellectual property owned and controlled by the Mexican government and was

inscribed in the international register of DO in Geneva, Switzerland.

The Declaration basically establishes the protected territory where both the cultivation

of the tequilana Weber blue variety Agave and the production process of the beverage

must take place (see Appendix 4). As for the rest of the characteristics and

requirements that the production of the beverage must meet in order to bear the name

“Tequila”, the Declaration refers to the Official Standard that the Federal Government

has issued for the beverage which presently, is NOM-006-SCFI-2005 Alcoholic

Beveraged-Tequila-Specifications.

With time, the Declaration has suffered a few changes aimed toward adjusting the

demarcation of the protected territory (inclusion of some municipalities of the State of

Tamaulipas in 1977, see Chapter 2, 2.1).

International recognition of the DOT

At international level, the DOT was recognized bilaterally by countries like the U.S.,

Canada and the European Union, as well as by the WTO in matters of observance of

intellectual property rights. With the signing of NAFTA12 the 1st of January 1994,

Canada and the U.S. recognized the DOT, as written in the NAFTA, Part Two,

Chapter 3, Appendix 313-3:

“Canada and the United States shall recognize tequila and mezcal as distinctive products of Mexico. Accordingly, Canada and the United States shall not permit the sale of any product as Tequila or Mezcal, unless it has been manufactured in Mexico in accordance with the laws and regulations of Mexico governing the manufacture of Tequila and Mezcal. This provision shall apply to Mezcal, either on the date of entry into force of this Agreement, or 90 days after the date when the official standard for this product is made obligatory by the Government of Mexico, whichever is later”.

Besides, the European Union endorsed the DOT the 27th of May 1997. Mexican

authorities and distilleries are now working towards a recognition of the DOT by other

countries in Asia, Africa and some countries of Latin America. South Africa is indeed

12 The NAFTA called off the majority of tariffs between products traded among the US, Canada and Mexico, and gradually phased out other tariffs over a 15-year period. The treaty also protected intellectual property rights so amonst them the DOT (wikipedia).


27

the country with the most important case of production and distribution of

“speudotequilas”13, and in particular one named “Hacienda”. Figure 1.7 shows the role

of different national and international actors in terms of DOT regulation.

Source: Gonzalez, 2002.

Figure 1.7: Principal actors of the tequila regulatory framework

Evolution of the norm regulating the quality of tequila

The norm to comply with to use the name tequila is published by the Dirección

General de Normas (Norms General Direction), part of the ministry of economy. It is

called a Norma Oficial Mexicana (NOM; Mexican Official Norm). It is agreed upon

by different parties: Government, tequila companies, the CRT, Instituto Mexicano de

la Propiedad Industrial (Mexican Institute for Industrial Property: IMPI), Distilled

Spirit council of the U.S. (since 1997). It defines the conditions of production, bottling,

and commercialisation that refers to the DOT as well as all the rules, characteristics

and specifications which all the authorised entities need to comply with.

13 Even if the DO is not recognized by South Africa, a procedure can occur against illegal South African producers through the WTO (Blomberg, 2000, p130).


28

2.2. Main requirements of the DOT

Raw material

According to Flores and Zamora (2003, p10), 273 species of the family Agavaceae14

were described in the American continent. In Mexico, 205 species are registered, from

which 151 are endemic to the country. As defined in the NOM, tequila is a product of

blue agave (Agave tequilana Weber), which differentiates it from other licor de agave

(agave liquor) like sotol15 and mezcal (see Chapter 4) and from other products

localized in micro areas (like raicilla in West Jalisco for example).

Area of production

To be called tequila, the distilled product has to bee made of agave from the DOT

delimitated territory and since 2006, the number of agave planted should be inscribed

in a register controlled by CRT (according to the NOM-006-SCFI-2005). The territory

of the DOT is constituted by the entire State of Jalisco (124 municipalities), 9

municipalities in the State of Nayarit, 7 municipalities in the State of Guanajuato, 30

municipalities in the State of Michoacan and 11 in the State of Tamaulipas (only since

1977). It represents approximately 11.8 million hectares, of which only 3 % is

dedicated to the cultivation of blue agave (CNIT, 2004). But Jalisco concentrates about

92% of agave planted in the zone of DOT (see Appendix 13, figure 1) and 99% of the

firms producing tequila16.

Since the last 10 years, the Zona Sur of Jalisco has emerged as an agave cultivation

centre, although the production in the Zona Centro and Los Altos is still greater. In

2000, 8% of agave in Jalisco was grown there (CRT, 2006) (Appendix 13, figure 2).

14 Contrary to common belief, agave plant is not a cactus. 15 It is known as the drink of Chihuahua. There are few commercial examples available. It is produced in a manner similar to the more common artisanal “mezcales” of central Mexico. 16 According to the CNIT, in 2005, there were 120 distilleries and it employed 38,000 persons (CNIT, 2005).


29

100% Agave

Tequila mixed

Joven o oro (gold)

Bottled in production site in the

DO zone

¾ exported in bulk

Reposado (rested)

Añejo (aged)

Joven o oro (gold)

Blanco (silver)

Extra Añejo (extra aged)

Reposado (rested)

Añejo (aged)

Blanco (silver)

Extra Añejo (extra aged)

2.3. Product differentiation possibilities in the scope of the DOT

The current product differentiation of tequila only refers to the aging process in oak

barrels and the relative quantity of blue agave sugar: minimum 51 % (see figure 1.8

and figure 1.9).

Figure 1.8: Tequila categories

Figure 1.9: Different kinds of tequila depending on the time in oak barrels.

Dilution with water

Tequila blanco Tequila reposado Tequila añejo extra añejo

1 year 3 years 2 months 0

Tequila joven

2 Categories

5 Types 5 Types


30

Figure 1.10: Different part of a label (based on information from Jaime Villalobos)

On the label, the indication “100% agave” is put for tequila made of 100% agave sugar

(Figure 1.10). As far as “mixed” products are concerned, they are called “tequila” and

nothing informs about the percentage of agave sugar. This precision is important and

explains why consumers are actually not aware that the “tequila” they drink is actually

a “mix17”.

Concerning the differentiation relating to the time in oak barrel, there is 7 different

sorts of tequila and 2 categories (figure 1.8). But it could be a lot more if the time in

oak barrels would be indicated. For example, nothing differentiates a reposado of 2

months and a reposado of 6 months: A consumer can not understand the price

difference between these 2 products. However, the new category “extra añejo” (since

2005) is a step forward in product differentiation. Indeed, instead of calling a product

“Premio” because it is above a certain price (what was done before), the differentiation

is taking into account the time in oak barrel.

The NOM also allows certain additives to soften and smooth the taste of tequila:

caramel colouring, oak wood extracts, glycerine as well as corn sugar syrup. Tequila

with such additives is called abocado. Tequila could also be differentiated depending

17 According to the norm for tequila, what is called “tequila” is a product that can be made with a minimum of 51% of blue agave sugar. Officially, I do not need to give the precision “mixed”, but for more clarity and a better distinction, I will use “mixed” tequila to differentiate it from tequila 100% agave (that many actors consider as the “real” tequila).

Type of tequila

NOM indication, sometimes added on the bottle as a

sticker (for licor de agave, see Chapter 4.4.4.)

Registered trademark

Word tequila

Net content

Cathegory TEQUILA

TEQUILA 100

Percentage of alcohol “ % Alc. Vol ”


31

on the production methods (traditional or more industrial) as well as by recognizing

the differences between areas of production by considering the natural and physical

properties of an area (see Chapter 5, 4).

3. Evolution of the tequila sector since the last century

The structure of the tequila supply chain is a result of political changes (more

capitalist, more open to international market) and social struggles between farmers and

tequila distilleries. The following part is a historical overview. The objective is to

present the organization of the tequila sector in order to comprehend the relationships

between each actor and the eminent conflicts between the different parties. To

understand the changes in the tequila sector during the last century, it is chosen to

divide this part in 3 periods relating to the consequences of land redistribution in a first

time (1910-1970), the increase in export and the modernisation of distillation

equipment (1970-1990), the current change of scale of the sector and its consequences

(1990-now).

3.1. Land redistribution: a major setback for tequila distilleries

From big haciendas to small plots of land

In the 18th and the 19th century, the now largest and most influential tequila distilleries

(Cuervo, Sauza, and Herradura) were established by owners of large haciendas18. They

were self-sufficient in their supply of agave (Limón, 2000). Thus, a large part of land

was cultivated with blue agave in the Amatitán-Tequila valley. After the Mexican

revolution of 191019, a land reform took place; the government divided and

redistributed the land to farmers. Groups of villagers were able to request allowances

of expropriated land, thus creating an ejido20. The State retained ownership of the land

18 It is a large landholding which usually includes absentee ownership, a large resent labour force, an administrator, on extensive rather intensive agriculture. 19 Prior to 1910, approximately 260 families owned 80% of the Mexican territory (Young, 2002). 20 An ejido is a group landholding unit established after the Mexican revolution. It is cultivated by ejidatarios. Although the 1992 amendment to article 27 of the Mexican constitution legalized the rental and sale of previously inalienable ejido land, a large proportion of smallholders in Mexico are still organized into ejidos (Valenzuela, Bowen, 2006, p4).


32

but villagers (known as ejidatarios) were given the right to farm, either collectively or

through designation of individual plots of land (Bowen, Valenzuela, 2006, p3).

Land redistribution occurred principally in the central part of Jalisco (Regalado, 1988,

p116).The haciendas of Tequila, Amatitán and Arenal were redistributed into 30

ejidos21 (Bowen and Valenzuela, 2006, p3/p10). It was a major setback for large

landowners’ self-sufficiency (Gonzalez, 1999, p8; Llamas, 1999, p11). Tequila

companies became dependent on ejidatarios for their supply of agave while the

ejidatarios often chose to plant basic crops such as maize that they could use for their

own consumption. In addition, as blue agave plantations require an important initial

investment and a long time before the paybacks, it presented little advantage. It

resulted in the emergence of new actors (intermediaries, explained further) and new

power relationships between farmers and distilleries (Luna, 1991, p127-129).

Consequently, the first important shortage occurred: Between 1900 and 1940, the

number of agave decreased by 74 million plants to only 4 million plants (Luna, 1991,

p133).

A growing demand of tequila in the U.S. and its consequences

After the Second World War, there was an important international demand of tequila

(and particularly in the U.S.) while there was little tequila produced. From 21,000

litres exported in 1940, it reached 4 million litres in 1945 (Luna, 2003, p2). To protect

tequila quality and prevent it from adulteration, the first tequila norm, the DEN-R-9,

was published by SECOFI in the Diario Oficial in 1949. According to this norm,

tequila had to be made of 100% blue agave and forbade any mixing with alcohol

derived from other sugars.

From the 1960s onward, the demand in national and international market increased

even more (Luna, 2003, p2; Gonzalez, 2003, p31). In the U.S., the main international

market of tequila (especially California and New Mexico), the cocktails “Margarita”

and “tequila sunrise” became popular and tequila export to the U.S. represented 60%

of tequila imported in the country (Expensión, 12 of July 1972). Thus another scarcity

of agave occurred which had four principal consequences (Llamas, 1999, p12). 21 In Amatitán were given 6,989.75 hectares were given to 308 ejidatarios; In Arenal, 5,480 hectares were given to 439 ejidatarios received and in Tequila, 11,765.94 hectares were redistributed to 594 ejidatarios (Regalado, 1988, p212-213), which means respectively 33%, 30% and 8% of the total surface of the municipality (Santiago, 2004). Appendix 10 gives an overview of the land tenure system in Mexico.


33

i) Reduction of tequila quality

First, it led distilleries to ask to the Congreso Federal (Federal congress) a

modification of the authorised amount of agave sugar allowed to produce tequila.

Therefore, the norm DGN-R9-1964 was published in the Diario Oficial the 12th of

March 1964 allowing the introduction of 30% other sugars in tequila production

(Luna, 2003, p2). The same situation happened in the 70s: as the demand was

increasing more than the number of agave planted, it resulted in new negotiations

between industrials and the State to a reduction of blue agave sugar to 51%. This norm

(DGN-V-7-1970) was published in the 5th of December 1970.

ii) Credits available for agave farmers

Secondly, distilleries solicited banks to open credits for ejidatarios cultivating agave

as they needed financial support to cover the cost of planting and to subsist during the

period between planting and harvest (Valenzuela, Bowen, 2006, p9; Luna, 2003, p2).

From 1968, the Banco Nacional de Crédito Agricola (National Bank for credits for

agriculture) and the Banco Nacional Agropecuario (National Bank for farming) did so,

but these credits were very low and insignificant since these institutions were also

providing credits for more basic crops (according to the agro-alimentary policy of the

State). So, distilleries had to start looking for other ways to control ejidatarios (Torres,

1998). It often took the form in financing contracts22, where they provided credits

themselves and gave the insurance to buy from the contracted ejidatario. It helped the

cultivated surface of agave to increase from 11 million plants in 1960 to more than 57

million in 1970 (Luna, 1991, p173; Luna, 2003, p3). The problem was (and still is)

that distilleries usually first asked farmers to lease their land to them before

considering having another type of contract that could benefit more to farmers

(Gonzalez, 2002, p10; Llamas, 1999, p13).

iii) Development of intermediaries for the purchase of agave

Not all ejidatarios decided to sign a contract with tequila companies. Some decided to

stay independent for different reasons (lack of trust, will to keep on farming and not

only leasing land…see Chapter 3, 3.2), but the outcome was that they could not sell

their produce directly to tequila companies: Seeing that some farmers preferred to stay

independent, some distilleries developed a network of middlemen (also called

22 Luna gave an example of a contract (1991, p 157-ss) : 70% of the benefits for the distillery or the financial intermediary and 30% for the farmer.


34

intermediaries or coyotes) whose role was to buy large quantities of agave. The

objective was to exclude agaveros libres from the production process. Indeed,

intermediaries pay less for agave (actually they control the price) than when agave

farmers sell their produce directly to distilleries (Valenzuela, Bowen, 2006, p6).

iv) Abundance and price decline

In 1976, the price of agave started to fall because many agave plants were mature.

Thus, some farmers of the municipality of Amatitán created the Union de Productores

e Introductores de Mezcal Tequilero del Estado de Jalisco (Union of Producers and

Introducers of Mezcal23Tequilero of the State of Jalisco). It was the first union of blue

agave peasant farmers created to counterattack intermediaries. Helped by the

Dirección Nacional de la Confederación de Trabadores de Mexico (National Direction

of the Mexican Workers Confederation), they blocked 22 distilleries during 3 days in

Tequila; the blockade of the distilleries of Cuervo and Sauza lasted 22 days. They

managed to increase the price of agave (from 60 to 90 centavos per kilo), and to be

officially recognized by distilleries as a group via which the purchase of agave should

be negotiated (Llamas, 1999, p13; Luna, 1991, p181). But in 1989, it was broken up

into many local associations incapable of integrating themselves into one homogenous

organization (González, 2002, p33).

3.2. The international development of tequila and its consequences

From the 1970s, distilleries had more difficulties to face the increase in international

demand with their “traditional” production methods. Hence, they started to modernize

their distillation and bottling equipment to be able to export more. Besides, major

international firms started to get involved in the tequila sector by making agreements

such as trading partnership (As the company Cuervo who has a commercial alliance

with Diageo) or ownership, (as it is the case for the company Sauza which is owned by

Pedro Domecq) bringing capital and new technologies to tequila distilleries (Gonzalez,

2002, p18; Goddard, 1998, p7). According to El Análisis (economic newspaper) of

October-November 2006, only 60% of the total tequila production is still in hands of

Mexican companies. The most important and recent acquisition was at the end of

2006, when the company Herradura was bought by the U.S. company Brown Forman.

23 Mezcal is a term that can also be used as a synonym of agave plant. It is the case here.


35

As it provides international distribution channels, cooperating with international

companies has also the advantage to open the door of the international market

(González, 2002, p24): Tequila export jumped from 14% of the total production in

1970 to 58% in 2006 (Goddard, 1997, p3; Gonzalez, 2002, p18; CNIT, 2006; CRT,

2007). However, with the capital that multinationals can invest in marketing,

advertisement or innovation, it closes market segments and distribution channels to

smaller companies and concentrates even more the capital in hands of the biggest

distilleries.

3.3. From the 1990s: Change of scale and its consequences

The tequila golden years for industrials

In the early 1990s, a fungal infection24 struck agave. Therefore, tequila companies

started to initiate plantation in other non affected areas (the Amula region is one of

them).

In the late 1990s, the future looked better then ever before for tequila distilleries. The

demand for tequila increased considerably both in the international market and in the

national market (Bowen, Valenzuela, 2006, p6). Besides, as there was abundance, raw

material price was quite low, and new distilleries started up (see Appendix 11).

Tequila production rose by 74% from 104,3 to 190,6 million litres between 1995 and

1999 (Gonzalez, 2001, p21).

But for agave farmers, abundance means losing any negotiation power. During the

important abundance of the 90s, as they did not have a strong representative

organization able to defend their interests, agave farmers petitioned El Barzón25, a

social movement that arose due to the economic crisis in the Mexican countryside, in

order to have a strong representative organization able to defend their rights. Rene

Beas, one of the directors, agreed and in May 1995, El Barzón del Agave was created

24 Fusarium oxisporum was accompanied by a bacteria called erwinia caratavora, the pair raging through plantations. A 1997 survey conducted by the CRT estimated that 27% of the country's agave crop was infected with at least one of the diseases. Many farmers and scientists said that figure was actually much higher (Chadwick, 2004) 25 El Barzón AC : Union Nacional de productores agropecuarios, comercantes, industriales and prestadores de Servicio (Nacional Union of agricultural and livestock producers, merchants, industrialist and service labourers) was created as a result of the Mexican economic crisis of 1994. It is officially registered as a civil association.


36

(Gonzalez, 2002, p36). Its objective was to improve the situation of agave farmers by

avoiding intermediaries and by doing so that agave could be bought at a reasonable

price (In the beginning of 1999, the price even went down to 0.85 cents per kilo)

(Luna, 2003, p4).

The worst agave shortage in history and its consequences

In the 1990s, a few unfavourable factors interfered. Because of a few people planted

agave as price was the low and because of an early winter frost took place in 1997, it

resulted in the most devastating shortage in history (Gonzalez, 2003, p38). From 1997

to 2000, blue agave plants decreased by 50.7 % (Bowen, 2004, p12). The shortage was

accentuated also due to a skyrocketing demand, caused mainly by the recognition of

the DOT (and other Mexican DO) by the U.S. and Canada, with the NAFTA (North

American Free Trade Agreement) in 1993 and by the European Union in 1997. The

price of agave rose to more than 14 pesos26 per kilogram in 2000 and smallholders

with mature plantations became rich overnight (Martinez et al, 2003, p5). This

shortage lasted till 2003, and had major consequences for the tequila sector and for the

region:

i) Farmers from other regions starting to plant agave

Blue agave was first produced in the Zona Centro and in Los Altos but in the end of

the 1990s, a lot of farmers from other regions started to plant blue agave, as the price

at that moment made it an attractive crop. In addition, the CRT assessed that the area

planted with agave should be increased to 100,000 hectares to face the rising demand

(Ruiz-Corral et al, 2000; in Martinez et al., 2003). The Zona Sur of Jalisco (Amula

region) is one of them (Chapter 4).

ii) Intent to decrease the amount of agave sugar in tequila

In 2000, a repetition of the events in the mid-1960s took place: tequila distilleries

proposed another reduction of agave sugar proportion to 30%, but the government did

not accept it, since it would have led to a political scandal and would have damaged

the reputation of tequila (Luna, 2003, p3).

26 1 euros= 13 pesos


37

iii) Reduction of possibilities for small distilleries (Macias Macias, 2001, p64).

When the price is so high, small distilleries can not compete with big distilleries in

terms of price and many are constrained to close. That is what occurred during the last

scarcity. However, as Luna argued (1991), it is still surprising to see the capacity and

the maintenance of small and medium size distilleries.

Start of a period of extreme abundance

By 2006, a new phase of abundance started and the price of agave dropped to 0.5

pesos to 2.5 pesos, which is below production costs (estimated at 2.55 pesos per kilo

by the CRT in 2005). In May 2007, the price was around 1 peso. Agave farmers have

difficulties selling their produce and are searching for alternative solutions or more

precisely, they expect the government to take measure.

