Mexico-U.S. produce trade hit by drug war concerns

by (c) Copyright Thomson Reuters 2010. Click For Restrictions. http://about.reuters.com/fulllegal.asp | Thomson Reuters Foundation
Tuesday, 21 December 2010 22:58 GMT

* Security concerns pulled U.S. inspectors out of Mexico

* U.S. importers facing new logistical challenges

* Arizona agriculture officials trying to minimize impact

By Mica Rosenberg

MEXICO CITY, Dec 21 (Reuters) - U.S. importers of fresh fruits and vegetables from Mexico say they are beginning to face losses from delays after U.S. quality inspectors pulled out of Mexico fearing escalating drug violence.

The Arizona Department of Agriculture, or ADA, decided last month to stop sending inspectors to northern Sonora state to check fresh produce quality prior to import, citing fears of surging drug murders south of the border. [ID:nN11286822]

The retreat of U.S. agricultural inspectors from Nogales, Mexico, across from the city of the same name in Arizona, is a sign the drug war is affecting business and risks denting the country's reputation as a safe place for foreign investment.

More than 30,000 people have been killed in drug violence in the past four years in Mexico, according to official figures. Most killings are along the northern border where rival drug gangs battle for smuggling turf, but which also serves as a gateway for billions of dollars of legal commerce.

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Full coverage of drug war http://link.reuters.com/wam89p

FACTBOX on political risks in Mexico [ID:nRISKMX]

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The State Department has issued travel warnings for U.S. citizens visiting some of the more dangerous border areas where there have been shootouts and explosives planted inside cars.

ADA, which has done quality checks on a contract basis from the U.S. Department of Agriculture for years, will now conduct hundreds of inspections in dozens of sites on the U.S. side of the border rather than in three warehouses in Nogales, Mexico.

Mostly tomatoes and table grapes are inspected in Nogales in a trade valued by the U.S. department of Agriculture at more than ${esc.dollar}1.1 billion.

TOMATO HARVEST

With the tomato harvest just beginning this month -- Mexico's No. 1 farm export to the United States, according to Mexico's agriculture ministry -- some importers say they are seeing the first signs of back-log because of the new rules.

"It's created a logistics nightmare for us as a company," said Gil Munguia, a manager at packing company L&M in Nogales.

"There's not enough space, there's not enough inspectors and there is not enough time in the day to get this done on the U.S. side of the border at multiple locations. Time and space is money in this industry," he said.

Adding to worries, Mexico could ship significantly more produce to the United States this year after a damaging frost hit crops in Florida, Mexico's main competitor for winter fruits and vegetables. More product crossing the border will put extra pressure on the new system.

Hold ups in inspection could stall distribution chains, forcing Mexican farmers to leave their fruit in the fields or face higher costs to export through alternative ports of entry, the Fresh Produce Association of the Americas, or FPAA, said.

Some U.S. warehouses have been forced to rent extra space to have room for the inspections, said Mexican tomato exporter Jose Castro from Yory Packing company.

Arizona agriculture officials say they are doing everything possible to minimize bottlenecks and so far -- early in the season -- there have been no problems.

Some Mexican growers may even find the new system beneficial since they will only have to unload once instead of unloading on the Mexican side for inspection and again on the U.S. side for distribution, ADA spokeswoman Laura Oxley said.

State inspectors agreed to change their schedules to handle the more than 1,000 truckloads of goods that can cross the border during peak harvesting in mid-January, February and March, said Lance Jungmeyer, president of the FPAA based in Nogales, Arizona.

But Jungmeyer added the real squeeze will be as the harvest hits full swing. "There is really no room for error and very little time for getting up to speed."

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