Publications: ISAAA Briefs

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Executive

Summary

List of Figures

List of Tables

List of Abbreviations and Acronyms

1. Introduction

2. Conceptual Framework

2.1 Scenario Approach

2.2 Methodology

2.3 Data for Analysis

3. The Mexican Potato

3.1 National Potato Production

3.2 Potato Marketing and Trade Channels

4. The Recombinant Potato Technology

4.1 Background of Agricultural Biotechnology in Mexico

4.2 The Biotechnology Transfer Project

4.3 Agronomic Technology Potentials

4.4 Technology Adoption

4.5 Technology-Inherent Risks

4.6 Biosafety Developments

5. Counting Potential Technology Benefits and Costs

5.1 Benefits at the Individual Farm Level

5.2 Structure of Scenarios to be Analyzed

5.3 Aggregate Benefits and Distributional Effects

5.4 Costs of the Technology Project

5.5 Summary Measures of Economic Effects

5.6 Sensitivity of Results

6. Conclusions and Policy Implications

Acknowledgements

References

Appendix A: Supplementary Tables and Figures

Appendix B: List of Personnel Contacted

Despite the rapid international development of biotechnology, we still lack knowledge and information about how low- and middle-income countries can best access this promising technology. Nor are the socioeconomic repercussions of applying biotechnology in these countries’ agricultural sectors well understood. This study seeks to fill in some of the gaps in our knowledge by analyzing a biotechnology transfer project that provided proprietary recombinant potato technology to Mexico.

In 1991, the government of Mexico and the private US corporation Monsanto entered into a North-South biotechnology transfer agreement in which Monsanto agreed to donate non-conventional virus resistance technology for potatoes. ISAAA developed and brokered the agreement, and the Rockefeller Foundation provided funding for the project. Two public Mexican research institutes, CINVESTAV and INIFAP, carried out product development and adapted the technology to local potato varieties. In 1993, the first transgenic potato field trials in Mexico took place. The release of three transformed varieties (Alpha, Norteña and the red variety Rosita) with resistance to the potato viruses PVX and PVY is expected in 1999. After seed multiplication by national seed producers, farmers’ technology adoption could start from the year 2000 onwards, under optimistic assumptions. In addition, a new project phase began in 1997, when Monsanto donated technology that confers resistance to PLRV, an economically more important virus in Mexico than PVX or PVY, but for which non-conventional resistance had not previously been available. The release to seed growers for multiplication of Norteña and Rosita varieties resistant to all three viruses is scheduled for 2001. The use, however, of the PLRV technology in Alpha¾the country’s most popular and widely used potato variety¾is prohibited in the current licensing agreement. Since none of these technologies have yet reached farmers’ fields, the socioeconomic effects of these innovations are quantitatively analyzed within an ex ante framework by means of an equilibrium displacement model of the Mexican potato market.

The most pressing phytosanitary problem in Mexican potato production does not have biotechnological nor conventional solutions. Virus resistance nevertheless is the priority need for which proven technologies are available. The limited use of pathogen-free seed material¾only 23 percent of the land devoted to growing potatoes is cultivated with certified seeds¾leads to virus-induced yield losses that are much higher than in countries with better developed potato seed industries. Genetic resistance is therefore likely to considerably increase potato yields, even without additional inputs. On average, the potential net yield gain of the transgenic varieties is projected to be 5 percent with resistance to PVX and PVY only, with an increase to 22 percent when resistance to PLRV is added. These productivity increases will raise income levels for Mexican potato farmers and will also benefit domestic consumers, who will pay lower prices as long as the international potato trade remains limited. In a closed potato economy, consumers would capture about half of the total economic benefits created by these biotechnology applications.  Increased international potato trade¾a possible outcome of the NAFTA trade agreement¾would slightly reduce the overall advantage of the technology, though with an increased benefit share for domestic producers.

This study includes an analysis of hypothetical scenarios in which the Alpha variety also possesses resistance to PLRV. The results show that if Monsanto were to donate PLRV resistance for the Alpha variety, then the project’s Internal Rate of Return (IRR) would increase from 50 to 64 percent, and, even more impressively, the aggregate benefits of the biotechnology transfer could triple. The additional cost of including this resistance would be low because of Mexico’s previous experience in related technology development. Furthermore, because Alpha is not widely grown in countries other than Mexico, Monsanto’s own commercial interest in transforming the variety would not be more than moderate.