3.4. Recent chance of political party and its consequences

In Jalisco, policies changed quite a lot since 1994, when the PAN (Partido de Acción

Nacional27) was elected in the government of the State (Jalisco) and replaced the PRI

(Partido Revolucionario Institucional)28. From very paternalistic, the policies have

changed to more participatory, where farmers are considered as “entrepreneurs”. At

federal level, the PAN arrived in the government in 2000. As explained by a

representative of the Secretaría de Desarollo Rural (SEDER: Rural Development

Ministry of Jalisco), the change is being done slowly to more participatory policies, (as

farmers still receive previous subsidies such as PROCAMPO29) “but peasant farmers

don’t like that change”. Now, supports are provided to farmers that are organized and

that are carrying a project. But for each project, it requires an important initial

investment which can be a limiting factor. The change from top down to bottom up

policies in a country where people are not “used to” take initiatives and to organize

themselves after more than 40 years of PRI will need some time before to be accepted

27 National action party. PAN is a political party right orientated. http://www.pan.org.mx/?P=12. 28 Institutional revolutionary party. PRI is a political party left orientated. http://www.pri.org.mx/estadetulado/index.html 29 PROCAMPO is a program of direct subventions (per hectare) for farmers that the Federal State provides via SAGARPA. It was implemented in 1993 and its primary objective was to compensate national farmers for the subsidies that farmers from other countries receive. Once the plots of land are registered, no matter that is being planted. http://www.aserca.gob.mx/artman/publish/article_183.asp.


38

and to have a real impact. To stimulate people to “participate in the construction of

their future30”, the government is organizing different forums of public consultancy.

The large area with DOT is a result of power influences that are in place in the tequila

sector. After a literature overview to present the regulatory and historical context,

analysing these internal mechanisms and the power relationships in the past and now is

the first step to understand why the sector was shaped so that distilleries are those who

benefit from the DOT. It is particularly the case in times of crisis when farmers can not

sell their agave because of abundance, one of the consequences of the fact that there is

no “regulation” to plant agave. The second part is dedicated to analyse what solutions

can be developed to solve the problem of price fluctuation. Another point comes out

when talking about the large area with DOT. What is happening in a “peripheral

region” and more particularly what are the local responses to the “political” decision

that is the implementation of the DOT, and to which extend is it different from what

has occurred in the “central region”?

30 Expression taken from TV advertisements of the government.

Chapter 2. Power relationships and internal mechanisms in the tequila sector

39

Chapter 2.

Power relationships and internal mechanisms in the tequila sector

1. Introduction

Often, the best questions come from an outsider’s point of view. The 4th of March 2007,

the IMPI had the visit of Mpazi SINJELA, Doyen of the world academy of the WIPO.

In order to give him a recorrido (round) of the agave landscape classified as worldwide

patrimony of the UNESCO, a trip to Tequila was organized with some stops to admire

the view. During one of them, Mpazi SINJEL asked 2 questions to Theodore Schultz,

director of the IMPI:

M. SINJEL:“It is incredible all these plantations of blue agave…it is wonderful. But, are they all registered to be raw material for tequila?” T. Schultz: “Heu…yes, they are”.

It is true that all blue agave plants can be used for tequila production, but if the

plantations are “registered”, that is another question (see Chapter 3, 3.1)

M. SINJEL: It is so immense… and behind these mountains over there, that is not an area where agave can be produced, is it? T. Schultz: Heu… Yes, it is. The delimitated area goes to the coast even. M. SINJEL: Oh really?

These two questions revealed the two main weaknesses of the DOT:

- The large area that was granted the DOT,

- The non-existence of a proper regulation for planting agave.

To understand the logic behind the DOT regulations and the limits of the tequila sector,

it is indispensable to first get a clear vision of each actor’s role and the existing power

relationships. This part presents the institutional context and the internal mechanisms1

which can demonstrate who benefits from the DOT.

The internal mechanisms can not only be perceived by doing interviews. Each actor has

his own vision, his own version and interpretation of the reality. Often even, this reality

1 By internal mecanisms, it is meant the role of each actor in the decision making process, and particularly in the NOM modification process and the DOT rules.


40

is simplified at his advantage, which makes it difficult to stay objective and to

understand what really happened. Each time, a bit of the truth is hidden; my task was

then to reconstitute the puzzle. The best way was by prospecting the past and by trying

to understand why things have gone a certain way and not another. Another point which

was a good basis to understand the evolution of the tequila sector was by looking at how

(and why) the NOM has evolved. To understand the power relationships, I also tried to

make people talk about the others as much as possible while interviewing them.

Farmers’ opinions collected during the FGs were also used.

2. How power relationships have shaped the tequila regulatory framework

2.1. Why is the area of DOT so big?

As Mpazi Sinjel noted it, the delimitated area with DOT is immense. While the

production of tequila was concentrated in the Zona Centro and Los Altos (only since the

end of the 19th century) one can wonder why it had not been limited to these two

regions.

Why does not the delimitated area only include the regions that have a tradition of

making tequila2?

When Don Francisco Javier Sauza (of the third generation of the Sauza family) went for

a trip to Europe and to Asia in 1961, he discovered that a drink called Tequila Morosso

was sold in Tokyo. He then understood the emergency to protect the “Mexican” tequila

from foreign imitation. When he returned to Mexico, he started to work with the

president of Mexico, Jose López Portillo, towards a way to protect the name tequila.

The problem was that they both had a different point of view on the symbolic value to

give to tequila. For the president, tequila was a national drink and thus, the delimitated

area should be Mexico as a whole. Don Francisco Javier Sauza, as well as many

distilleries in the Zona Centro and Los Altos did not share that opinion. For them,

tequila was a local drink and therefore the delimitated area should only include these

two regions. Distilleries from the Zona Centro even claimed that as tequila was

2 Information from different interviews and in particular according to Jaime Villalobos (Writer of “Mi amigo el tequila”, not published yet).


41

originally from there, the area with DOT should only be the Amatitán-Tequila Valley.

According to the president, by granting the DOT only to these 2 zones, tequila would

only be a “regional drink”. Besides, seeing that the DOT would bring economic benefit,

the governors of the surrounding States started to get interested in it and started to

promote to plant blue agave in their State to influence the final decision. As a

compromise, the president finally decided to include some municipalities of the

surrounding States.

Why Tamaulipas?

In December 1976, the distillery la Gonzaleña (the unique distillery of Tamaulipas)

asked to enlarge the territory of DOT to some municipalities of Tamaulipas (according

to the Diario Oficial of the 13th of October 1977). Even while some distilleries

disagreed with this proposition, it was accepted and added in the Declaración General

de la Protección a la Denominación de origen “tequila” and published in the Diario

Oficial of the 13th of October 1977).

It is interesting to focus on the reasons that were put forward in the declaration to

include Tamaulipas:

c) Las inversiones que se han realisado en esa region son cuantiosas y permiten prever un desarrollo considerable con la consecuente generacion de empleo y aprovechamiento de recursos naturales. (Investments done in the region are considerable and enable an important development in terms of job and natural resources management)

By reading this justification, it supposes that the “investors” may have put pressure on

the decision making process concerning the inclusion of Tamaulipas in the DOT

delimitated territory. Jaime Villalobos (writer of mi amigo el tequila and big agavero

owner of his own brand) confirmed that fact and explained that Andres Lombardo

Toledano, political man in times of the president Jose López Portillo, had economic

interests in Tamaulipas. Together with Francisco Javier Sauza who had plantations there

(and who is the initiator of the distillery “La Gonzaleña), they used their influence to

include Tamaulipas in the DOT delimitated area. Another reason given was:

e) Es necesario contar con un mayor volumen de material prima para producir tequila y asi poder satisfacer las demanda creciente de ese producto, especialmente en el extranjero y evitar el uso de azucares distinctos al del agave en su elaboración.


42

(It is necessary to assure a major volume of raw material to produce tequila and this way to face the increase in demand especially abroad and avoid the use of other sugars in tequila making).

According to this argument, it suggests that one of the reason to include Tamaulipas

was to be able to face the increase in international demand and avoid the decrease in

tequila quality in the norm (at that time, tequila could already be produced with only

51% of agave sugar). Nowadays, tequila from Tamaulipas (and especially the brand

Chinaco Blanco of La Gonzaleña) is considered as one of the best tequila to make

“margaritas” (so it is a “mixed” tequila) according to "The New York Times" (from the

website of the State of Tamaulipas3) which contradicts with the prime reason to include

Tamaulipas. Another argument that was also given was its strategic position: the

proximity to the US would facilitate tequila export.

It is clear that the area that was granted the DOT is not homogeneous in terms of

climate, soil properties and rainfall. In the State of Jalisco, it goes from Los Altos at

2000 metres above see level to coast level and from red soil to volcanic soil in the Zona

Centro (Gobeille et al, 2005, p81). This delimitation, purely man-made, contrasts with

the definition of a DO established during the Lisbon agreement (see Chapter 1, 2.1),

according to which “the quality and characteristics (of the product with DO) are due

exclusively or essentially to the geographic environment, including natural and human

factors”. But as Groze (2004, p3) explained, as far as “industrialized” product are

concerned, the requirement in the (TRIP) definition of a link between geographical

environment and the product may have existed, but it is now difficult to prove. Indeed,

“manufacturing traditions and human skills can be transferred from one geographical

area to another, taking into account in particular increasing professional mobility and

economic globalization”.

Will the DOT delimitated area be reduced?

Since only 3% of the DOT delimitated area is planted of agave, one could think that

there is no reason for enlarging it. But as farmers are not aware of the DOT, they start

planting agave everywhere when the price is high, even if they are not in the delimitated

area: Some governors of other States also incite farmers to do so, or because of

ignorance, or because they want to be integrated in the area and use that excuse to

3 http://www.pymexportatam.gob.mx/tequila.htm


43

justify why they want to be within the DOT area. Indeed, Ramon Gonzalez4 (director of

the CRT) recognized that, “the whole country would like to be included”, but he added

that “it will not take place because there is a compromise with the government not to

amplify the area”. But some small distillery owners have doubts on that question:

Tenemos miedo de que se extende cada vez más la zona, que los governadores alrededor pressionan cada vez más para incluir sus municipios en la zona delimitada.

(We fear that the delimitated area with DOT will still be extended, that governors of surrounding States will continue pressuring to include their municipalities within the delimitated zone).

If it was agreed upon by the government that it would not increase, why are some

distillery owners not convinced of it? Because small distilleries do not take part in the

decision making process, they are not always informed about the latest objectives and

orientations that the tequila sector (or more precisely the big distilleries) follows. But it

is difficult to know if it is due to the fact that small distilleries voluntarily do not

involved themselves in the decision making process or if it is because the most

influential distilleries do not include them and do not inform them enough.

2.2. The evolution of the NOM, a way for distilleries to overcome crisis

Since the first norm in 1949, the NOM had major changes (Appendix 12):

- Changes in the minimum authorized content of agave sugar ,

- Changes related to the recognition of DOT by other countries,

- Changes related to the different tequila categories.

The 6th of January, the latest version of the NOM was published: the NOM-006-SCFI-

2005. The main changes comparing with previous versions were:

- The authorisation to add colorants or aromas to tequila (making tequila with

“tastes”),

- The reinforcement of control methods for tequila exported in bulk, and

- The introduction of a register in which all agave farmers have to be inscribed,

- The introduction of a new category of tequila: extra-añejo (more than 3 years in

oak barrel).

4 When I cite someone by giving his first name and without reference of date, it means it is information collected during the interviews.


44

Understanding the logic behind these changes helps to see how and why the tequila

regulatory framework has become what it is now.

Should not the name tequila only be used for tequila 100% agave?

From the 1960s onward, the demand in national and international market increased a

lot. At that time, tequila was still mainly produced with traditional methods, like the

Tahona, a cylindrical stone mill used to extract the juice of the cooked piña; but with

such methods, distilleries were unable to face the demand. In Tala, a village in the other

side of the Tequila volcano, sugar cane was produced and transformed with an industrial

process. Thus, distilleries started to go with their piñas to the factory, called Ingenio de

Tala, to extract agave juice. The idea to add sugar cane alcohol to tequila was born from

that interaction. By doing so, it would help producing more tequila and cheaper (as

modern and mechanized equipment reduces the production costs per litre) and therefore

facing the increase in demand (information from Jaime Villalobos). As a result, large

distilleries asked the Congreso Federal (federal congress) for a modification of the

NOM. Therefore, the norm DGN-R9-1964 allowed the introduction of 30% of other

sugars in tequila (Luna, 2003, p2). While before that date all distilleries would have

banned the idea to add other sugars to tequila (as tequila was the 100% agave for them,

according to the DEN-R-9) for market reasons it became suddenly possible. According

to previous (and first) tequila norm of 1949, the DEN-R-9, tequila had to be made of

100% blue agave sugar and forbade the mixing with alcohol derived from other sugars.

As explained in Chapter 1, 3.1, adapting the quantity of agave sugar has been a solution

(for the distilleries) to adapt to the scarcity crisis (while responding at the international

preference for cheap tequila).

As far as the tendency to decrease the quality of tequila to adapt to the international

market is concerned, the case of tequila is not an exception and can somehow be

compared with vodka and whisky. As explained in a BBC news article (19.06.2007),

Nordic and Baltic countries (“vodka belt countries”) had requested to tighten the legal

definition of vodka: they stipulated that vodka should be only made of potatoes or grain.

But European members of the Parliament rejected the bid. Indeed, it would have had

consequences for the vodka producers in “non traditional countries” such as England,

France or Germany, who are integrating sugar beet, grapes and citrus fruit in the vodka

recipe (and are counting for one third of the UE vodka production). What was agreed

upon is that it has to be indicated on the bottle from what the vodka is made (but it can


45

be written as small as they want). As for tequila, interests of international actors are

taken into account even when decisions are aiming to protect a “traditional process”.

But for tequila, indicating on the bottle from what it is made would already be a first

step to educate and inform consumers on tequila different “qualities” (in terms of agave

sugar quantities).

Why was tequila reposado created?

Four years before the Olympic Games in Mexico in 1968, an important promotion of

“Mexican culture” started. During that event, visitors from abroad wanted to experience

tequila. The demand in tequila rose incredibly and particularly the demand in tequila

tipo B5 (now called añejo), as it is a bit sweeter and softer. The distilleries quickly

finished their stocks of tequila tipo B and were forced to open barrels (younger than 2

years). As this tequila appeared to be successful as well, the category “reposado” was

created.

Why is it allowed to use additives in the tequila recipe?

According to the NOM (4.1.), to “natural tequila”, it can be added caramel colorant,

natural extract of oak, glycerine and sugar syrup. During the interviews, I asked

opinions about the fact that the taste of “natural tequila” can actually be modified and

why it is allowed. Concerning the last point, I had a lot of different versions. It is

important to mention that 51% of agave sugar is the minimum, but each distillery has its

“unique” recipe and can choose to make it the minimum or more (99% for example), as

long as it keeps the same “mix”. According to a small distillery manager, during the last

scarcity, distilleries that were producing “mixed” tequila had to change their recipe and

came closer to the minimum limit (and therefore used less agave). To avoid consumers

noticing the change, they wanted to add in the NOM the possibility to put additives in

tequila (Apparently, Cuervo played a major role it this process). In fact, by checking the

oldest NOMs I could see that it has always been allowed. Only one paragraph was

added:

“6.1.1.1. Cuando a los Tequilas [...] se les agregue edulcorantes, colorantes, aromatizantes y/o saborizantes permitidos por la Secretaría de Salud,con objeto de proporcionar o intensificar su color, aroma y/o sabor, pueden tener como máximo 75 g/L de azúcares reductores totales de acuerdo a la NMX-V-006-NORMEX y 85 g/L de extracto seco a la NMX-V-017-NORMEX.”

5 At that time, tequila was only differentiated in 2 categories: tequila blanco and tequila tipo B, which had to have 2 years of maturation (See Appendix 12).


46

(6.1.1.1 When to the Tequilas [...] are added sweetening substance, colorants, aromatizing substances or aromas allowed by the Secretaría de Salud (ministry of Health), with the objective to proportion or intensify its colour, aroma and/or taste, it can have as maximum 75 g/L of total reduced sugar according to the NMX-V-006-NORMEX and 85 g/L of dry extract according to NMX-V-017-NORMEX.)

An chemical doctor that I interviewed explained that it is terrible that it stipulates

“intensificar” (intensify), as it means that the taste of tequila can really be modified by

what is added: “At the end, one will like a tequila not because a distillery uses good and

mature agave or has good production methods, but thanks to the chemical engineer”.

Since 2006, tequila with flavours can be produced. According to Jaime Villalobos, the

company Cuervo pushed it, taking as “model” the vodka industry: because there is

Absolute lime (vodka with lemon flavour) Cuervo created a kind of tequila lime. The

representative of the CNIT (2006) argued that it opens more possibilities for consumers.

In fact it would have been more accurate to say “more possibilities for U.S. consumers”

because these products are only for export. The taste of U.S. consumers dictates

distilleries to develop new products. As Goodman (2004) stated, “Consumers are co-

producing the food sector through the large retailers”. (But would not it be more

because spirit multinationals shape tastes?)

Why has precision in the NOM-1994 that agave should be mature been removed in

the NOM 2005?

When it was added in the NOM 1994 that agave should be bought mature, biologists

saw it as a big improvement. But in the latest norm, this precision was removed, as

proved underneath in the NOM-006-SCFI-1994:

6.2. “El agave que se utilice como materia prima para la elaboracion del Tequila debe ser maduro, de la especia Agave tequilana weber variedad Azul haber sido cultivado en el territorio comprendido en la Declaración. (6.2. Agave that is used for the elaboration of tequila should be mature, of the specie Agave tequilana Weber variety Blue, should have been cultivated in the territory described in the declaration)

NOM-006-SCFI-2005:

6.2. El agave que se utilice como materia prima para la elaboracion del Tequila debe ser de la especia Agave tequilana weber variedad Azul haber sido cultivado


47

en el territorio comprendido en la Declaración y estar inscrito en el registro mencionado en el inciso 6.5.1.1 de esta NOM6. (6.2. Agave that is used for the production of tequila should be of the specie Agave tequilana Weber variety Blue and should have been cultivated in the territory described in the Declaracion de Protección de la DOT and should be inscribed in the register mentioned in 6.5.1.1. of this NOM)

Biologists and academics are criticizing the CRT and the big distilleries for having

removed the term “mature”, saying that “it was because it was not convenient for them

as they want as few restrictions as possible”. But what is the real use of the indication

“mature” if it is not defined and if the methods to verify it are not explained in the

norm? Ramon Gonzalez argued that because it was not measurable, it was decided to

remove this precision. A director of a big distillery also added that leaving the

possibility open to buy agave of different ages allows more differentiation possibilities.

As he said, some people prefer sweeter tequila, other more acid. “We should not try to

“standardize” tequila, but try to keep different tequila profiles”. It is interesting to note

that it actually gives some more flexibility in times of scarcity and foreseeable

abundance. Besides, as the agave plant is not a fruit, it does not have to be mature to be

used for making tequila (not like grape for wine).

2.3. Why is it still allowed to export tequila in bulk and to bottle it abroad?

As Rogelio Luna argued when I interviewed him: “Mexico has become the

“maquilador” (making factory) of the U.S. and that is very bad for its proud”. Indeed,

bulk export represents 64% of all product export, which means more than one third of

the total tequila produced (see Appendix 13, figure 7, 8 and 9). El IMPI, el Barzón, and

some distilleries like Herradura wanted tequila to be made of 100% agave and bottled in

Mexico. They put forth the reasons that it would help solving problems of abundance

and it would help improving the situation by keeping the added value inside national

borders. As Francisco Soltero (executive manager of the CNIT) argued, if every

distillery sold its product under its brands instead of exporting in bulk and letting

foreign companies bottle and put their brand on the product, it would be easier to

control and to plan future sales, and therefore would help implementing a crop planning

of agave. Besides, it would generate more economic benefits to the origin region.

6 This precision is detailed in Chapter 3, 3.1.


48

The 1st of January 2004, the Mexican government approved a law stating that tequila

should be bottled only in the DOT territory, but it did not go into effect (Coelho and

Castillo-Giron, 2005, p13; González, 2002, p24; Crutsinger, 2004). Indeed, the Distilled

Spirits Council of the U.S. complained about the proposed rule, saying that it would

raise costs for consumers and threaten jobs in U.S. bottling plants (Coelho and Castillo-

Giron, 2005, p34). As the council's president Peter Cressy said (quote taken from

Crutsinger, 2004)

"This proposal could have a severe effect on consumers worldwide through higher prices, fewer choices and the significant potential for serious product shortages. It would also violate the rules of the World Trade Organization and commitments made by Mexico when it joined the United States and Canada in the NAFTA in 1994”.

Besides, since Mexico has signed the NAFTA, the NOM can not be modified in a sense

that would be a “barrier” in market exchanges between the 3 countries: By forbidding

the export in barrel, it would be a commercial barrier as it would increase the price of

the product7. Foreign consumers will not accept having to pay 6 times more for a bottle

of tequila to make cocktails. It would cut down the international market and have more

negative consequences for Mexico than for the U.S. Indeed, tequila sales only represent

5% of total alcoholic drink sales in the U.S. (El Público, 7th of April 2007) while 44%

of the total tequila production is exported to the U.S.8 (and 64% of the total exports in

bulk) (CRT, 2006). As Servando Calderon (field director of Sauza) said, “we can not

fight against our clients”. Furthermore, because some distilleries have bottling

companies abroad, (like the distillery Gonzalez y Gonzalez9 which has a firm in

Germany), it would lead to a total restructuring of tequila distilleries.

There is also another problem: The proposed ban on bulk shipments can not enter into

effect in the short term since “the tequila industry (labels, bottles, stamps) is not ready

for having these 140 million litres that are exported every year”, Gabriel Castro,

president of the CNPAT (Confederación Nacional de Productores de Agave Tequilero),

explained.

7 When the product is exported, it is exempt of taxes, which, in the national market, represents 65 %: 50 % IEPS and 15 % IVA (see Chapter 4, 4.4). 8 57 % of the total tequila produced is exported, from which 77% to the U.S. (see Appendix 13, figure 7, 8 and 9). 9 Classified as a medium size distillery according to the classification of the CNIT 2007 (see Appendix 6).


49

But Francisco Huijdal remains convinced that “mixed” tequila is not tequila and should

not be called this way. He is conscious that the norm can not forbid suddenly the

production of “mixed” tequila and exports in bulk, but according to him, the best way

would be to change the NOM gradually to reach that tequila should only be made of

100% agave (for example, starting by saying that tequila should be made of 70% agave

sugar, then 80% …). But such a progressive change would mean that every time the

NOM is modified, distilleries would have to adapt their recipe and change their product.

What can be done is to educate and convey information about tequila quality. It could

start by communicating on the different types (qualities) of tequila. Indeed, by simply

asking around me the kind of tequila people preferred, I noticed that few knew that there

were different tequilas. Maybe if people knew that when it is not written “tequila 100%

agave”, it means that it is a mixed product, they might start paying attention that this

indication is on the bottle (and not only look at the price to decide which tequila they

buy).

3. What does each actor think of the others?

During the interviews, I tried to grasp the opinion of the interviewed persons about the

others. In many cases people would take precaution not to give too “controversial”

answers. Therefore, I had to spend some time explaining that my goal was not to

denounce them, but to understand what was going on by comparing each person’s

perception.

3.1. Farmers: “what is the DOT?”

The first thing that can be noticed during the FGs is that very few know what the DOT

is, or if they do, they do not understand the purpose of it. That proves that they have not

been involved in the decision making process relating to the DOT and they are still not

well informed.

This eminent tension between farmers and the other actors (distilleries, institutional

actors…) is clear when one talks with agave farmers, in particular with small agaveros

libres. Not only are they negative about the DOT, but also about the sector in general.

During a talk with an agavero libre (who knows the sector as he has grown agave since

20 years), he made his point of view very clear:


50

“La DOT, no sirve a nada. Ah, si, sirve a los tequileros para vender su producto al extrangero. El CRT, no sirve a nada. Si el tequila que venden con el nombre tequila 100% estababa realmente 100%, no seriamos en esta situación de crisis!”

(The DOT is useless. No, in fact, it is useful for the tequileros to sell their product abroad. The CRT is useless too. If the tequila that they sell under the name “tequila 100% agave” was really 100% agave, we would not be in this situation of abundance now!)

For agaveros libres, distilleries are the ones making money and enjoying the benefits of

tequila recognition at the international level. Farmers do not realize that if tequila

worldwide known, it is partly thanks to the entrepreneurship of distillers.

They also often lack respect for distilleries. But there is an exception: they generally do

value Herradura (from Amatitán) more, because it is for them the “distillery that gives

the best price, who buys mature agave and who keeps long term relationships with its

farmers and employees”. If one asks them what their favourite tequila is, there are big

chances that they answer “Herradura blanco o reposado”. But the myth of the only “big

national distillery producing tequila 100% agave and bottling everything in Mexico” is

gone. At the end of 2006, Herradura was bought by the U.S. firm Brown Forman

(Maldonado, 2007, Dec-Jan). The direct consequences of this acquisition are still

unknown. As Lourdes, owner of a small “tienda” (shop) in Amatitán, said:

“No Sabemos lo que va a pasar. De un modo, va a traer más capital, pues más capacidad de producción y al final, van a comprar más agave. Por lo menos, es lo que esperemos”.

(We don’t know what is going to happen. In a sense, it will bring more capital, so more production capacity, which means that they will buy more agave from us. At least that is what we hope).

She worked 25 years as administrative coordinator in Herradura. Recently, she was fired

as other 40 local people. Even if in a few years more agave will be bought, it seems that

the long term relationship that the company had with its employees and farmers is

threatened. Although she was fired, she keeps on proposing you a “Herradura blanco o

reposado” when you visit her.


51

3.2. Distilleries: Inequalities and divergent interests

As explained in the methodology, it was very difficult to make distillery owners

“criticize” other actors or other distilleries. But when you get answers like the following

by smaller distilleries, it is quite clear that the relationships between distilleries are not

so amicable (they actually reject the fault on the big distilleries):

Interviewer: Porque Tamaulipas está dentro de la DOT ? (Why is Tamaulipas in the DOT delimitated area?) Distillery owner: Es porque Sauza tenía intereses allí”. (It is because Sauza had some interests there…)

Or Interviewer: Porque es possible añadir glycerina o acido citrico a tequila ? (Why is it allowed to add glycerine or citric acid to tequila?)

Distillery owner: Porque Cuervo quería comprar agave tierno sin que el consumidor se dio cuenta” (Because Cuervo wanted to be able to buy young agave without consumers noticing it).

According to El Financiero (the 9th of February 2005), in the beginning of 2005,

Cuervo, Herradura, Sauza and Cazadores (owned by Pernot Ricard) controlled around

67% of the total market10. As distilleries have to pay a percentage of their sales to the

CRT, they are its biggest “clients”. Luna (2003, p6) argued that with the millions the

tequila industry generates, it is difficult to imagine that the CRT is not influenced by the

biggest tequileros. But such a power concentration would not be a problem if all the

distilleries would have the same interests. In other words, it is not a problem in itself

that decisions are taken by few people if these persons speak in name of the others and

consider the interests of everyone. As a spokesman of the CNIT said:

“La dificultad en la industria tequilera es que es una industria muy variada : hay muchos tipos de destilerias, con estretegias diferentes, de tamaño differente. Por eso, es muy dificil encontrar intereses en commun. Lo único que compartimos es que se debe proteger el nombre tequila de competencia ilegal”

(The difficulty in the tequila industry is that it is very varied: there are many different distilleries, with different strategies and sizes. Because of that, it is very hard to find common interests. The only thing we share is the will to protect the name tequila from illegal competence.)

As Coelho and Castillo-Giron indicated (2005, p21, p29), with the exception of

institutional and regulatory activities, there is no coordinated action among tequila

10 It was not possible to get the percentage per distillery as the data is confidential. The only data I found is from 1999 : According to the CNIT, at the beginning of 1999, Tequila Cuervo produced around 22% of the total volume of tequila produced, Sauza 15% and Herradura 8.5% (in Público, 22nd of February 1999)


52

companies. This lack of communication and information is quite threatening for small

distilleries. As the director of a small distillery expressed it :

“A mi, lo que me hace miedo es que las grandes destilerías van a cambiar las normas hacia menor qualidad por intereses economicos a traves de que pertenecen a multinacionales. Pero, del otro lado, esas multinacionales trabajan bien y diffusan el conocimiento de la bebida en todo el mundo, lo que nosotros no podemos hacer por falta de capacidad y porque no tenemos un red de distribución tan grande”.

(As they are now part of or linked with multinationals, what I fear is that the big distilleries change the norm to less quality for economic interests. But on the other hand, these multinationals are working to spread our drink worldwide, what we, small distilleries, we can’t do as we don’t have this capital and such an important distribution network)

Servando Calderon (field director of Sauza) expressed his opinion on how the NOM

will evolve: “It will depend on how the market will evolve ». So, maybe the distiller

cited above has some reasons to be scared. As Francisco Soltero (executive manager of

the CNIT) explained, a NOM can not modify consumption patterns, but the contrary. As

long as there is a market for “mixed” tequila, the NOM will not forbid the production of

“mixed” tequila. Now, “the first preoccupation of the big distilleries is to satisfy the

international market and to adapt to North American tastes”. Distillery managers will

tell you about the “long family tradition” or their will to diffuse Mexican culture into

the world. But if they are not asked clearly: “Is your company 100% Mexican?”, they

will forget to tell that their company belongs to a multinational.

To adapt, small and new distilleries have to be well administrated and very competitive

to find space for their product in a market which is dominated by a few distilleries. As

Salvador Maldonado explained, they have to have a clear strategy and define one type

of product, one profile of consumer and one market segment. If not, they will not be

able to compete with the big distilleries that are present in each market segment.

Another solution is to cooperate with a (U.S.) distributor. That is often the only way

small and new distilleries have to enter international market (Luna, 1991, p161;

Goddard, 1998; p12). The only problem is that it places them only as “maquiladora”

(making factory) as most of the time, the foreign company that bottles will put its

brands on the product. As an employee of the distillery Hacienda de Oro:


53

“I only work here since 1 year, but what I can tell you on the sector is that the secret for new or small distilleries to survive is to have good and sure contact and to be sure to have a buyer”.

Hacienda de Oro is one of these small distilleries that belongs to an American company

(in this case, an American Millionaire) and exports all the production to the U.S.

3.3. El CRT, a “young” certification and control body

In other European DOs, at the very moment of the DO recognition, a “regulating

council” is implemented, whose role is to guaranty that the whole supply chain

complies with the norm and the “codes of practices” of the DO (Garcia and Orozco,

2005, p110). As far as tequila is concerned, even if the DOT has more than 30 years, its

real start in terms of control was in 1994, when the CRT was created. Before, there was

no real control, so no real guaranty for the consumer that the drink was from a

delimitated area and was made of a minimum content of blue agave sugar. During the

interviews with distillery managers, when asking about the control of the DOT before

the founding of the CRT, they would all say that “Of course (with a tone like “why is

she asking that?”), there was control” (see Chapter 4, 4.1). But a representative of the

CRT showed more precaution:

Interviewer: ¿Y antes de la creación del CRT, no habia control? And before the founding of the CRT, there was no control? CRT : Si podemos decir eso...... Es que no tenemos esos datos We can say so… but we do not have this data.

(And then, he searched for books)

For the distilleries, the founding of the CRT has been very important to access

international market (as it gives security to foreign consumers that the product is a

tequila that meets certain quality standards). Theodore Shultz even thinks that “More

than the DO, it is the implementation of the CRT that explains the boom in export”.

Indeed, in addition to control, the CRT also works on communicating around tequila

and its qualities (that the CRT checked).

During some interviews, I noted a certain scepticism regarding the CRT, from very

extreme statements of farmers (“the CRT is useless”, see Chapter 2, 3.1) to “when it

was scarcity, they closed their eyes on the origin of agave plants”. One should keep in


54

mind that the CRT is a relatively new control body and therefore, it needed some time

to implement an efficient control. Nowadays, some experts do recognize that the

implementation of the CRT has helped the sector to become more professional. Besides,

the CRT is aware of the limits of the tequila sector and is slowly but steady taking

initiatives to correct them (SAGARPA, 2005, p6):

(i) As far as bulk export is concerned, according to El Periodico de Mexico

(15.11.2006), “what happens is that they (foreign companies) foment to practice

adulteration as it is more difficult for the CRT to control abroad how the tequila is

bottled)”. But it seems that it has improved: the NOM 2006 reinforces the control

abroad. Furthermore, the CRT has now three offices abroad (Brussels, Washington and

Madrid) that control bottling companies every month.

(ii) They are conscious of the need for an efficient crop planning to avoid price

fluctuation, and for that purpose, they are putting a lot of effort in implementing an

updated agave inventory.

(iii) Another example is the “guide to bring agave plants from the field to distilleries”,

manual for farmers that explains all the “administrative” steps to follow.

But as a representative of the CNIT said, the control of the CRT can still be improved,

as for example find a way to control that no agave plant goes out of the State or is

imported from other States in times of scarcity (by improving the traceability system via

invoicing). Reinforcing the control on field could also be an option as it would reduce

the possibilities for small farmers out of the DOT area to start planting. But on the other

hand, there is a risk that it also reduces possibilities for every small farmers as it would

lead to the same situation as what is happening for small distilleries (more detailed

chapter 4); small farmers will not be able to comply with the “technical” requirements

and at the end, the biggest farmers will be the beneficiaries.


55

4. Conclusion Valenzuela and Bowen argued that the entire history of the tequila sector has been

characterized by tensions and conflicts between agave farmers and tequila companies

(2006, p5). This statement has to be nuanced, not to fall in a simplified description of

the relationships where distilleries are “the baddies”, the government is “a dictatorship”

and agave producers “the poor victims”. It is true that there are clear “winners” and

“losers” to be distinguished, but it is not so easy: there are also very small distilleries

that are suffering from the power concentration and some farmers that have so much

land that they can have their own trademark of tequila. But what is sure is that the

tequila sector is characterized by:

- A geographical concentration of distilleries (and consequently of blue agave

plantations) in a relatively small territory in the State of Jalisco (see Appendix

11),

- A concentration of power and capital which leads to a few distilleries, often

belonging to multinational companies, exerting disproportionate control over the

whole sector (Bowen, Valenzuela, 2006, p24; Macias Macias, 2001, p65)

The presence of tequila on international scene is (i) the reason why foreign companies

(multinationals) started to get involved in the sector and (ii) the consequence, as without

the capital from foreign investors some distilleries (often the biggest) would have never

reached it. The emergence of non-family-ownership and the development of export-

orientated firms created a new type of relationships in the supply chain and notably

between distilleries and farmers. But talking about « supply chain » usually implies a

group of actors at different levels that collaborates for the final elaboration of the

product. It is not really the case for tequila: little importance is given to the “production

part” (agave farmers) and the regulatory decisions are highly influenced by the biggest

actors (distilleries) that shape the tequila regulatory framework at their advantage

without considering other actors’ interests, as the changes in the NOM demonstrate it.

However, one should note that it is not strange that the norm to follow to be granted a

label of origin changes. In other GI, such as the “appellation d’origine” in France, it also


56

takes place. As Gade explained (2004, p853), “appellation rules are not inflexible”11. As

for the tequila sector, it most cases, the idea behind asking for a modification of the

regulation is to face a particular crisis (extreme climate, price fluctuation, plague…).

The problem in the tequila sector is that these changes did not have the primary

objective to profit the whole supply chain and to solve the eminent problems (like the

issue of price fluctuation) but more to privilege the development of big international

distilleries:

(i) For what concerns the regulations which refer to distillation activity, if the interest of

everyone was towards the same goal it would not be an issue that only a few distilleries

are “taking the decisions”. But it is not the case. Those who reached the international

market are more preoccupied to satisfy the U.S. consumers than to maintain a local

tradition. The smallest distilleries have no other possibility but to adapt. The problem is

that such a disproportionate control has created tension and led to a situation where

distilleries do not communicate with each other.

(ii) The absence of communication can also be found in a “vertical” sense: distilleries

often fail to integrate farmers in the decision making and simply forget to recognize

their importance as raw material suppliers. Thus, agave farmers feel left out and think

that they do not have their future in their hand.

One could think that the goal of making the DOT delimitated area so big was to give to

more people the opportunity to enjoy the added value that the DOT generates. But it is

actually the contrary: it has enabled big distilleries to extend their control by giving

them the possibility to plant agave in other regions. As Rodriguez demonstrated (2004),

delimitations always depend on people’s interests, it is never purely geographic. The

problem is that it also makes agave supply more difficult to regulate and favours agave

price fluctuation.

In this chapter, the main limits of the tequila sector have been stressed, the most

important being the lack of communication and coordination between farmers and

distillers (as well as between the distilleries themselves). The fact that agave plant has a

11 He gave the example of the “appellation d’origine controlée Cassis”, “requests for dispensation of INAO regulations (National Institute of Appelation d’Origine, French organization, part of the Ministry of Agriculture charged with regulating controlled place names,) were in most cases granted”.


57

long life cycle (7 years) would require special attention and planning to make the need

for agave for tequila production correspond with the supply, but in a context where

actors do not communicate, the price follows the fluctuation of agave quantities

available on the market. Figure 2.1 is a resume of Chapter 1 and Chapter 2 and presents

how different facts and issues can lead to the vicious circle of price fluctuation. The

following chapter aims at analysing the economic dynamic in the tequila supply chain,

its consequences as well as the solutions proposed by the different parties to come to a

stable situation by avoiding the fluctuation of agave price.


58

Increasing bargaining power of coyotes

Agave abundance

Price decrease

Social conflicts

Lower income of farmers Bad experience of farmers with

coyotes and industry

No incentive to plant blue agave

New plant disease possible

Increasing dependency of farmers on Tequila industries

Less blue agave planted

Increasing international market

Increasing number of new plantations

Conversion of land to blue agave

plantation

More farmers want to grow agave

Price increase

Pressure by industrials to change the official norm

Agave scarcity More exports

Less quality Tequila

1999

Illegal stealing of agave from other regions

Founding of new destilleries

What ways out could be developed so that the farmers and distillers could avoid the

vicious circle?

2007 1990s

2000

Figure 2.1: Schematic representation of agave cycle of abundance and scarcity and its

consequences

Chapter 3.The cyclical price of agave

59

2000

2002

2004

2006

Guanajuato

Michoacan

Nayarit

Tamaulipas

Jalisco

total

0

25

50

75

100

Agave inventory for each municipality with DOT (in million of plants)

Chapter 3. The cyclical price of agave:

Alternatives and solutions as proposed by actors involved

.

1. Introduction

Agave price fluctuation is no new issue. But over the last ten years it has become more

extreme, reaching the high price of 14 pesos in 2000 before plummeting to the current

low price of around 80 cents to 1 peso per kilo (in May 2007). In Jalisco, 8,300 hectares

have extremely mature agave according to the Confederación Nacional Campesina

(National farming Confederation) (Público, the 30th of March 2007) which means

approximately 7 million plants1. Even if distilleries have been using more agave in 2006

(Appendix 13, figure 5), it has not bought all agave plants on the market. Regarding the

fact the peak of planting agave was from 2000 to 2003 (figure 3.1) and that agave needs

7 years minimum to mature, it shows that abundance crisis has just started and will

probably be even more pressing in 2009.

Figure 3.1: Agave inventory in the municipalities with DOT (

Source: Data from the CRT

1 As there were around 100 million plants in December 2006 (Appendix 13 figure 2) on the 120,000 hectares that are planted with agave.


60

Different factors, more or less interdependent, are responsible for agave price

fluctuation, as figure 2.1 shows. But the starting point is the lack of regulation: The

Mexican Constitution states that one is free to plant what one wants. Thus, opportunistic

farmers or distilleries become involved in the tequila sector when it appears beneficial

to them: when the agave price is high, independent farmers start agave plantations with

the objective of benefiting from the high price. The problem is that every farmer does

this and 7 years later, when it is ready to harvest, there is too much agave.

Consequently, the price decreases and opportunistic agave farmers who did not think of

planting in “scale2” are losing their plantations or are forced to sell agave at a price that

sometimes does not cover production costs. So they stop planting agave and the reverse

happens 7 years latter. In addition, the lack of communication between actors does not

help in improving the situation.

Knowing who is responsible for the current situation is not the primary issue. Indeed,

each actor assigns the responsibilities to the others, which limits the possibilities in

working towards a solution. The urgent issue is to understand why nothing has been

done before to cope with (and to stop) price fluctuation. Once the limits of

implementation of an efficient solution are understood, the next step is to see which

solutions are put forward by various actors and in which time scale it could be

implemented.

Data used for this part is data collected from the individual interviews in the “central

region3” and the 6 FGs that were carried out in the Zona Centro, in Los Altos and in the

Zona Sur. The idea is to analyse perceptions and solutions of each actor and to confront

them with views of other actors, which helps comprehending the problems at supply

chain level.