New agricultural technologies are often criticized for fostering inequality among farmers. The potential effects of the distribution of recombinant potato technology, therefore, are explicitly considered in this study in terms of different farm sizes. On average, potato farms in Mexico are larger than those devoted to more basic food crops. In addition, potato production is predominantly for commercial purposes¾production for household consumption is negligible. Still, there are striking differences between different potato farm types. In the northern parts of the country, large potato production units with advanced technological standards predominate, while in the central and southern parts of Mexico there are more small, resource-poor farms. The smaller the farm, the fewer the purchases of certified, clean seed material. Most of the smaller producers use farm-saved seeds or buy tubers destined for the fresh market from larger producers. The repeated vegetative reproduction of potato seeds leads to a constant virus buildup in the stock, so that virus-induced yield losses¾and thus agronomic technology potentials¾are highest in smaller farming systems. So, while PVX-PVY-PLRV resistant varieties decrease per unit production costs on large farms by 13 percent, small-scale producers’ costs are even cut by 32 percent. These significant benefits would be limited, however, by the current seed distribution system, which is based upon a farm type-specific pattern of variety use. Many small and medium-scale farmers¾especially those cultivating in higher altitudes¾often use local red colored varieties, which are less susceptible to potato late blight than imported cultivars. But wealthier large-scale farmers, the primary market for certified seeds, never use these red varieties. Private seed producers, therefore, have no incentive to sell them. In fact, Mexico has no formal seed market for colored potato varieties. Establishing a seed distribution system for these potato varieties is essential to making the benefits of biotechnology available to all of Mexico’s potato farmers. While CINVESTAV works to transform the most important red variety¾Rosita¾for virus resistance, and while transgenic breeder material will be available at the R&D level, the institutional bottleneck in the current seed distribution system will hamper efforts to multiply and disseminate it. Without particular programs developed to address these constraints, the adoption of biotechnology by resource-poor farmers would be unsatisfactory, and this would create greater income disparities between large and small-scale farmers.

In order to increase the participation of small and medium-scale farmers in the new technology, a subsidized seed distribution mechanism for the transgenic Rosita variety is proposed. Its implementation could be based on an already existing instrument for the country’s maize and bean sectors under the national program Alianza para el Campo. To speed up the adoption of improved varieties by smaller farmers, government organizations buy certified seeds of maize and beans at commercial prices and sell them to resource-poor farmers at subsidized rates. Extending this program to include potatoes would help to equalize the benefits of the recombinant technology. The guaranteed demand for transgenic Rositas by the state would automatically create enough incentive for private seed producers to start handling this variety. Moreover, these subsidies would exclusively address those most in need, since wealthier large-scale farmers do not use the red variety Rosita. Scenario calculations demonstrate that the proposed distribution mechanism would have positive implications in terms of equity and would enhance overall efficiency at the same time: the IRR would rise from 50 to 59 percent. These results clearly show that a new technology’s general agronomic suitability for a certain environment is only one element that influences its actual effects. The institutional factors and support systems that make possible the technology’s diffusion and application are also crucial aspects that determine its social and economic impacts.

Apart from the immediate advantages to Mexico’s potato sector, the biotechnology transfer project will have positive repercussions of a much broader scope. The transgenic potatoes are the first recombinant technology to be released by national organizations in Mexico. To this point, institutional constraints in the NARS and a lack of effective cooperation between institutes have prevented biotechnology from reaching farmers’ fields. Under the project, new inter-organizational connections have been established between CINVESTAV, a leader in molecular research, and INIFAP, with its experience in potato breeding. The transfer also significantly contributed to human-capacity building, increased self-confidence and directed R&D to well-defined goals. Moreover, it enhanced international relations between involved researchers and stake-holders. The experience the NARS gained through the transfer project can already be seen, for instance, in the 50 percent reduction in time needed to develop PLRV resistance in comparison to the first PVX-PVY technology. This positive institutional evolution will facilitate Mexico’s own biotechnology generation, as well as the acquisition and adaptation of foreign technologies in the future. In addition, the project established and consolidated biotechnology regulatory mechanisms in Mexico, a sine qua non for any country wishing to take part in the biotechnology revolution. All these developments might produce positive technology spillovers for other developing countries too.

If appropriate social support mechanisms can be implemented, the project could successfully demonstrate that modern proprietary agricultural biotechnology applications can help low- and middle-income countries meet their urgent development objectives. Donor organizations should recognize that such transfer programs are great opportunities to promote an equitable international biotechnology evolution that will open up new vistas of technological and institutional innovation.

List of Figures