2 With planting in scale, it is meant to have agave of different ages in the field (and therefore not to lose the whole production in case of abundance) 3 Data from the interviews with distilleries in the Amula Region was not used for this part.


61

Power of the producers

Power of the distilleries

Agave supply

Social crisis Social crisis

Price of agave

2007

2. How does the price fluctuation affect the tequila sector?

2.1. Fluctuating power relationships between distilleries and farmers

Price fluctuation does not have the same consequences for farmers as it does for

distilleries (see figure 3.2). When the price is high (so when there is little agave on the

market) farmers have more bargaining power as the distilleries are “forced” to buy from

them. During scarcity times, distilleries had tendency to ask for a decrease in tequila

quality (in terms of percentage of agave sugar; Appendix 13, figure 6). On the contrary,

when the price is low, it provides distilleries with cheap raw material. Besides, as there

is too much agave on the market they can choose from whom they buy the produce.

Abundance is also often the most favourable condition for founding new distilleries

(but, according to Rogelio Luna, they never last long4).

Figure 3.2: Schematic representation of the reversing power of each group depending on

agave price.

As a representative of the CNPAT explained: “At the moment, it is not very

encouraging for farmers”. The current overproduction gives distilleries complete

control. The bargaining power of farmers is very low and they are often obliged to sell 4 It is important to note that if a distillery appears in the register of the CNIT, it does not mean that it is in operation. In some case, small distilleries are from producers and only work in times of abundance. Often, a small distillery can be affiliated to a bigger as they do not have the financial capacity to bottle and they do not have the « reputation ». It positions them as « maquiladora » (making factory).


62

their agave to intermediaries. He even added that “distilleries are playing with farmer

groups’ representatives with the idea to keep controlling the social context (by avoiding

social revolt) and to keep them down”. According to Salvador Maldonado (Público, the

7th of April 2007) Alvaro Garcia Chavez (minister of SAGARPA) emitted a declaration

that accuses “the industrials of enjoying agave abundance to buy raw material cheaper”.

This extreme statement reveals the eminent conflict that exists between the 2 groups.

This situation prevents the 2 parties from working together towards a solution for

avoiding price fluctuation.

2.2. Different impacts depending on “farmers’ type”

Agave farmers do not all experience the crisis in a similar manner due to large

differences in income, anticipatory skills and being able to take initiatives. The

distinction is made by farmers themselves: often, what they call “opportunistic” farmers

are the ones who started planting in 2000 without having any previous knowledge of

cultivation practices and without being aware of the risk of price fluctuation. Such

farmers may have used all the lands available to them to plant agave in one go, not

realising the danger of price fluctuations. Others that learned from previous bad

experiences are planting in “scale” so they can compensate years of low price with years

of higher price. According to “traditional” farmers, one has to be careful when saying

that price fluctuation is caused by agaveros libres. “It is not true because we have

always existed”, an agavero libre said; “Those that make the price fluctuate are the

“opportunistic” farmers.”

Another factor influencing the way in which farmers manage their plantations is the

level of education and the capacity to anticipate (which is one of the difficulties of

agave cultivation). However, some seem to be so desperate that they forget what

happened previously: abundance is followed by scarcity, which means that it is now the

best moment to plant. But the issue is not only the will to plant agave in times of low

pricing; it is a question of capacity. First, starting a new agave plantation requires 2

years of soil preparation, which is impossible to realise in the short term as their fields

are full of “quioting” agave plants (flowering), waiting for a buyer. Second, it requires

capital that small farmers do not have “a mano” (at their disposition). Furthermore,

having access to credit is very difficult: at times of overproduction, it is generally only

granted to farmers that have signed supply contracts with distilleries, with explicit


63

timings, prices and quantities involved (Coelho and Castillo-Giron, 2005, p20).

Consequently, it is clear that the smallest farmers are most “hit” by the crisis.

2.3. The despair of small agaveros libres

During each FG, farmers expressed their despair of seeing their agave rooting in their

fields. They cannot do anything else but “esperar”, Spanish word that defines very well

their position as it has two meanings: to wait and to hope. They also expressed feelings

of being forgotten by the government, “that is doing nothing” for them. They claimed

that if they were told that there was too much agave being planted, they would have

grown something else. On the one hand, if they were more organized, they could have

had a wider vision of sectoral problems and predict abundance. On the other hand, it is

quite difficult for farmers to have a global vision on what is being planted relative to

market opportunities. Government institutions are much more suited to provide such

information. But this information seems to be hard to obtain. Salvador Maldonado

wrote in Público (29th of March) that the extent of the problem is difficult to determine

as: “it is interesting for the tequileros to keep on saying that there is an extreme

abundance so that they can buy raw material at a cheap price”. In that article, the

government (SEDER and SAGARPA) is even accusing the CNIT and the CRT of

refusal to communicate data concerning agave inventory (data which is being made

available on-line). There is definitely a crisis, (there are facts to prove this5), but this

may not be as extreme as is claimed.

Nevertheless, when they were asked what they were planning to do to show their

“anger”, they often answered: “nothing, we wait”. While at the end of the 1990s

blockades of distilleries, rebellions, and conflicts were reported everyday on local and

international news led by the movement the Barzón del agave, one might wonder why it

is still so “calm”(while the crisis is at least as “bad” as what is was at the end of the

1990s). But, as Gabriel Torres explained, the Barzón del agave is not as powerful as it

was because:

- It has lost prestige,

5 The industrials have bought more agave than usual and the tequila inventory in distilleries proved it : there is now 132 million litres of tequila in stock in the distilleries affiliated to the CNIT while the capacity of the tequila industry is estimated at 120 million litres (According to Maldonado, Público, 30th of March 2007, and data from the CRT). They also keep tequila in stock in order to counter balance shortage of raw material.


64

- The leaders became rich during the scarcity that occurred in 2000 and hence

stopped their function of opinion leaders,

- They are less organized than 10 years ago, and

- There are many other farmer groups.

But even if farmers are not organized in one single association, some manifestations are

taking place: the 3rd week of March, the distillery El Patron was blocked by trucks full

of agave. Around 200 farmers were waiting for the distillery to finally agree on buying

their piñas. It was reproached that the distillery only purchased via a few coyotes and

had never negotiated directly with agave farmers.

Price fluctuation is a vicious cycle that has a negative impact across the entire tequila

supply chain (but at different time). The governor Emilio Gonzalez even talked about

“dialectica perversa” to describe the changing context of who loses and who wins

(Público, 3rd of March 2007). Despite the fact that everyone directs responsibility

towards others, a point on which all agree is that a solution needs to be found to

coordinate agave supply with tequila demand. But considering the internal struggles in

the sector, it seems to be difficult to implement it in the short term.

3. Global crop planning, an obligatory step and its limits of implementation As a field manager of one of the biggest tequila distilleries stated, a “global crop

planning” should take place. Each distillery should estimate its tequila market in 7 years

for each type of product (“tequila 100% agave” and tequila). From that, the number of

litres of distillate could be estimated as well as the amount of agave required for

production. To come to a crop planning that integrates both farmers and distilleries, two

points are indispensable:

- Having a list with every farmer’s plantations to be able to know exactly how

much agave will are planted so as to be able to anticipate a possible shortage or

abundance,

- Creating a contract in advance to make sure that distilleries only buy from

registered farmers.


65

3.1. The registration of every farmer’s plantations

As a crop planning cannot be implemented with a system of permit as in Europe 6(because of the constitution), agave farmers and distilleries have to start working

together without regulation. To help the implementation of a precise agave inventory,

the latest norm (the NOM-006-SCFI-2005) stipulates that all agave farmers who want to

sell for tequila production have to be registered:

6.5.1 Agave El Agave que se utilice como materia prima para la elaboración de Tequila debe cumplir con los requisitos mencionados a continuación: (Agave that is being used as raw material to make tequila has to comply with the following requirements :)

6.5.1.1 Estar debidamente inscrito en el Registro de Plantación de Predios instalado para tales efectos por el Organismo Evaluador de la Conformidad. La inscripción en el registro debe efectuarse a más tardar durante el año calendario posterior al de su plantación.

(To be inscribed in the register of plantations implemented by the body that evaluates the conformity. The inscription in the register has to be done the latest during the calendar year after planting)

But the problem is that some are reluctant to register. As Guadalupe Rodriquez argued:

“they think that if they say how many hectares or plants they have, it will increase their

taxes”. Thus, even if it is compulsory, registration seems (for now) simply a good way

to gain insight into the gravity of the problem.

Another issue appears: if too much agave is being planted (which means that agave

price is high at that moment), how to convince farmers that they should plant something

else? The risk is indeed that each farmer counts on his neighbour to stop planting agave

and does not do it himself. According to the “institutional part7”, the solution is to incite

farmers to sign a contract with a distillery8. Once that is done, other farmers will have to

plant something else if they want to survive, as they will not find buyers for their

produce. “Va a pasar una selección natural” (a natural selection will take place), a

6 http://www.inao.gouv.fr 7 All actors of the supply chain « above » the producers. 8 To do so, the CRT has a program of “strategic planning” where they try to incite farmers to have a contract with a distillery. It goes through advertisements on the radio, or when producers come to register themselves to the CRT.


66

representative of the CNPAT explained. But the chances that it happens in the short

term are few as:

- No distillery has an advantage to have contract with farmers for 100% of their

agave supply (see 4.2) and they will keep on buying on open market,

- Not every farmer will want to establish a contract with a distillery,

- The problem of corruption still dominates Mexican fields (intermediaries, corrupt

relationships between some farmers and some distillery field managers…).

3.2. Implementing a contract between farmers and distilleries: Why is it difficult ?

The CRT tends to present the problem as being the responsibility of farmers: “the

remaining independent farmers are responsible for the price fluctuation: Many refuse to

have a contract with a distillery as they want to benefit from an agave price increase

once it. By doing so, they make the price fluctuate. Now they are paying the

consequences”. From farmers’ side, the problem is opposite: “The distilleries refuse to

link themselves with us. They are already self-sufficient9”. But if every distillery was

almost self sufficient, “opportunist” agave farmers would not exist.

What prevent distilleries from being 100% self-sufficient?

It is true that the biggest distilleries (which represent around 60% of total tequila

production) are almost self-sufficient since they have developed a network of contracts

with farmers over the years, which helps prevent problems concerning agave supply.

But “almost self-sufficient” is not 100% self sufficient, and this small difference creates

the need for agaveros libres. A representative of the CNIT explained that the big

distilleries are “almost self-sufficient at 80%”. The 20% is to give flexibility in case the

demand differs from the demand as was estimated 7 years earlier”. But if each distillery

was 80% self-sufficient, it would already reduce the problem considerably. But it is not

the case and it is very improbable that it changes in the short term: small distilleries or

“opportunistic distilleries” that were created in times of low pricing primarily buy from

agaveros libres as it is not advantageous for them to have contracts with farmers

because:

9 Self sufficient in the sense that almost all their agave supply come from owned lands, rented lands or from purchase contracts with producers.


67

- 7-year-contracts would cost a lot more in the end than buying agave on the open

market when it is mature (as the annual rent has to be paid as well as all

production costs and labour)

- They do not have such a stable and secure market as big distilleries do, so if they

lose their contact in 7 years time, they would lose both the market and 7 years

worth of investment they would have made with farmers.

“That is what creates the disorder”, the representative of the CNIT added. Even if the

CNIT has the objective that each distillery is linked at 80%, small ones are disinclined.

As a spokesman of the IMPI rightly noticed, “Although the sector is mature, it is not

professional enough and consequently, there is no coordination to work together”.

Why would a farmer want to stay independent?

If we assume that what distilleries say is true, namely that “the farmers are the ones who

do not want to link themselves”, one might wonder what motivates agaveros libres to

remain independent, as it seems that contracting with a distillery is the only way to

establish economic “stability”. There are many explanations: Often, contracts with a

distillery mean being in contact with engineers from Guadalajara, which is quite scary

for some small farmers who in some cases cannot read or write. Others may have

already profited from the last agave scarcity and are taking the risk to remain

independent hoping to experience the high price once more. In some other cases,

farmers have had a contract with a distillery that, according to them, did not respect the

contract. Concerning that matter, distilleries presented the problem the other way round.

According to a field manager of a big tequila distillery, “Farmers don’t respect

contracts. If they have a contract stating an established price but if another distillery

pays more, farmers will sell it to the last one”. He added that “as the laws tend to protect

the poorest (farmers), distilleries cannot do anything about that”. Of the 40 million

plants that his distillery owns, 70% are on rented land, which, he says, “is more

beneficial as it gives a guarantee of quality and security of obtaining raw material in the

end”. The remaining 30 % is bought via farmer groups, registered by the government,

he added:

«A pesar de que tenemos más de que necesitamos, tenemos la “obligación social” de comprar también a agaveros libres para ayudar a los productores y protegernos de bloqueación y de revueltas. Pero no directamente sino a través de los grupos de productores reconocidos por el gobierno ».


68

(While we already have what we need (in agave supply), we have the « social obligation » to buy also from agaveros libres to help them and to protect us from blockades or revolts. But not directly to them, but via farmer groups recognized by the government)

He continued by admitting that:

«A veces, tenemos que sacrificar unos de nuestros agaveros para tratar de ayudar a todos »

(Sometimes, we have to sacrifice one of our farmers [meaning the farmers with whom they have a contract] to try to help everyone)

This specification is very important and explains why farmers are reluctant to sign a

contract with a distillery, as they are not sure it will be respected.


69

The distilleries can´t be linked

100%

Evaluation of agave necessary in

7 years

Evaluation of tequila market in 7

years

Problem They can´t be sure of the

market in 7 years

Problem: There are still distilleries that buy on the free market

Some farmers want to stay independent

¡Coyotes!

Distilleries Producers

Contract farmers- destillery

SOLUTION Global crop planning

Price fluctuation

No respect of the contract

BUT

AS Problem They have to buy to agaveros libres to

maintain the social order

Problem Bad experience with

non respected contract

AS

3.3. The limits of implementation

Figure 3.3: Limits of implementation of a crop planning of agave

As represented in figure 3.3, price fluctuation is a vicious cycle that will remain if the

problems are not solved.


70

4. How to make a global crop planning possible?

A planning of the quantity of agave planted is the solution to price fluctuation but an

indispensable step to implementation is to improve the relationships between farmers

and distilleries and to stop intermediaries. This section presents the solutions that

different actors have proposed.

4.1. Improving the conditions of the contracts between farmers and distilleries

There are many different contracts but the fact is that most of the time they do not

benefit farmers. The type of contracts used most often is a reverse leasing arrangement,

where a farmer rents out plots of land to a tequila company (or an affiliated company)

who brings in capital, machinery, and labour forces: the smallholder lose the access to

his land and to any management decisions (Bowen and Gerritsen, 2006, p2). It was used

a lot by big distilleries when they started to get involved in regions that did not have any

previous experience with agave cultivation, such as the Amula region. Arnulfo, a agave

farmer of the Amula region, had such a contract, but stopped it to grow agave

independently. He could testify the consequences of being under leasing contract.

He and his 2 brothers are working on the 20 hectares that his dad got during land

redistribution in Mezquitan. Before 1995, they grew maize but its low market price and

the lack of water made it difficult to assure a minimum income. Therefore, they decided

to lease their land under a specific kind of contract that stipulated that a participation of

5% of the total production was given to the owner of the land. Seeing that 8 hectares

produced 1050 tonnes (at a price of that time of 14 pesos) they decided not to renew the

contract10.

Bowen and Gerritsen (2006, p3) argued that reverse leasing arrangements transfer

environmental costs of agave cultivation onto landowners. This point was confirmed by

Arnulfo. He explained that when Agave Azul y Servicio11(affiliated company of Cuervo)

10 It is important to specify that this type of contract was more beneficial than what is done at the moment: nowadays, the farmer is only given an annual rent that corresponds to the value of 2 tonnes of maize (estimated at a minimum of 1 300 pesos) and only for the best plots of land a percentage of the total production can be negotiated (Gerritsen et al, 2007, p 16). 11 Every producer knows that Agave Azul y Servicio is property of one of the big tequila distilleries, but few can say that it is from Cuervo. During an interview, someone explained me the advantages for Cuervo to have an “affiliated” company: in case of legal problem, Cuervo will not be involved and will not damage the “reputation” of Cuervo.


71

left, the soil was depleted. They left everything on the ground (leaves, roots etc. and he

had to burn it12) and it was not exploitable so much they used pesticides, herbicides and

fertilizer. He added that “as it was not written on the contract that they should clean the

land when they leave it, of course they did not do it”.

According to one farmer, it is not normal for distilleries to be involved in the agave

production process (via reverse leasing arrangement). “Distilleries should not do our job

and only do what they know: making tequila”. That would avoid excluding us from the

production process.” A representative of the SEDER also recognized that “the real

solution would be if distilleries could come to an agreement to rent less land”. But for

small maize13 farmers that have an immediate need for money, renting is a solution to

gain a small but secure income.

The ideal type of contract would be a contract in which a distillery agrees in advance to

buy agave from a farmer while still allowing him to work on his land. It would give

farmers the security to sell their produce. However, this type of contract remains very

rare (Bowen, Valenzuela, 2006, p16).

4.2. Finishing with intermediaries

Intermediaries, called coyotes, are a taboo subject in the tequila supply chain.

Distilleries often do not dare to admit their existence. For example, during an interview

with a distillery director:

The interviewer: ¿ No hay interm…? (There is no inter…?) Director X: no

Seeing the answer, I changed my question…

The interviewer: ¿Intermediarios como… grupos de productores que negocian con usted? Intermediaries like…farmer groups with whom you negotiate instead of negotiating directly with farmers?)

Director X : Si, tenemos un poco. Pero es minimo. (Yes, a bit. But it is not a lot)

12 Common practice that has very bad environmental consequences. SAGARGA (according to the local office of El Grullo) is trying to make farmers aware of the risks it has, but it is still done a lot. 13 Whose production cost is higher than the current price they get for their product.


72

At that precise moment, the communication director came in, heard the last part of the

discussion and asked, without having heard the previous answer of his colleague:

The communication director: Están hablando del problema de los intermediarios, verdad? (You are talking about the problem of intermediaries, aren’t you?)

This intervention is a sound proof that it is a real problem. A representative of the CRT

admitted this as well. When I asked how the CRT checks to see that distilleries are

really purchasing to registered farmers, he answered:

CRT: La función de los intermediarios es solamente vender el producto. No es un problema... [pause] Si, en realidad es un problema, pero no quiero opinar.... es un tema fuera del CRT.

(The function of intermediaries is only to buy and sell the produce. It is not a problem…[pause]. Yes, in fact, it is a problem, but I don’t want to express my opinion…It is a theme out of the CRT.)

As the representative of the CRT remarked, the fact that intermediaries exist is not bad

in itself. The point is that they abuse the situation.

CRT: Hum.... yo, respeto a eso, no creo que sea mala la labor de un intermediario. Yo pienso que en todas las cadenas productivas hay quien realiza valor agregado pero el punto es que cada uno tiene que tener al final un ingreso justo. Aquí el problema es que hay un abuso....que deja afuera el agricultor.

(About that, I don’t think it is bad to buy from an intermediary. In every supply chain, some are making the added value, but the point is to let to every actor have a fair income. Here, the problem is that they abuse and exclude farmers from the production process.)

The point is then to understand why the coyotes have so much power. Coyotes would

not exist if distilleries would not buy from them. The other way round, if farmers would

not sell to them, they would not have as much power. One does not go without the

other. As the director of a small distillery explained, in times of abundance the coyotes

prefer to buy from big farmers, excluding even more small farmers who lose their

motivation and stop planting agave. He provided an example of how powerful and

influential coyotes can be: “Sometimes, they even organize farmer manifestations

themselves with big farmers and even pay people to march!”

One may remark why it is interesting for a distillery to buy via intermediaries. Even if

the price that they have to pay is higher in the end, it has the following advantages:


73

- It is easier to buy a big quantity of agave at a time without having to negotiate

with each independent farmer,

- The coyotes have many contacts (which simplifies the search for agave

suppliers, especially in times of scarcity)

- It provides them with a secure supply as they have a contract with the coyotes to

ensure a steady supply of agave.

For what concerns agaveros libres, as a field manager of Sauza explained, their

motivations to sell via coyotes are:

- It is often the only way to sell their produce,

- They do not need to fulfil an invoice (important as some cannot read nor write),

- It stops them having to go to Guadalajara (for example) to negotiate a price as

many distilleries have an office there,

- Coyotes are often “powerful” men in the village or chief of a farmers

association, and farmers feel more at ease selling to “a man of the village” or to

“a friend of a friend” than to an engineer whom they do not know.

A funny anecdote illustrates the fact that coyotes are “amongst” agave farmers. I had the

opportunity to be with agave farmers during the blockade of the distillery El Patron.

Farmers were complaining that the distillery had only bought from a few coyotes and all

were walking around with a piece of paper with coyote names from whom el Patron had

bought agave. An agave farmer, when looking at the paper, said surprised:

“¡Ah, el cabron! ¡Ves, el es mi amigo!” ( Ah! See, he is my friend!)

Proof that in crisis time you cannot trust anyone. This lack of trust is one of the reasons

why farmers do not organize themselves. All these factors lead to, as Ramon Gonzalez

noted, “Son los coyotes que hacen sus fiestas” (The coyotes are the ones that enjoy the

situation).

A solution that was proposed by a farmer would be to create local governmental offices,

where farmers could go to declare how much agave they have available. Agave could

then be bought by distilleries via this office. That would enable:

- A precise agave inventory as it will be easier for farmers to go to this office to

declare the number of plants they have than to go to the CRT office in

Guadalajara, ,


74

- Control of the price of agave,

- An end to intermediaries,

- Centralization (but at a local level) of the purchase of agave,

- Equality between farmers, without preference, and

- Local, technical and organizational support for farmers.

The problem is that when government purposely delegated control to the CRT not to

have this responsibility anymore. Such a solution would mean going back to a

governmental control, while it seems that when tequila NOM was control by the

government, “there was not real control” (see Chapter 2, 3.3).

4.3. Evaluation of the potential of each region

Many farmers are asking for more intervention by the government. They wish to have a

fixed price or to receive direct subsidies at times of low pricing. The first proposition is

impossible as the ley federal de la oferta y de la demanda (law of supply and demand)

forbids it. The solution of price compensation is what is being done with maize for

example. This does not take place for agave as it is not considered a prime necessity

crop (according to the government).

Prior to the new land planning reform of 199214, farmers received “easy credits and

protection” (Gonzalez, 2002, p12). Now that the political orientation of the government

changed at State and at Federal level, (see Chapter 1, 3.4) farmers have to realize that

the paternalistic State has gone and that they are now the actors (According to the

SEDER).

As a farmer cannot be forced into one kind of culture, the INIFAP, research centre of

SAGARPA is evaluating the productive potential of each region. In Jalisco, it has

already been defined where quality agave could be produced. The hardest part is yet to

come: to convince farmers to plant according to the most suitable production capacities

14 In 1992, the agrarian legislation was reformed to extend the limited property rights of rural land, which has been to peasants over a period of 75 years since the Mexican revolution in 1910. Under the new Agrarian Law, peasants retain full property rights over their plots of land and the right to decide the future use of common lands and resources. This reform was driven by the desire to create an active land market, promote efficient resource allocation and to encourage investment in agriculture (Appendini, 2002)


75

of a region. Besides, regional specificities could be valorised by expanding regional

differentiation possibilities.

On the 19th of November, the SPAT was created. This is an institution that gathers all

the actors of the tequila sector with the objective of talking about strategies and

improvement possibilities to the eminent problems of the sector, and taking measures to

coordinate the different actors.

The SPAT is the first systema producto in Jalisco and at Federal level. The objective of

the government is to create such an institution for every agricultural product. According

to a representative of the SPAT, the annual use of agave for tequila production is 1 270

million kilos. One of the objectives of the SPAT is to obtain a subsidy of 200 million

pesos from the SAGARPA during times of crisis. The idea would be to provide agave

farmers with the guarantee of selling their produce at a price of 2 pesos/kg: 1 peso paid

by the distillery, and 1 peso from this subsidy, paid directly to farmers via the invoice.

This way, it could support the price of 200 million kilos of agave. But often, if the price

paid to farmers is low, it is because it is not sold directly to distilleries but through

intermediaries.

5. Conclusion

Price fluctuation is a complex issue and is the result of:

- A lack of coordination between all the actors of the supply chain and

- A lack of information and education of farmers.

The only way to stop with price fluctuation is to implement proper crop planning, so - in

other words - to find a way to synchronise supply with demand. But as this is not

possible via law; actors have to start cooperating. The first step is to improve the

relationships between farmers and distilleries through providing better conditions in

contracts and by considering farmers as producers of raw material15 (so not buying from

15 The 14th of March 2007, SAGARPA organized a forum for rural and sustainable development objectives of the western region (States of Aguascalientes, Colima, Jalisco, Michoacán y Nayarit). It was interesting to see that the problems of the tequila sector such as intermediaries, lack of added value created by farmers, lack of organization and problems of coordination between farmers and institutions (sectoral or governmental) are in fact common to a lot of supply chains (according to the results of the forum).


76

intermediaries and by avoiding distilleries having their own plantations). In figure 3.4,

different solutions to avoid the vicious cycle of price fluctuation are summarized.

A situation where 80% of agave farmers are linked to a distillery and 20% remaining

libres could be an option, if agaveros libres and distilleries have a direct and long-term

relationship. However, it seems improbable that the relationships improve, at least in the

short term, considering how deep-rooted tensions between the 2 parties seem to be. A

remark of a farmer (the same as Chapter 2, 3.1) aptly illustrated the current context of

mistrust. According to him “what I find most unfair is that farmers also have to pay the

CRT”. As it did not seem logical to me, I asked explanation to Ramon Gonzalez during

the second meeting. But he said that it was not true, that agave farmers never had to pay

for the CRT. As he explained, “the coyotes say that they have to take a quota for the

CRT, but that will go directly to their pocket!”. This example shows how corruption is a

real issue in the tequila sector. In such a context, it is difficult to imagine that an

“efficient solution” takes place.

It is true that farmers are expecting a lot from the government, but as the governor

Emilio Gonzalez Marquez declared for Público (the 30th of March 2007), the

government can not transform a scheme were a few win and a lot lose to a win-win

situation. It does have a role to play, but it can not solve the problem by itself. Farmers

should then take their future in hand and start organising themselves. One way could be

by agreeing on a price and not to sell agave under this price. At the end, distilleries will

have to respect that price. But seeing how difficult it is to find a buyer, if a farmer

knows that his neighbour is selling at a certain price, he will sell cheaper.

A solution could be to use agave for other purposes. Since a few years, other uses of

agave have been developed. The most important is the market of “agave honey”, which

suits diabetics as it is rich in fructose. The market for this product is still not very

developed but the perspectives for export are important in the U.S. and in Europe (even

more if it is from organic farming). SAGARPA is supporting projects of farmers groups

that want to start manufacturing agave honey16, making available 60 million pesos in

16 For example, 3 projects of producer groups are being supported : - In the municipality of Cucillo, the enterprise Necutli : to produce agave honey and Inuline to export to Germany and to the U.S. - In the municipality of Tepatlipan, enterprise Capilla de Guadalupe to produce agave honey - In the municipality of Tepatlipan, enterprise: Capilla de mil pilas for agave Money and inuline Already one distillery was created by 89 producers in Juanacatlan, called destilería Juanacatlan. There are also subsidies for other distilleries in Tototlan, Ayotlan and in Arenal.


77

total (Buenrostro, 2006). The State of Jalisco is even promoting this product and

specialists are exploring the commercial possibilities. But as it was presented before,

farmers lack motivation and organizing capacity. In addition, such projects require

money that small farmers do not have right now. What is happening is typical: big

distilleries or the biggest farmers are already developing this alternative while small

farmers are not informed of its potential as they do not know that credits are made

available. The answer of one farmer during a FG illustrated this:

Interviewer: ¿Que podrian hacer con sus magueyes que no sea tequila? (Now that you can not sell your agave for making tequila, what could you do with it?)

Farmer: No, pues nosotros nomás oímos rumores que hacen miel para medicamentos para ciertas cosas y eso es lo que están queriendo hacer algunas compañías.(Only we heard rumours that they do honey for medicine for some things and that is what some companies would like to do)

Interviewer:¿Y piensan que la miel de agave podría tener futuro? (And do you think that agave honey could have a future?)

Farmer: Podría, pero nomás dicen, nosotros estamos esperando a ver que sale, a todo le vemos futuro pero no nos ha llegado. (It could, but that’s just what they say. We are waiting to see what will happen, we see a future to everything but it does not reach us).

For farmers, the solution of agave honey is just a “rumour” that “they” (the tequila

companies) want to develop. Maybe it has a future, but not to small agave farmers.

Chapter 3 has analysed the consequences of price fluctuation by focusing on how it has

shaped the current relationships (conflicts) in the supply chain (at a vertical level) and

the solutions to price fluctuation. But price fluctuation and the recent change of scale of

the tequila industry also have consequences at a “horizontal level”. The expansion of

agave plantations in a “periphery” can modify other sectors of activities (when farmers

switch from a traditional crop to agave) or local traditions. Chapter 4 is dedicated to

present the local responses in a periphery by analysing the case of the Amula region.

The point is to understand the changes that are happening and how local people in a

“dominated” periphery are adapting. As the Amula region has a tradition of producing a

sort of “mezcal”, how do they manage (or not) to upkeep this?


78

Price fluctuation

Distilleries can not be linked

100%

Evaluation of agave necessary

in 7 years

Evaluation of the tequila market in

7 years

Some farmers want to stay independent

Distilleries Producers

Contract farmers- destillery

SOLUTION Global crop

Planning

BUT

Developing other uses for agave

Start making their own tequila

Finishing with intermediaries

Improve the conditions In contracts

Fewer farmers want to stay independent

More distilleries will be linked at least 80%

Improve the relationships between distilleries and farmers

They will not have to buy to agaveros libres to maintain the social order

Farmers will not be reluctant to having a

contract

Where the government could intervene Solution to facilitate the implementation of an efficient crop planning

SOLUTIONS

Figure 3.4: Solutions that could be developed to avoid price fluctuation.

Chapter 4.The case of the Amula region

79

Chapter 4.

Regional dynamics in the tequila sector: the case of the Amula region

1. Introduction

The objective of this chapter is in a first place, to analyze the consequences of the recent

international development of tequila in a peripheral area and in a second place, to

examine the local responses of the current crisis. If we consider the theory centre-

periphery, the hypothesis is the following: The further one is from the “centre”, the

fewest benefits one gets (Hypergeo, 2004), which would mean that the Amula region

(also called Zona Sur) is “victim” of the power and capital concentration to the “central

region”. To understand how local people really adapt to it, the following points are

analysed:

1. What are the consequences of the expansion of blue agave plantations in a

region that does not have a tequilera tradition?

2. To which extend have local people managed to preserve their local tradition in

a context dominated by few big tequila companies? Are we going towards a

homogenization of all agave distilled products? From many regional

“mezcales” to one unique tequila?

3. What local solutions have been developed by local farmers and traditional

distillers to face the crisis and what are their futures?

The study area chosen is the Amula region, which includes 5 municipalities of southern

Jalisco: Autlán de Navarro, El Grullo, El Limon, Tonaya and Tuxcacuesco (figure 4.1).


80

Figure 4.1: Location of the Amula region.

Source: Gerritsen et al, 2005

The interesting points about the Amula region that distinguish it from other areas are the

following:

i) For many farmers, blue agave cultivation is new. They started it when the price was

high during the shortage in mid-1999, hoping that they would benefit from it more than

from maize, the traditional crop.

ii) Contrary to other areas (like for example the municipalities of Guanajuato or

Nayarit that also have the DOT), there is also a growing distillation activity and the

number of distilleries is increasing (see figure 4.2), particularly since the agave price

started to drop in 2003 (see Appendix 13, figure 3 for the total production of distilled

product of agave in the Amula region).

iii) In some municipalities, they have a tradition of cultivating green agave that they use

to produce a distilled beverage consumed in the region, before called “mezcal” but now

called licor de agave (agave liquor), destilado de agave (agave distillate), aguardiente

(brandy) or licor.


81

Evolution of the number of destillery in the Amula region

0

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Year

Num

ber

of d

istil

lery

...

Figure 4.2: Evolution of the number of distilleries in the Amula region

Source: Leclert, Gónzalez and Gerritsen, 2007

Thus, the Amula region provides a good opportunity to examine how people “adapt”

and how they manage to conserve their local distillation tradition in a context where

tequila (and with it few distilleries) dominates the market.

To respond to the objectives, one FG was conducted with 7 agaveros libres of the ejidos

of El Limon and La Cienega (municipality of El Limon) and the same questions than

during the other FGs were asked. But as every farmer interviewed started agave

cultivation less than 10 years ago, it was interesting to focus on1 their opinion on the

price crisis, what solutions they see to it, and whether they are willing to plant agave

again.

The information from eight individual interviews (see figure 4.3) conducted with local

distillers were also used.

1 The objective of this research was not to understand the motivation of farmers to start cultivating blue agave; during the interviews and the FG, this point was thus not intensively discussed.

?

?


82

Name of the owner

Distillery Place creation Type of product agave used

Agave farmer

Arnulfo* ---------- 2006 Licor de agave not registered Blue yes

Benjamin Emvitsa Tonaya 1932 Licor Licor de agave Tequila

Blue sometimes

Carlos Tonaya 1973 Licor de agave Both yes

Fredi Destiladora de agave

El Mentirero

2005 Licor de agave Blue yes

Jesus * Hacienda Mezquitan Mezquitan 2005 Licor de agave Blue yes

Javier El Grullo 1967 Licor de agave Both non

Jose Maria* El Limon 1992 Licor de agave Blue sometimes

Jose Grupo Tonayan

Tonaya 1968 Licor de agave Both ?

*: More intensive research contact

Figure 4.3: Characteristics of the distilleries visited.

Out of the eight distilleries interviewed, 5 were created before 1999. For them, the focus

was to understand the changes in their production strategies and to link it with agave

supply cycles. The idea is at the end to understand the evolution of the number of

distilleries and analyse the different steps represented in figure 4.2.

2. The specific context of the Amula region

2.1. General characteristics of the Amula region

The Amula region is characterized by poverty, high illiteracy rates, minimal education,

poor sewage systems and intra-family violence. Maize cultivation continues to be

important even when less and less farmers are planting it: between 1994 and 2002,

maize cultivation dropped with around 50% in the Zona Sur (Martinez et al, 2003).

Other important crops are sugar cane, chilli peppers, green and blue agave (for the

production of licor de agave and tequila) and tomatoes mainly grown for export.

Breeding cattle is also an important activity. It is also interesting to note that many

farmers’ strategies are based on diversification (different farm activities and off-farm

income).


83

0

200

400

600

800

1000

1200

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Su

pe

rfic

ie s

em

bra

da

(h

a)

Autlán

El Grullo

El Limón

Tonaya

Tuxcacuesco

Total

2.2. Expansion to other areas in times of scarcity: the case of the Amula region

Because of fungal infection in agave fields in the Zona Centro in the 1990s, tequila

companies (and particularly Agave Azul y Servicio) expanded its area of interests in

others regions and came to the region with to start blue agave plantations (Martinez,

2003, p5-8). What they mainly did is rent the land at an annual price equivalent to the

value of one tonne of maize (price from January of each year) per hectare. It appeared

beneficial to farmers as it provided a secure annual income which was greater than what

they could earn by growing maize and farmers were still eligible for PROCAMPO

subsidies (Bowen and Valenzuela, 2006, p8; Zamora and Flores, 2003, p79).

Before the entry of big distilleries in the region, agave farmers did not have any

previous experience with blue agave and thus were not aware of the risks associated

with blue agave cultivation (Bowen, 2004, p43). By seeing how many kilos of agave the

companies that rented their land (or rented the land of someone they knew) were

making and the price it was worth at that moment (2000: 14 pesos), it appeared very

beneficial and a lot of farmers switched to agave (figure 4.4 and Appendix 13, figure 4).

Figure 4.4: Cumulated surface of blue agave planted per municipality in the Zona Sur.

Source: Gerritsen et al, 2007

As figure 4.4 shows, There are two main periods where agave started to be planted:

from 1995 mainly due to the expansion of distilleries’ plantations in the region and then

from 2000 by agaveros libres. From 2002 onwards, less and less agave was planted

because the price decreased.


84

2.3. Between the “mezcalera” tradition and the crisis of blue agave

Figure 4.52: Evolution of the number of distillery per municipality


Figure 4.2 and 4.5 shows that distillation was traditional in the region. In Tonaya, there

was already a distillery before 1930 and in Tuxcacuesco, the first one was created in

1932. This is confirmed by the literature: In the municipality of Tonaya and

Tuxcacuesco to a lesser extend, there is an old tradition of cultivating green agave

(Agave angustifolia Haw) for the production of “mezcal”, now called licor de agave or

destilado de agave (Martinez, 2003, p8). But green agave is being replaced by blue

agave in the distillation process (Duran, 2006; Hostettler, 2007, p12) since 2000 as it

appeared to be a more profitable crop (blue agave price reaching 14 pesos in 2000 while

green agave price stayed almost constant at 3 pesos). From 2002, new distilleries

appeared, linked with the drop in blue agave price. Considering the blue agave

abundance, they chose to only distil blue agave instead of continuing the mezcalera

tradition. In a total of 17 distilleries, 6 were created after 2000 from which 5 use blue

agave3 (see figure 4.6).

2 It could have been interesting to ask since when each distillery has started to distil blue agave also, to see to which extent it can be linked with the increase in blue agave plantations in the region and with the price of blue agave. 3 The other one is a distillery from Tuxcacuesco that only uses green agave.

Evolution of the number of destillery per municipality

0

1

2

3

4

5

6

7

8

1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Year

Nu

mb

er

of

dis

tille

ry

Autlan El Grullo Tuxcacuesco El Limon Tonaya


85

Agave used Municipality Distilleries

Created

after 2000 Only blue agave Only green agave

Blue and green agave

Autlán 3 3 3 - -

El Grullo 1 0 - - 1

Tuxcacuesco 3 1 - 1 2

Tonaya 7 2 2 (1 registered to produce tequila)

1 4

El Limon 3 2 2 1 -

Figure 4.6: Characteristics of the distilleries per municipality.


2.4. From mezcal to licor de agave: impact of the DOM

Before the Mexican law passed in 1994 to protect the name mezcal with a DO, the

distilled product of agave from Tonaya or Tuxcacuesco was called “Mezcal”, as in the

rest of Mexico to name the distilled agave juice4. Because the area with DOM was

delimitated to the States of Durango, Guerrero, Oaxaca, San Luis Potosi and Zacatecas

(see Appendix 3), the name “mezcal” could not be used anymore in the region. But

people still use the word “mezcal” when they talk about their product. In Tonaya and

Tuxcacuesco, it is still possible to see signs of this recent and “unaccepted” change

(such as seats in a distillery with written on it “Mezcal de Tonaya”, or bottles sold with

the old label “mezcal ….” instead of licor de agave or destilado de agave).

As for tequila, there is a “Norma Oficial Mexicana” (NOM -070-SCFI-1994) which

regulates the quality of mezcal. SECOFI was responsible for checking that mezcal

producers complied with the norm, but since 1997 “the Consejo Regulador de la

qualidad del mezcal” (constituted by the five States that have the DOM) is in charge of

it (Blomberg, 2000, p229). In 1995, the Cámara Nacional de la Industria del Mezcal

(the National chamber of mezcal industry) was established by the distillers of the 5

States that have the DOM which can be compared with the CNIT.

4 At the national level, there is some local variations on “mezcales” (in the sense of distilled product of agave) depending on the areas: Chichihualco, (from Chichihualco de los Bravos in Guerrero state); Excommun (Excommunication, from Michoacan); Lechugilla (made from wild agave in Sonora, Puebla and Chihuahua states); Petaquillas (made from mezcal, orange juice and cinnamon in Guerrero); Tuxca (from Tuxcacuesco, in Jalisco), Raicilla (From Mascota, in Jalisco) (Chadwick 2004). However, these are not officially recognized as "mezcal” under the DOM.


86

While tequila can only be made from one variety of agave (Agave tequilana Weber),

mezcal can be made from several species (among them, 24 species grow in Oaxaca)

which have to be cultivated within the DOM delimitated area:

- Agave Angustiofolia Haw, most used (“espadín” maguey),

- Agave Esperrima Jacobi, Amarilidáceas (“cenizo” maguey),

- Agave Weberi Cela, Amarilidáceas (“mezcal” maguey),

- Agave Potatorum Zucc, Amarilidáceas (“tobalá” maguey),

- Agave Salmiana Otto (“mezcalero” maguey),

- Other agave species provided that they are not used as the primary material in

other governmental DO (thus, blue agave can not be used for making mezcal).

3. What are the local consequences of the international development of tequila? Local tradition vs. tequila domination

3.1. Mezcalera tradition difficult to maintain

The idea of this part is to understand how the evolution of the tequila sector has had an

impact on local distilleries that first had a tradition of distilling agave for the local

market. Every distillery owner interviewed agreed on one point: if they could call their

product mezcal or tequila, it would help to sell more. Therefore, I first tried to

understand why the area did not get the DOM, and secondly why they are not enjoying

the fact that they are included in the DOT area by calling their product tequila.

Why the municipalities of Tonaya and Tuxcacuesco have not got the DOM?

This information was really hard to obtain. I asked it several times (to the CRT,

academics), but the only answer I got (if I got one) was very general, like “lack of

organization” or the usual “for political reasons”. Only one person gave me a detailed

explanation: According to a distillery in Tonaya, at the moment the DOM was in

process, the governor of Jalisco Alberto Cárdenas Jiménez wanted to help Tonaya to

obtain it. The problem was that licor producers were from another political party (PRI).

Thus, they neglected the support that the governor wanted to provide and consequently

did not obtain the DOM. No one could really confirm this statement, but at least it

proves how political divergences (or separatism) have an impact at the local level.


87

How has the drop in blue agave price and the expansion of blue agave plantations

in the region affected the local traditional distilleries?

As Benjamin explained, local people mainly buy the “cheapest” product5. Therefore,

traditional distilleries (that were on the market before the wave of new distilleries in

2003) have always searched for the best way to produce as cheap as possible. As blue

agave price is cyclically low, a solution to respond to regional “popular” market

expectations is to adapt the quantity of blue agave and green agave in their product

depending on raw material prices. At the moment, it is only blue agave. The distillery in

El Grullo does the same: Javier said that in the 90s, when blue agave was cheaper than

green agave but still not planted in the region, his dad would go to Los Altos to buy

agave at 50 cents per kilo (instead of paying 3 pesos per kilo for green agave). “The lack

of regulation6 for licor de agave or aguardiente production makes it possible to adapt

the quantity of blue agave and green agave you put in the product”. This flexibility

contrasts with the “hard to comply” requirements for making tequila, which explains

why new distilleries created by farmers can not call their product tequila.

Another solution is to plant blue agave when the price is low so that 7 years latter, as

there are big chances that a scarcity happens, they will use their own agave instead of

buying it at a very high price to agaveros libres. But that is what is being done by the

big tequila distilleries and it is what fuels the agave price cycle.

3.2. Making your “own tequila”, a way not to lose 7 years of investment

Because of blue agave abundance in the region, a lot of small entrepreneurs that had the

financial and organizational capacity (agave farmers often) could benefit from the

situation by starting a distillery. Of the ones I interviewed, it was the case for 5 out of 8

distilleries. Thanks to direct selling, good production methods and a good organization,

5. If we take the example of the distillery EMVITSA, they have 3 types of product:

- “Tonayita” and “Costeño”, which is called licor, “popular product” sold mainly on the national market and which costs around 20 pesos per litre.

- “Huapanguero”, which is called licor de agave, and - “Huapano”, which is a tequila 100% agave that they are starting (see Chapter 4.4)

But the most known and sold at the regional market is “Tonayita” and “Costeño” as the people of the region are quite poor. It explains why nowadays the quality of some product has decreased and licor de agave has a bad reputation for tequila connoisseurs. 6 That is his opinion. The reality is that there is a norm of licor de agave (see Chapter 4, 4.5.)


88

some succeeded and achieved a stable business. The following examples of new

distilleries show:

- How the price situation motivated the founding of new distilleries,

- Their strategy to make space for their product in the market,

- How the future for these new enterprises could be.

(i) Mezquitan has the peculiarity to have an active local farmer association called:

Asociacion Agricola de agaveros de Mezquitan. Through it, the distillery “destiladora

hacienda Mezquitan” was founded gathering 7 farmers (5 in Mezquitan and 2 in

Autlán). As Jesus (initiator of the distillery) explained, they tried to get money for their

project from SAGARPA and from other institutions (Secretaría de Haciendas y

Creditos Públicos) but it did not work out.

(ii)The distillery of El Mentirero is a good example of a new distillery. It is a family

founded enterprise started in 2005 to absorb 10 ha of agave from 2 brothers that could

not find other buyers. They are producing a unique product, called “Casta Negra”. It is a

product made of 100% agave. The interesting point is that when I asked Fredi (one of

the brothers) which kind of product they were making, he answered: tequila. But then

when I checked the bottles, I noticed that it was in fact written licor de agave. So I

asked him again and he answered: “No no, it is tequila. The same production method,

the same raw material… but we can not call it so because we are not registered by the

CRT”.

As most of the oldest distilleries (and especially distilleries of Tonaya) are known for

their cheap product, new distilleries have to find a market segment that is not occupied

if they want to “survive”. Since blue agave abundance makes it possible to produce with

a high quantity of blue agave sugar, the 2 “new” distilleries visited have chosen to enter

the regional market with a quality product (100% agave sugar). According to them, it is

a good business. Even if their product is called licor de agave, they are enjoying the

growing popularity of tequila: both are selling mainly in their own shop, which gives

them the possibility to explain to their clients that their product is “like a tequila”, but

by not using that name, they can sell it cheaper.


89

3.3. The development of informal market: a survival possibility?

No matter the strategy chosen (cheap product or “quality” product), many distilleries

have common characteristics:

- The distilled product is kind of “exchange money” between friends,

- An important “face to face” market, which helps diffusing the information that

the product is in fact equal to tequila but has the advantage to be cheaper, and

- A part of what they produce is sold without “NOM stamp” (so without paying

taxes as they pay the taxes via the purchase of a certain number of “NOM

stamps” that they are supposed to put on each bottle) , when it is for relatives

and friends.

More than once when I wanted to buy a bottle, I was asked: “Are you going to drink it

here or will you travel with it?” Of course, my answer would determine whether I

would get the “NOM” sticker that costs around 10 pesos to the distiller.

Taxes to pay on the product are high7. Approximately 65% of the price is taxes: 50% of

the price is for IEPS (Impuesto Especial sobre Producción y Servicios: special tax on

production and services) and 15% for the IVA (Impuesto Sobre el Valor Agregado: tax

on added value). Selling via the informal market is therefore a good way for distillers to

provide the local market with even cheaper product and to earn a bit more. What often

happens also is selling the bottle without any label at all (so without declaring the

production). “I sell more than 50% of my production without label”, I was told.

According to Blomberg (2000, p51), the quantity of adulterated distilled licor sold in

the informal market every year is estimated at 132 million litres. And as a producer

said: “the more taxes they will put on our product, the more we will not have other

choice that selling it “illegally””.

But illegal selling also takes place in the “central region”. During the FGs, the idea to

create a distillery as a way to escape from the crisis was raised out. Often, farmers did

not look really convinced. Once, I was told: “there is no space for local products. The

big distilleries have the monopoly. There is no local market”. But at the end of this FG,

when the recorder was switched off, 2 members of the group called me:

7 But these high taxes have also negative consequences for the tequila distilleries in the “central region”. According to A. Ayala (Público, the 7th of April 2007), Eduardo Orendain Giovannini has even proposed a legislative debate to decrease the IEPS to 40%.


90

Farmer: Oye, Lucie, queríamos ofrecerte una botella de nuestra tequila! La mejor! (Hey, Lucie, we would like to offer you a bottle of our tequila. The best one!)

As there was no label, no mentioning of “tequila” on the bottle, I asked:

Interviewer: Tiene usted su propia destilería ? (So you have your own distillery?)

Farmer: No, nos los hace…. Pero solamente es para amigos y familia. (No, someone does it for us. But it is only for friends and family)

Interviewer: Cuantos litros ? (How many litres do you make?)

Farmer: 17 000 litros cada año, mas o menos. (17,000 litres per year, more or less).

Definitely, this man has a big family and a lot of friends.

It is important to make the difference between the illegal market and the local market.

What is illegal and what the CRT is fighting against is the use on the word “tequila” on

bottles that have not been controlled by the CRT8. It is a real problem in Mexico. The 1st

of December 2004, the Procuraduria Federal del Consumidor (Federal Institution for

Consumers Protection; PROFECO) even published a “warning to the consumer”

concerning the tequila that were sold in certain shops in Tequila. In places like Amatitán

or Tequila, you can find hundreds of small tiendas (shops) that sell a big variety of

tequila, located in the back of the shop, and also barrels of licor de agave without labels

standing on the counter, often their own production. The misuse of the name tequila is a

point that can be controlled. What can not be checked is what the seller says to the

people that enter his shop concerning his product on the counter. Often, it is like:

“Look, that is home made tequila, it is cheap” and then he makes you taste it. As most

tourists can not really make the difference between good tequila and bad tequila, and as

they are not aware that the name tequila can be misused, they go for the cheap

“homemade” product. If we take the case of the two farmers that gave me a bottle of

their own “tequila”, it would not be a problem if they made it themselves for their own

consumption only, without calling it tequila. The issue is that their “tequila” is made

8 The CRT has people working in every distillery registered who check that the NOM is respected and that the label with the name tequila is well used. For what concerns the distribution part, the CRT and PROFECO are regularly controlling shops to check the product sold.


91

illegally by a tequila distillery, and it is very improbable than these 17,000 litres per

year are only for their family.

4. The future of local agave farmers and local distilleries

4.1. A regulation framework that reduces the opportunities for small-scale enterprises

A socio-political configuration that threatens small-scale distilleries9

The in depth interview I did with Jose Maria gave me a good insight into the local

impact of the founding of the CRT. His motivation and the evolution of his distillery

followed an original path. It first started as a common project with his brother. In 1992,

seeing the blue agave abundance in the Zona Centro and in Los Altos, it was the good

moment to start. Starting up a distillery that only used blue agave was original for the

region (as such distilleries mainly appeared in 1999). As there was no blue agave, he

bought it in Los Altos at 50 pesos per kilo. His product was called “tequila”10. In 1994,

the CRT was created and consequently more precise requirements on production

methods were implemented. He explained that “before, there was no real control. Only

PROFECO was in charge of the control but it controlled very small things”. After that

the CRT was created, he could not comply with the new requirements and had to

change the name of his product.

The fact that he did not have any “problems” to produce tequila helps answering an

important question, which is “How was it before the creation of the CRT?” (see Chapter

2, 3.3). Gabriel Torres explained (during an interview) that the main changes that

occurred with the implementation of the CRT are the change from “cottage industry”

production methods to more high-tech methods. This modernisation is due to the

requirements of the NOM that “force” to modernize. But for very small distilleries like

those of the Amula region, this modernization of distillation equipment is too expensive

in relation to the quantity that they produce.

According to Jose Maria, “with the CRT, there are a lot of limitations for small

distilleries”: 9 In this part, I am mainly explaining the point of view and the experience of one person, which means that the conclusions I am drawing here can not be taken as general truth. 10 In Appendix 11, the distillery of Jose Maria can still be seen while actually he stopped before 2000.


92

i) Analysis is required, which costs a lot (analysis of the composition of methanol

and superior alcohol, which cost 15,000 pesos). In case one does not have the

material, it is possible to go to the CNIT in Guadalajara or to a bigger distillery

(Cuervo for example) which has it (and who ask them to pay for it).

ii) They have to pay the control

A small distillery can not face these costs. These costs are free if one is member of the

CRT. But then, fees per litre of tequila have to be paid (0.34 pesos per litre of tequila

produced at 55º Alc. Vol), and there is a minimum cost of 8,000 pesos per month (see

figure 2 Appendix 5). For small distilleries, even if they do not produce anything during

that month, they have to pay this amount. In both case, the fees are difficult to face.

According to small distilleries, it is unfair:

Si te fijas, la constitución dice que somos libres de plantar lo que queremos. No nos importa que nos controlan pero no debemos pagarlo. Porque la realidad es que por no poder pagarlo, es como si nos obligamos a pajar la producción, ¡lo que es normalemente contra la constitucion! Todo eso es para beneficiar a las grandes destilerías.

(If you are careful, the constitution says that we are free to plant what we want. We don’t mind that we are controlled but we can not pay it. In that sense, we are kind of forced to stop producing, which contradicts the constitution!” Everything is to benefit to the biggest distilleries.)

The fact that the requirements are difficult to comply with for small distilleries was

confirmed by Benjamin. Since this year, they started a product that they want to call

“tequila”. He explained that because the NOM for tequila is very strict regarding

material and production process11, they could not use the same equipment than what is

used for the production of their “cheaper” product. Therefore, since one year, they have

a commercial alliance with “Autentica Tequila” of the Orendain family who

“maquilan” (makes) for them. I confronted Ramon Gonzalez with this point. According

to him, if they had good production methods, it would not be difficult to comply with.

“The priority is not to make it easier for everyone to start producing their own distillate

but to make sure that what arrives to consumers respects certain quality standards”.

11 For example, distillery has to be “closed” (difficult for small distilleries: most of the time, their equipment are outside or in a semi-closed shed) and the equipment has to be in stainless steel (which is rarely the case for the distilleries I visited in the Amula region)


93

The NOM for licor de agave: the consequences

During interviews with producers of destilado de agave or licor de agave, I heard

different versions about the existence (or not) of a norm. One told me that there is a

norm for destilado de agave and that was why everyone had changed their product

name to licor de agave (So that they do not have to comply with the norm). From that

moment on, I started asking about this norm each time. When Fredi (distillery of the

Mentirero, 4.3) told me that there was no “paper work” and no control to produce

destilado de agave, I asked him about the norm and he answered me the following:

“Existe una norma o no al final? Es que, hace algunos meses, alguien de Tonaya pasó por aquí para invitarnos a una reunión para esa norma. Pero no nos fuimos. Y desde ese tiempo, no hemos oído nada de la dicha norma”

(Actually, is there a norm? The thing is that a few months ago, someone from Tonaya came here to invite us to a meeting about this norm. But we did not go. And since that time, we have not heard anything about it).

Ramon Gonzalez confirmed that there is a norm for destilado de agave: the NOM-EM-

012-SCFI-2006, bebidas alcohólicas-destilados de agave-información commercial,

etiquetado y métodos de prueba. It was published the 29th of November 2006 as a

response to an urgent need to forbid products that could be dangerous for health. But

according to him, it concerns both destilado de agave and licor de agave (as it is

indicated destilados de agave). But on the norm itself, there is no mention on licor de

agave, which can explain why distillers changed to that name.

Ramon Gonzalez added that 95% of destilado de agave does not comply with the norm.

Since it was published, 85 brands were forbidden. Indeed, it specifies that destilado de

agave should be made of 100% agave sugar, requirements that nobody complies with.

There is a non-official version of the reasons why a norm for “destilado de agave” was

implemented. According to a distillery owner, the group Corona in Tonaya is stealing

quite an important part of the market from the tequileros. In vengeance, they insisted on

making a norm to avoid competition and to conserve the monopoly as all producers are

mainly small and producing with small scale artesanal equipment (see Appendix 14)

and therefore unable to comply with this norm.


94

4.2. From “mezcal” to a nameless product: loss of tradition and prestige

During the interviews, I could visit some distilleries and notice that licor de agave

production (with some exceptions) is still for the most part done in tiny, family-run

operations, managed along with other business or agriculture. It contrasts with the

modern methods that I saw in tequila distilleries in the Zona Centro. Only 40 years ago,

the tequila industry was also more a cottage type of industry. Its recent evolution and

particularly the growing volume produced, due to increase in export and up-scaling,

transformed it in a radical way. In that sense, it is normal that the CRT and the

requirements of the NOM follow the modernisation of the sector.

As the centre-periphery theory suggests it, each periphery follows a unique path as it

has unique social and human and economic factors (Gren, 2003, p2). While some can

gradually lose an established tradition as a result of the domination of the “central

region”, others take advantages of this distance. The case of Raicilla is a good example

of how a periphery can adapt. By understanding the circumstances that help the

conservation of this local drink, the limits of the Zona Sur are made clearer.

During a field trip, I could talk with some Raicilla producers and with some researchers

(see Appendix 8). It is a very local drink from the Sierra Madre Occidental (produced

around Mascota) which uses the Sylvester agave. Generally, every farmer has his own

small distillery (called tabernas). The advantages that this area has are:

- It is relatively close to Puerto Vallarta, one of the most touristic place of Jalisco,

from where tourist trips are organised to visit small tabernas,

- The area (also included in the DOT) is very mountainous and is therefore not

“exploitable” for tequila companies, so they do not start getting involved in the

area, which reduces competition,

- Local people are very proud of their regional drink and consider that “it is better

than tequila”.

This last point is very important. Because people are proud of their tradition, they take

initiatives to conserve it: since last year, they implemented a Consejo regulador and are

now working together with a research centre to implement some norms that each of

them will have to respect, with the idea to create a collective trade mark.


95

Evolution of the number of destillery in the Amula region

0

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Year

Num

ber

of d

istil

lery

...

In the Zona Sur, it is the contrary. The people do not have confidence and dislike the

traditional drink that some distilleries of Tonaya (the oldest distilleries) are producing

since decades. Some remarks from other distillery owners from the region like:

“They have very bad methods like adding urea to start the fermentation…”

“They are not clear with their production process: some of them also had very

important fiscal problems”.

“My product is made with a traditional process; I do not add anything, not like

those in Tonaya. There, they are adding Mezcalina (agave extract). Their product

is alcohol + Mezcalina. No wonder why you get a hangover!”

Distillers of the Amula region could have valued the fact that the region has a long time

tradition in this activity. But what has happened is the contrary: the region is gradually

losing its tradition. According to the findings of this chapter, it is possible to interpret

the evolution of the number of distilleries in the region as represented in figure 4.7.

Figure 4.7: Evolution of the number of distilleries in the Amula region: interpretation


Boom tequilero Creation of distilleries that distil blue agave

Predominance of tradition mescalera

Boom mescalero

predominance of tradition mescalera


96

4.3. Change of land use again: return to previous situation?

The current abundance and the price decrease were totally unexpected. For farmers of

the Zona Centro and Los Altos, the situation is also depressing but as they say: “it has

always been like that” and they still grow agave because they live hoping that a better

time comes.

An anecdote that illustrates the despair of farmers happened to Peter Gerritsen and me:

We had made an appointment with farmers at a certain time via a contact person of a

village (Rodolfo Gónzalez) in the ejido of La Cienega. But only one farmer came.

According to him, the reason why farmers did not come was because “they don’t want

to hear anything about agave anymore”. So we visited another producer and convinced

him to gather some of his friends for a group discussion. Finally, a few days later, we

went back and talked with a group of agaveros libres. Seeing their previous reaction,

one could think that they are all regretting to have started agave. But at that question,

they surprisingly answered that no, as “anyway, nothing gives anything nowadays”.

With agave, they at least tried, hoped, but it did not work out.

The interviewer : ¿Y alguien de ustedes se arrepiente de haber sembrado agave? (Does someone regret to have planted agave?)

A farmer: No, no. Porque ningún cultivo lleva seguro nada […]. Además creíamos que iba a estar bien. Pues los de aquí de la región ya estamos impuestos a perder, todos sabemos que lo que cultivemos es una perdida. /Solamente esperabamos con el agave. (No, no. Because no crop is sure nowadays […]. However, with agave, we all thought it would go fine for once. We, here, are actually all constrained to lose; we all know that everything is a loss. Only we hoped for once that it would be different).

Even if the regional office of SAGARPA stated that there are other possibilities for

agave (like the creation of agave honey enterprises) it will not absorb all agave available

on the market. In addition, local distilleries are not able to buy more plants since they

are very small and have problems selling their product (According to farmers).

Agaveros libres are thus struggled between (i) harvesting and destroying their agave to

start planting something else and forget this bad experience, and (ii) waiting a bit more

to see if a “miracle buyer” shows up. What they are sure is that they will not plant agave

independently anymore, as the following part of the FG transcription shows.


97

Interviewer: ¿Y entonces que van a hacer con sus plantaciones?

A farmer: ¿Pues que podemos hacer?,

I: ¿Pues va a volver a otro producto ?

P: Otro cultivo sí, otra cosa que veamos (1) mejor, a ver como sale también.

I: ¿Y pues que van a plantar después de agave, si no van a plantar otra vez agave?

P: Bueno, en mi caso, yo pienso plantar limones.

I:¿Y usted?

Other farmer: También.

I: ¿Limones? ¿no maíz?

P : ¡No! ¡maíz no (2)!

I: ¿Y agave no, nadie de ustedes va a plantar agave?

P: Está muy difícil, mucho arriesgue, yo ya no. / Yo si vuelvo a plantar el arriesgue es que las compañías tienen suficiente. / Y eso va a seguir siendo, ellos se van a plantar lo que necesitan y dejar nosotros aca que... Mientras encuentran tierras no van a dejar de plantar (3).

I: And so, what are you going to do with your plantations?

P: What can we do?

I: Will you plant something else?

P: Other culture, yes, something else that seems better to us (1), and then see how it goes.

I: So what will you plant, if you don’t plant agave ?

P: Me, I am thinking of planting lemon.

I: And you?

P: Also

I: Lemon, not maize?

P: No! Maize no (2)!

I: And agave? None of you wants to plant agave?

P: It would be very difficult and very risky. Not anymore. If I plant again, the risk is that the companies would have already enough agave. And that will go on. They are going to plant what they need, and forget us here… As long as they find land, they will continue planting (3).

Apart from the fact that they are really not willing to plant agave again, a few points are

interesting in this dialogue:

(1) The expression “veamos” shows clearly the strategy of these farmers: to choose

what they are going to plant next, they have to “guess” what it is going to be

worth. That is what happened 7 years earlier: they started with agave “Porque

creíamos que iba a estar bien” (because they thought it would go fine). That

reveals the urgent need for institutions to start informing more farmers about

Chapter 4. The case of the Amula region

98

possible interesting crops and risks (Chapter 3, 4.3). It seems that it is on project

according to the SEDER. “Veamos” can also be explained because farmers’

strategies in the Amula region, contrary to the other agave regions, are based on

diversification, .i.e. farmers have a lot of other farm (cattle breeding) and off-farm

(small shops) incomes.

(2) Farmers are really not willing to plant maize again because of its low market price.

The problem with maize is that since the NAFTA, Mexico is importing it quite

cheaply from the U.S. and therefore can not give a good price to national farmers.

Nevertheless, according to an agave farmer, a “methanol” company will open soon

and that will create a market for regional maize.

(3) Distilleries are more and more self sufficient and therefore do not need agaveros

libres anymore. This statement of a farmer would mean that there are more and

more farmers that start renting out their land1.

Indeed, farmers are really not reluctant to the idea of having a contract with a distillery.

While Bowen (2004, p101) noted a gradual shift in which more farmers are beginning

to grow agave themselves instead of leasing their land, it does not seem to be the case

anymore. The only way farmers will want to plant agave again is if they have a contract

stipulating a fixed price:

Interviewer: ¿Y por ejemplo, si una destilería le propone un contrato de compra, usted plantaría otra vez agave o no? (And for example, if a distillery proposes you a purchase contract, would you plant again?)

A farmer: De esa manera sí, más seguro ya. Si hay un contrato que fija un precio, y que te asegura que te lo comprarán, entonces sí. (If in the contract there is a fixed price, a security that they will buy it, then yes)

To that question, they reacted really differently than agave farmers of the Zona Centro,

for whom having a contract with a distillery it out of question as many of them have

already had a bad experience with non-respected contracts (see Chapter 3, 3.2). But it is

important to note that all the producers that participated in the FG were agaveros libres

that did not have any experience of contract with a distillery. Those who have had one

(as Arnulfo, see Chapter 3, 4.1) are also not willing to experience it again.

1 Dr Peter Gerritsen noticed new agave fields recently. There are big chances that they are fields planted by big tequila companies via reverse leasing arrangements.


99

5. Conclusion

As far as agaveros libres are concerned, at the question “how will they adapt to the

crisis”, the answer for most that do not have financing and organizing capacities to start

making their own product, is that they will not adapt, they will stop planting and start

with a new crop that seems more profitable.

Renting and al (2003, p1) wrote : “the productivist research and policy agendas that

dominated for most of the second half of the last century magnified an intensification of

agriculture and globalisation of food markets that promised to accelerate the eradication

of embedded food networks. […] Far from disappearing, those diverse and dynamic

food networks that had been cast has remnant or marginal in the shadow of

productivism have strengthened and proliferated”. It seems to be more complicated for

the distilleries of the Amula region.

One could think that the relative distance to the “decision centre” of the tequila industry

(Guadalajara) facilitates the development of alternative solutions (in the margin). On the

one hand, it is true: as a distillery owner said: “Porque somos un poquitos retirados, no

nos prejudicia tanto el CRT” (we are far enough from Guadalajara not to be too

pressured by the CRT). Besides, distillers have the alternative to make “licor de agave”,

product that is drunk in the region, but not so much in the “central region” as the market

is already saturated by “tequila” of various prices (A consumer in the “central region”

will therefore prefer buying a cheap tequila than a cheap “licor de agave”). On the other

hand, it seems that its quality is not recognized (or maybe they do not communicate or

exploit this quality enough), which restrains the possibilities to create new local

distilleries. One farmer remarked that: “the local distilleries can not make good tequila,

so they have problems selling it”; It resumes well the situation of traditional distilleries:

they are “trying” to make tequila.

Because of the non inclusion of the region in the DOM and the expansion of agave

fields in the region, local distilleries have put aside their tradition of distilling green

agave and started to modify their recipe to distil mainly blue agave. Local distillers are

struggled between all the DOM, the DOT and all the regulations and thus do not know

how to name their product. Not mezcal, neither tequila, as distilleries can not fulfil with


100

the requirements of the NOM. Till now, it was called licor (o destilado) de agave but

with the new norm on destilados de agave, those who can not comply with it will have

to change again to simply licor or aguardiente (which will not help improving the

reputation of local products). But seeing it from another angle, it will at least give an

opportunity for distilleries that have good production methods (and basic hygienic rules)

to differentiate their product from the others in terms of quality.

The problem is that as a response to more regulations and more control, small

distilleries start selling more at the “informal market2”, at least in the short term. As a

farmer explained: “The CRT and PROFECO are aiming at limiting and constraining

small scale production with their norms and their high taxes. If it was easier and cheaper

to comply with, more people would start a distillery “legally” while what is happening

now is the reverse: more and more people are selling their home made product without

label”. But if local distilleries were organized via for example an “associacion de

productores de destilado de agave”, they could have acted so the norm implemented for

their product would have been adapted to their real needs and real capacity.

However, at the long term, the reinforcement of regulations might have positive

consequences: distilleries that respect “basic” health rules and that have a long term

vision will survive; the “quality” of destilado de agave3 will increase, as well as its

reputation (That could be a first step in regional differentiation). But as agaveros libres

of the Amula region are not planting anymore, in 5 to 7 years time, local distilleries will

have to buy to other regions (Zona Centro and Los Altos). Besides, considering the

agave price crisis (everywhere), it is probable that the price of agave will increase.

Small distilleries that do not have a long term vision will then not be able to compete

with bigger distilleries (as they can not keep product in stock and will not be able to pay

the price asked for agave), farmers will try to gain more with another crop… while big

tequila companies will continue to expand their fields of agave in the area, next to the

new fields of lemon of agaveros libres. 2 Luna even argued (1991) that the amplitude of this informal market is what has enabled the coexistence of small, medium or big tequila companies. He added that illegal sales of tequila without label or mention reached more than twice the production which is officially declared in times of overproduction. It is true that the CRT and PROFECO are “fighting against” illegal sales but it still exists and is quite important: At national level, one third of the alcoholic drinks distributed illegally are coming from an uncontrolled parallel market (Massieu Trigo, 2000, p121) 3 The distinction has to be made between licor de agave and licor as for licor (often made with around 5% of agave sugar), there is no norm to follow so the quality of the products may not improve.


101

1990 1996 1999-2000 2002 2007

Region

Region

Region

Region

Centro

Centro

Centro

Centro

High Taxes

1994

AMULA REGION

AMULA REGION

AMULA REGION

AMULA REGION

Dis

tille

ries

P

rodu

cers

Mezcal making

Agave plague

Tequila companies get involved

Blue agave plantations

Agave scarcity Agave abundance

Traditional distilleries making licor de agave

Change of recipe

Creation of distillery

Start of other crop

Loss of tradition

Production of « fake » tequila

Green agave

Illegal market

Creation of the CRT Strengthening of the NOM and of the control

Official context

Reverse leasing contract

$ $

No buyer for agave

DOM not given to the region

Blue agave cheap

Agave plantation Independently

Maize

Region

Region

Region

Region

Centro

Centro

Centro

Centro

Conclusion scheme

Figure 4.8: The local consequences of agave price fluctuation in the Amula region

102

Chapter 5. Conclusion

103

Chapter 5: conclusion

1. Consequences of the geographical and power concentration

While the DOT delimitated area is large, the tequila sector is characterized by a geographical

concentration of distilleries and a concentration of power and capital in hands of few large

distilleries controlled by multinationals: Being the biggest in terms of purchase of agave, sales

and exports, they are also the most influential in institutions like the CRT and the CNIT.

Thus, their “voice” has been really important as far as regulatory decisions have been

concerned. Consequently, the evolution of the NOM (together with the delimitation of the

DOT area), shaped at their advantage, resulted in concentrating even more the benefits to

them (and excluding smaller distilleries and agave farmers from the benefits). This situation is

a vicious cycle: the more profits arrive to big tequila companies, the more “power” they will

have to control and to regulate the rules of the tequila sector.

Inequalities have always existed and are one of the reasons of the tensions between the

different actors. More than the DOT implementation in itself, the recent change of the sector’s

interests and priorities (more accurately: the interests of the biggest distilleries) has enhanced

these inequalities: less attention is given to the production part of the supply chain as

preoccupations are towards international questions, which has led to the current situation of

agave supply fluctuation. In addition, with the increasing inequalities goes an increase of

corruption which makes the powerful even more powerful.

The need to protect (what was) a traditional drink with a DO and the entry of foreign capital

in the sector (delocalizing and concentrating the profits to multinationals) can seem opposite,

but actually these two steps are interconnected and consequences of globalisation. The value

of the DOT can then be questioned as it seems that it has been more a tool to open the door of

the international market for a few big distilleries than to protect a “regional tradition”.

In such a globalised context, it is now really hard to talk about “traditional drink” (in general).

What is happening is a standardization of a food product while giving it an image of

“locality” with tools such as GIs. In the case of tequila, traditional tequila making process is at

risk and become more and more standardized. But as Ray argued (1998, p16), the most

important is not whether the tradition is kept identical but rather how much control a territory


104

(meaning local people) can exert over the identity and the resultant form / value-added of a

GI. As far as the DOT is concerned, that is the main problem: local actors are losing control

(some such as agave farmers never really had control) over the benefits of the DOT. Figure

5.1 responds to figure 1.3 in introduction, and puts in evidence that the impact of the DOT is

indirect and that the DOT has unequal benefits amongst the actors of the tequila supply chain.

Besides, it demonstrates that the unequal division of benefits is a vicious cycle that will go on

if no initiatives are taken.

Figure 5.1: Impact of the DOT and the uneven repartition of the benefits

Growing power of the main Tequila

companies

DOT and rules that regulates the sector (NOM)

Agreement with foreign investors

PERIODICAL benefit at production levels

Difficult concurrence for the smallest distilleries

Increasing international market

Benefit repartition

(1)

(2)

Globalisation


105

2. Where do the benefits of the DOT go?

The entry of tequila in the globalisation of food goods had some major consequences at

different scales (see figure 5.2).

2.1. The unequal beneficiaries in the supply chain

The inequalities in decision power have led to internal struggles and conflicts in the supply

chain which keep the different parties from working together and considering the tequila

supply chain as a whole. Everyone knows that a solution has to be found to break the vicious

cycle of price fluctuation. A crop planning should take place but is hard to implement: no

coordination is possible between the 2 concerned groups (agave farmers and distilleries) as

the power that one group has over the other is constantly reversing and the low price of agave

actually benefits distilleries. Besides, for the big distilleries, solving the problem of price

fluctuation is not a priority: it is just a “local” issue (that is benefiting them right now) while

they are directing their attention toward international consumers.

It even seems that there are few chances that a scarcity like the one that occurred in 2000

happens again: the biggest distilleries have their own plantations, so they will not be

submitted to price fluctuation that much. Agave farmers are conscious that they do not have

any influence on the future of the tequila supply chain.

2.2. The inequalities between “peripheral region” and “central region”

The large DOT delimitated area combined with the cycles of abundance and scarcity has led

to the expansion of agave plantations in areas that do not have a tradition in making tequila

which has resulted in making unprepared farmers in those peripheries more disinclined and

more dependant on the central region. That is what has happened in the Amula region: for

farmers who have leased their plots of land to tequila companies, it has excluded them from

the production chain. For others, it has given them hopes that agave would be a good crop and

so a lot have switched to agave without being aware of its risks. Besides, the Amula region

has the particularity to have a “mezcalera” tradition which has been put aside as distilling

blue agave seems more “profitable”. The thing is that local distillers can not start making

tequila and enjoy the international recognition that tequila achieved as the requirements

(influenced by big distilleries) are too difficult to comply with. But on the other hand, the


106

Regional Loss of tradition Illegal market Farmers left out

Countryside abandoned Increasing gap between city and villages

Delocalisation of capital Increase gap between North-South countries

International

Local

Change of scale of the tequila

industry

position of “periphery” gives them more space for alternatives at local level: a great pity is

that the alternatives chosen are often on the side of the informal market.

2.3. The benefits relocated to the Northern countries

The acquisition by foreign companies of previously national distilleries can be seen either as

part of the globalization process or as a loss of tradition and origin of the drink. As the DOT

has principally helped increasing international sales, its benefits go to distilleries that are

exporting, in other words to firms that belong (or that are linked) to multinationals. Thus,

decision–making and political influence is increasingly being transferred to the foreign

companies and the taste of international consumers is now leading the future of the sector. It

is one of the motivations that can explain the fail of the adoption of the Mexican law stating

the obligation of bottling the tequila production in the DOT region.

Figure 5.2: International development of the tequila industry and its consequences

But how can the tequila sector continue its path on the international scene if it does not have a

“stable basis” (in the sense of basis of the supply chain, ie the agave farmers). What will

happen to the Mexican countryside if every tequila distillery has its own plantations? The

villages will empty and the migration to the U.S. will get more and more important. The


107

general Porfidio Diaz (dictator between 1880 and 1910) was already aware of the limits of his

country, as his famous saying expresses:

Tan lejos de dios pero tan cerca de los Estados Unidos...

(So far away from God but so close to the United States…)

3. Recommendations

Tequila is not the only product that had to face several crises. Indeed, the current problems of

the tequila sector have some similarities with problems that some other DOs had to overcome

in the past. Such an abundance crisis also took place in the vineyard of Champagne. By

looking at how vine growers adapted, it can give an idea of how the tequila sector could

evolved.

After the Second World War, only 6000 hectares of vines were left in the Champagne region,

often infected by parasites or Phylloxera. 40% of the vineyard had disappeared (comparable

to the situation of agave plantations in 1990s). From that moment on, attention was given to

plant good quality vines. Sales increased a lot (up to 37 million bottles) as champagne started

to be recognized. But from 1927, the tendency reversed. Champagne was submitted to high

taxes: sales dropped to only 5.8 million bottles, many export market closed and the big

economic crisis of 1929 busted. As in parallel to the drop in sales, more wine was produced

(the vineyard had recovered from the war), an important abundance crisis took place: the

Champagne region was producing 2 times more than what was needed and the price

decreased considerably. As a response to the crisis, many vine growers chose to make their

own champagne instead of losing their production. But it required a lot of investment and

learning. To help one another, vine growers organized themselves and created different

cooperatives, with the objective to share equipment and experience. In 1939, 29 cooperatives

existed. The Syndicat general du commerce des vins de Champagne (General syndicate of

vine of Champagne) started to work towards a permanent integration of each actor of the

supply chain to avoid situations of crisis. It started with fixing a price for grapes of each

category to avoid price fluctuation and fixing standards of quality. Nowadays, champagne is

recognized all over the world as a luxury quality drink for special occasions (Information

collected during a visit to the “Musée de la vigne, Verzenay, the 23.06.07).


108

The history of champagne is interesting and enables to see what can be done to get out of the

crisis. The first step is to be organized and to work towards an integrated solution. As the

Syndicat general du commerce des vins de Champagne, the SPAT has also for objective to

integrate the whole supply chain in one unique institution. But the problem is that now that

tequila has reached the international scene, the decisions concerning its future are highly

influenced by international interests, which was not yet the case for Champagne in the 1930s.

Multinational in the tequila sector are having an increasing importance, giving the feeling to

small agave farmers and small distilleries that they do not have their future in their hands.

Before to start thinking of a way to re-equilibrate the benefits in the supply chain, the first

step is to finish with these conflict relationships. To reach a more “harmonious” situation, an

end has to put at price fluctuation. Actors have ideas on how to improve the situation, as

presented in Chapter 3, but they all (and particularly the solution of global crop planning) start

from a positive view on the sector. But as presented in previous chapters, it seems that

conflicts and unequal relationships between actors will remain (at least in the short term) as

not everyone is ready to make compromises for the “global welfare” of the supply chain. In

addition, agaveros libres will still exist (in the short term also). In other word, the idea of

global crop planning is maybe THE solution to avoid price fluctuation but it is not doable.

Some general recommendations such as the ones represented in figure 5.3 can be made, but

they are idealistic. As explained in previous chapters, it seems difficult that large industries

change their current strategies: one should not expect that they will take big measures to

reverse the situation. Coelho and Castillo-Giron (2005, p28) argued that the entry of foreign

capital does have the primary goal of the power concentration, but it can also play a

preventive and curative role by helping firms to achieve solvency. This statement suggests

that once the problems of some firms are solved, the former owners (generally the founding

families) could buy back the share of the foreign partner1, but it is difficult to imagine:

globalisation is irreversible. The solution is then to empower farmers in the margin of

globalized tequila production.

11 That is what happened with Cuervo: during several years, José Cuervo S.A. was owned by Diageo at 45%, but in 2002, Cuervo bought back this percentage, and both companies established an international agreement in order to distribute Cuervo brands in the international market through the distribution network of Diego.


109

Regional

Farmers should organise themselves

Better communication

between distilleries for a global crop planning

Distilleries should not plant agave

Multinational companies should be more aware of the local

issues International

Local

Solutions

Figure 5.3: Different scales of solutions

4. Discussion. Towards more differentiation possibilities or towards a homogenisation of product?

One may note that even though no intention was made to strengthen small local distilleries,

some have managed to survive. In the Amula region, there are agave distilleries that use the

green agave that have existed for more than 30 years and are still successful, at a local level.

These people have their own agave; they make their own licor and sell it only in the region.

There may be a lot of barren ground, undiscovered endogenous properties that should be

developed. Figure 5.4 is a schematic representation of the tequila supply chain and shows

what the most beneficial “circuits” for agave farmers are.


110

Figure 5.4. Tequila supply chain and the different entries for farmers to sell agave

Inputs of actors

Most advantageous alternatives for farmers but which are rare

Actors of the tequila supply chain

Terms of reference

Product flow (agave or tequila)

Symbols used in the figure:

Good alternative: Producers that make their own product

Small distilleries affiliated or owned

Plantation cultivated by « agaveros

libres »

Plantation under reverse leasing

contract

Plantation owned by the

Tequila companies

Local distilleries

International consumers Local consumers

National consumers

International companies

Bottlers

Propietarios privados (Land owners)

Ejidatarios

Agave cultivation

distillation

Big tequila companies

Bottling

intermediaries

Land

Capital, Labour Machinery Management decision

Rent the land

Bulk production

Supply chain

Coyotes

Purchase

agreement

Reverse leasing

contract

Farmer association

Price negotiation

If no bottling

equipment

Am

ula

regi

on

consumption


111

Van der Meulen and Ventura (2000, p.238) defined endogenous development by initiatives

controlled by the local population who makes optimum use of local resources, and whose

benefits return to that population. As the champagne vine growers, one way for local farmers

and distillers to regain control and to make an optimal use of their resources would be by

making their own regional distilled product of agave for local market. This way, they could

break the monopoly established, at least at a local scale. One would expect it to be a good

solution to satisfy the local market as local people would probably be happier to buy a local

product made by one of their friends than a brand of a big distillery that “is buying their agave

for almost nothing”.

Besides, it could be a form of regional differentiation. As I was explained during the cata del

tequila2, a tequila from Los Altos is different from a tequila from the Zona Centro as the rate in

sugar is different due to different “terroirs3” as well as the water4. As far as the Amula

distilleries are concerned, they could play the card of having a unique product that integrates

also green agave, a traditional crop in the region. One could wonder whether the same that with

agave honey will not happen, where the big distilleries or the biggest farmers are already

developing this alternative and taking over the market. But the development of regional

differentiation possibilities appears difficult for big distilleries as they actually mix agave from

different regions. Therefore it can definitely be an option of agaveros libres or small local

distilleries.

But as the case of the agave farmers in the Amula region shows, starting a distillery is not an

option for every agave farmers: it requires financing and organization capacity that few have.

To incite them to do so and to help them “daring” to develop this alternative, governmental

institutions could intervene by:

- Special subsidies to small distilleries, to help them face certification costs (for those

who want to make tequila),

- Providing technical and professional advice,

- Organizing events promoting local products, 2 I could participate to an official tequila tasting to elect the best añejo for the year. During this event, I could learn a lot about what differentiates a tequila form another and what can explain these differences. 3 Terroir (French term used for wine production) refers to the type of soil but also to other geographic factors that might influence the quality of the finished product like altitude, position relative to the sun, angle of incline, and water drainage (http://www.vitis.org/LEXIQUE.html). The idea of Terroir claims that the special quality of an agricultural product is determined by the character of the place from where it comes from. 4 The water is an important element in the making process of tequila.


112

- Organizing competitions for the best local tequila,

- Developing market segments for regional tequila in supermarket or specialized shops.

These tequila and mezcal farmer products could also be commercialised through organic or

Fair Trade channels. Though, that would again require that farmers start organising

themselves and take their future in their hands (according to Fair trade standards5).

One may also think that because production processes remain mainly traditional and small

scale, it could open more opportunities for product differentiation. The problem is that on a

tequila bottle, there is no reference on how the product is made6, which reduces the

opportunities for small distilleries who can not compete in terms of production with the big

distilleries but who could have developed a type of more “traditional” product. Influencing

the NOM making process so that it becomes more flexible and enables more product

differentiation such as the mention “tequila 100% agave AND artisanal” for example could be

an option.

The development of tourism could also be a good alternative for regional products. In the case

of the city of Tequila, tourism has had a positive impact. Museums and attractions offering

tours in agave plantations and visits of distilleries are now available for tourists. The biggest

project is still the project of “El Mundo Cuervo”: the “tequila express”, a train that goes

directly from Guadalajara to Tequila, offering to passengers a meal with Mariachis7, tequila

tasting, and while in Tequila, the visit of Cuervo distillery. But it seems that the benefits of

tourism are concentrated mainly to the big distilleries, who promote the visits. As a farmers of

tequila said :

“Los turistas, vienen con viajes organisados, con todo incluido. Lo unico que nos compran a veces es una botella de agua”. (The tourists, they come with organized trip, where everything is included. The only thing they may buy from us it a bottle of water).

5 http://www.fairtrade.net/fileadmin/user_upload/content/Generic_Fairtrade_Standard_SF_March_2007_FR.pdf 6 In some cases, the reference to “traditional method” or “local product” can be given by the trademark. For instance, brands like “Don Julio” refer to a traditional way to produce tequila. “Tequila regional” (product elaborated by a group of ejidatarios of Amatitán, the only ejidatarial distillery) or “Tequila Tapatio” focuses on the origin of the product. Besides, many big distilleries are starting selling “special edition” tequila. But more than a high quality drink, it is purely marketing. Someone who has the money to buy a good tequila will orientate his choice towards a tequila with a nice bottle, with handcraft or with a painting from a local artist. 7 Mariachi is a type of musical group, originally from Mexico. Usually a mariachi consists of at least two violins, two trumpets, one Spanish guitar, one vihuela (a high-pitched, five-string guitar) and one guitarrón (a small-scaled acoustic bass).

References

113

References

Agreement between the European Community and the United Mexican States on the mutual recognition and protection of designations for spirit drinks. 1997. In Diario Oficial de la Federación. Published the11.06.97.L 152. p.0016-0026. Appendini, K. 2002. Land regularization and conflict resolution: The case of Mexico. Rome: FAO. In Hostettler, S. 2007.

Ayala, A. Los tequileros no compran agave a “coyotes”: Orendain. In Público. Published the 07.04.07. Barman, H. J., 2000. Alcohol in Ancient Mexico. University of Utah press. BBC news. 2007. Euro MPs spurn “pure vodka” bid. Published the 19.06.07. http://news.bbc.co.uk/go/em/fr/-/2/hi/europe/6767193.stm. Consulted the 20.06.07.

Blomberg L., 2000. Tequila Mezcal y pulque. Lo auténtico mexicano. Editorial Diana. Bowen, S. 2004. The road to Margaretville: expansion of agave cultivation and power dynamics in Southern Jalisco, Mexico. Msc thesis. University of Wisconsin-Madison. Bowen, S; Duran, A.L. and Gerritsen, P. 2004. Análysis Cuantitativo del agave en los Municipios Autlán, El Grullo, El Limón, Tonaya y Tuxcacuesco. CUCSUR. May 2004. Bowen, S and Gerritsen, P. 2006. Reverse leasing and power dynamics among blue agave farmers in Western Mexico. Forthcoming in “Agriculture and Human Value”. Bowen, S and Valenzuela, A. 2006. Denominations of Origin and socioeconomic and ecological sustainability: the case of tequila. Paper accepted by the Comité Científico del III Congreso international de la red SIAL “Alimentación y territorios”. Universitad internacional de Andalucia, Spain. 18-21.10.06. Buenrostro Díaz, S. 2006. Proyecto de investigación para la producción del producto alternativo (miel de agave orgánica). Universidad de Guadalajara. CUCSUR. Autlán de Navarro, Jalisco. México. January 2006. Chadwick, I. 2004. Mezcal: the ‘other spirit’ of Mexico. In search of the blue Agave. Updated the 21.06.04. http://www.ianchadwick.com/tequila/mezcal.html. Consulted the 18.06.07. CNIT. 2004. Informe de la Cámara national de la industria de Tequila sobre su comportamiento durante el año 2003. http://www.tequileros.com.mx/informe/informe.htm. Consulted the 03.02.07. CNIT. 2007. Estatisticas deciembre 2006. http://www.tequileros.org/website/industria/documents/EstadisticasCNITABRIL07.pdf. Consulted the 04.07.07.

References

114

CNIT. 2007. Los tequileros. http://www.tequileros.org/website/frameset/html. Consulted the 25. 07.07 Coelho, A. M and Castillo-Giron V. M. 2005. Multinational Corporations, collective Action problems and the Tequila Cluster. Paper prepared for the presentation at the international workshop “Innovation, Multinationals and local development”. Montpellier, France.14.04.05. Croze, D. 2003. Elementos para la organización de las indicationes geográphicas. OMPI ORIGIN Second meeting. “Una valorización de Cancún y el cambio a seguir”. Alicante. Spain. 27-28.11.03. http://www.origin-gi.com. Consulted the 17.06.07. CRT. 2006. Información Estadística Enero-Diciembre 1995-2006. Pdf presentation. Crutsinger, M. 2004. Is Tequila the 'Champagne' of Mexico? Proposed Rules Could Trigger Major Economic Fallout. AP. Washington. 25.09.2004. Duran, A. L. 2006. Agave Azul (Agave tequilana Weber) y desarrollo rural sustentable: estudio del caso del municipio de Tonaya, Jalisco. Msc thesis. Universidad de Guadalajara, CUCSUR. July 2006. El Periodico de Mexico. 2006. El tequila, la bebida más tradicional de México la controlan extranjeros. Published the 15.11.06. http://www.elperiodicodemexico.com/nota.php?sec=Nacional-Finanzas&id=50165. Consulted the 12.12.06. Flores Preciado, E.and Zamora Duran, J. 2003. Analysis socioambiental de la expansion del cultivo de Agave azul en los municipios de Autlán de Navarro y Tuxcacuesco, Jalisco. Msc thesis. Gade, D. 2004. Tradition, Territory and Terroir in French Viniculture: Cassis, France and Appellation Contrôlée. Annals of the association of American Geographers, 94(4), 2004, p848-867. Backwell publishing. Garcia Murillo, G and Orozco Argote, I. 2005. Las indicaciones geográphicas y denominaciones de origen. In Jurisconsulto.Year 1, No.1, p107-114. Aguacalientes. July-December 2005. Gerritsen, P; Rosales Adame, J.J; Moreno Hernández, A and Martínez Rivera, L.M. 2007.

Agave azul y el desarrollo rural sustentable. Estudio de Caso en la Costa Sur de Jalisco. Prepared for the SIT (Seminario Internacional del Tequila: first international seminar on tequila) of October 2007: “Ambiente, Cultura y Sociedad”. Guadalajara.

Gerritsen, P. Back to the basic: Potentials and Limitations of Socio-Economic Field Methods in “Fuzzy empirical Situations”. Gobeille, A; Yavitt, J; Stalcup, P; Valenzuela, A. 2005. Effects of Soil management practices on soil fertility measurements on Agave tequilana in Western central Mexico. Soil and Tillage research 87 (2006) p 80-88. Accepted the 28.02.05.

References

115

Goddard López, J. G. 1998. El Éxito del Tequila. CONACYT. México D.F. Gonzàlez, M.A. 2002. Blue Agave Peasant Producers and the Tequila Industry in Jalisco, Mexico. Goodman, D. 2004. Rural Europe Redux? Reflections on Alternative Agro-food Networks and Paradigm Change. In Socioligia Ruralis 42(1): 3-16. Gren, J. 2003. Reaching the Peripheral Regional Growth Centres. Centre-periphery convergence through the Structural Funds’ transport infrastructure actions and the evolution of the centre-periphery paradigm. In European Journal of Spatial Development. http://www.nordregio.se/EJSD/-ISSN 1650-9544-Refereed Articles Jan 2003-no3. Consulted the 15.06.07. Gutiérrez, R, M, S. 2000. Agave de Jalisco. http://www.cucba.udg.mx/new/informacionacademica/coaxican/plts_mex/agave. Consulted the 03.02.07. Hostettler, S. 2007. Land use changes and transnational migration: the impact of remittances in Western Mexico. Doctoral thesis. Ecole polytectique federal de Lausanne. Lausanne, EPFL, 2007. Hypergeo, 2004. Theories of spatial analysis. http://www.hypergeo.eu/IMG/_article_PDF/article_264.pdf. Consulted the 10.06.07. IOWA State University, 2004. Focus groups fundamentals. Methodology brief. May 2004. http://www.extension.iastate.edu/publications/pm1969b.pdf. Consulted the 10.06.07. Josh, J. 2001. Tequila : trade, culture and environment. TED Case Studies. Number 629. June, 2001. http://www.american.edu/ted/tequila.htm. Consulted the 12.05.2006. Leal, J. D. 2006. Tequila in Peligro. In Vanguardia-Reportajes especiales. 18.11.06. http://srv2.vanguardia.com.mx/hub.cfm/FuseAction.Detalle/Nota.582473/SecID.38/index.sal. Consulted the 12.12.06 Leclert, L; Gónzalez, R and Gerritsen, P. 2007. Description of the situation of agave and tequila production in the Amula region. Not published. Limón, E.M. 2000. Tequila, the spirit of Mexico. New York: Abbeville Press. Lisbon Agreement for the Protection of Appellations of Origin and their International Registration of October 31st, 1958 http://www.wipo.int/lisbon/en/legal_texts/lisbon_agreement.htm#P22_1099. Consulted the 09.02.07. Llamas Navarro, J.A. 1999. La politica del agave. Synthetic version.

References

116

Luna, R. 1991. La historia del tequila, de sus regiones y sus hombres. Mexico D. F.Consejo Nacional para la Cultura y las Artes. Luna, R. 2003. El estado mexicano y las politicas de patrimonialidad del Tequila. Paper presented at the seminar of scientific Interest Group for “Local agrofood systems”, Montpellier, France. http://www.gis-syal.agropolis.fr/Syal2002/FR/Atelier%205/LUNA.pdf. Consulted the 13.02.07 Maldonado, S. 2006. A la vista, un reacomodo del mercado del tequila. In Anàlisis, Num 136 Año 11. Oct-nov 2006. Maldonado, S. 2007. La ruta del tequila. In Anàlisis, Num 137. Año 12. Dec-Jan 2007. Maldonado, S. 2007. El tequila ya tiene Edificio inteligente. In Anàlisis, Num 138. Año 12. Jan-feb 2007. Maldonado, S. 2007. La Cámara tequilera lucro con el agave, acusa SEDER. In Público. 29. 03.07. Maldonado, S. 2007. Con o Sin coyotes, hay agave de sobra. Público.Negocio. 30.03.2007. Marquina, D.; Santiago, A. 2005. Procesadora de Mieles y derivados de agave sierra de Amula S.P.R. de R.L. Department of Microbiology III, Faculty of Biology. University of Complutense. Martínez Rivera, L. M.; Iñiguez, L. I.; Palomera Garcia, C.; Contreras Martinez, S; Rivera, L. E.; Garcia Real, E.;Carrillo Garcia, R. E., Pacheco Martínez, C.; Solís Magallanes, A.; Cuevas, R; Santana Michel, F; Aguirre, A; Olguín, J. L.; Cardenas, O; Ramírez, M; Rosales Adame, J; Gerritsen, P; Moreno, A. 2003. Impacto Ambiental, social y económico del cultivo del agave azul (Agave tequilana Weber) en el municipio de Tonaya, Jalisco. Autlán. Universidad de Guadalajara. CUCSUR. Massias Massias, A. 2001. El cluster en la industria del tequila en Jalisco. In Agroalimentaria 13: 57-72. Massieu Trigo, Y. C. 2000. Estrategias empresariales globales y agroexportaciones mexicanas: ahora el Tequila. In El cotidiano No. 99, UAM-A, PP103-112. January-February 2000. Meulen, H.S. van der & Ventura, F. 2000. Circuits and Regional Development; a Scenario-study. in: H.S. van der Meulen, Circuits in de Landbouwvoedselketen; verscheidenheid en samenhang in de productie en vermarkting van rundvlees in Midden-Italië (Circuits in the Agri-Food Chain; variety and coherences in the production and marketing of beef in central Italy). Wageningen: Rural Sociology Group, Wageningen University: 221-239 Murdoch, J; Marsden, T and Banks, J. 2000. Quality, nature and embeddedness. In Econmic geography. 76(2) 107-125. In Renting et al., 2003.

References

117

Murià, J. M. 1990. El Tequila. Boceto histórico de una industria. In “Cuadernos de diffusión cientifica” number 18. Universidad de Guadalajara. Guadalajara. Murià, J. M. 1996. Una bebida llamada Tequila. Guadalajara. Editorial Agata. NORMA Oficial Mexicana de Emergencia NOM-EM-012-SCFI-1994, Bebidas alcohólicas-Mezcal-Especificaciones. Published in the Diario Oficial de la Federación. 28.11.1994 NORMA Oficial Mexicana NOM-006-SCFI-2005, Bebidas alcohólicas-Tequila-Especificaciones. Published in the Diario oficial de la Federación. 06.01.06 NORMA Oficial Mexicana de Emergencia NOM-EM-012-SCFI-2006, Bebidas alcohólicas-Destillados de agave-Especificaciones. Published in the Diario oficial de la Federación. 30.11.06. PROFECO, 2004. Alerta al consumidor historica 2004. http://www.profeco.gob.mx/alertas/alertas04/alertas_ftequila.asp. Consulted the 05.06.07 PROFECO, 2004.Verificacion de bebidas alcoholicas. Ppt.A22. September 2004 Raminez, T.M. 2007. El mezcal se toma por gusto o decepción; cura y no causa cruda. In La Jornada. 08.03.2007 http://www. Jornada.unam.mx. Consulted the 01.04.07. Ray, C. 1998. Culture, Intellectual property and territorial rural development. In Sociologia Ruralis. Volume 38, No 1, 1998. Regalado, J. 1998. Los agraristas. In Laura Patricia Romero, “Jalisco desde la revolution. Movimiento sociales”. 1929-1940, vol. 5. Gobierno del estado de Jalisco. Universidad de Guadalajara, 1998. Renting, H. , Marsden, T. and Banks, J. 2003. Understanding alternative food networks: exploring the role of short food supply chains in rural development. In Environment and Planning. 35, 393-411. Rodríguez Gomez, G., 2004. El derecho a ostentar la denominación de origen: las disputas por la hegemonía en el mercado agroalimentario mundial. Desacatos num 15-16. Automn Winter 2004. pp171-196. Ruiz-Corra, J; Pimienta-Barrios, E. and Zañudo-Hernandez, J. 2002. Regiones Térmicas Optimas y marginales para el cultivo de Agave tequilana en el estado de Jalisco. In Martinez Rivera et al. 2003. SAGARPA. 2002. Norma Oficial Mexicana NOM-EM-037-FITO-2002. Especificaciones fitosatinatias para la producción y movilización de Agave tequilana Weber variedad azul. Diario oficial de la Federación. 12.06.2002. SAGARPA. 2002. PROCAMPO: Vamos al grano para progresar: Mexican Secretary of Agricultura, Ranching, Rural development, Fisheries ans Food supply (SAGARPA). http://www.sagarpa.gob.mx. Consulted the 15.04.07.

References

118

SAGARPA. 2004. Statistics on agriculture, cattle ranching, rural development, and fisheries. http://www.tequileros.org/website/industria/documents/EstadisticasCNITABRIL07.pdf. Consulted the 15.04.07. SAGARPA. 2005. Inventario General de Agave tequilana Weber variedad Azul dentro de la Denominación de origen tequila. May 2005. http://www.crt.org.mx/docs/Inventario/Inventario%20Parte%20I.pdf.Consulted the 15.04.07. Santiago Lopez, C.I. 2004. El Notario como coayuvante de Estado en materia Agraria. 143-150. num 29. June 2004. SECOFI, 1977. Declaración general de la protección a la denominación de origen “tequila”. In Diario Oficial de la Federación. 13.10.77. Secretaría de Economia. Establecimientos Comerciales. Establecimientos según tamaño de empresa. Serrano Iñiguez, S. 2007. Imilio pondrá a discussión problemas agaveros. In Público. 30.03.07. Torres, G. 1998. The Agave war: toward an agenda for the post NAFTA ejido. Pp73-100 in the future role of the ejido in rural Mexico, edited by Snyder, R and Torres, G. La Jolla, California. Centre for US-Mexican studies, University of California, San Diego. Torres, G. 1999. El Barzón del agave: plusvalia y sobreproducción en un contexto de globalización. Valenzuela, A; Marchenay, P; Foroughbakhch, R and Berard, L. 2004. Conservación de la diversidad de cultivos en las regiones con indicaciones geográphicas : los ejemplos del Tequila, Mezcal y Calvados. Congreso international agroindistria rural y territorio –ARTE- Toluca, Estado de México. December 4, 2004. Valenzuela, A. 1997. El Agave tequilero: su cultivo e industria. Guadalajara. Editorial Littoris. Valenzuela, A. and Nabhan, G. P. 2003. ¡Tequila! A natural and cultural history. University of Arizona press. Verschoor, G. 1997. Tacos, tiendas and mezcal. ‘An actor-network perspective on small-scale entrepreneurial projects in Western Mexico’. Villalobos, J. 2007. Mi amigo el tequila. Not published yet. Young, M. 2002. Land use change in the context of cattle breeding revolution. Transnational migration and the biosphere reserve. Msc Thesis. Wisconsin: University of Wisconsin. In Hostettler, 2007.

References

119

Websites (consulted different time but still available the 26.07.07)

http://www.origin-food.org (SINER-GI project)

http://www.tequileros.org.mx (CNIT)

http://www.crt.org.mx (CRT)

http://www.acamextequila.com.mx (Academia del tequila)

http://www.elperiodicodemexico.com (El Periódico de mexico)

http://www.comercam.org (Consejo regulador de la qualidad del mezcal)

http://www.pymexportatam.gob.mx/tequila.htm (website of the State of Tamaulipas)

http://www.elBarzón.org (Barzón)

http://www.aserca.gob.mx/artman/publish/article_183.asp (PROCAMPO information)

http://www.champagne.fr (Comité Interprofessionnel du vin de champagne)

http://www.inao.gouv.fr (information on French DO)

http://www.vitis.org/LEXIQUE.html (definition)

http://www.fairtrade.net (Fair trade information)

http://www.wikipedia.org (definition)

http://www.map-of-mexico.co.uk. Consulted the 22.05.07 (Mexico map)

http://www.maps.expedia.com, consulted the 22.05.07 (Mexico map)

Date post:	16-Oct-2021
Category:	Documents
Upload:	others
View:	1 times
Download:	0 times

Academic year 2006 – 2007

Documents