Competitiveness and comparative advantages of milk production systems in Jalisco State, Mexico

Mexico is the largest importer of powdered milk in the world. Due to free trade and non governmental intervention in markets, it is necessary to know the competitiveness and comparative advantages of milk production systems, as well as the effects that sectorial and macroeconomic policies have on these systems, in order to place development perspectives of this activity under the new conditions. This work empirically evaluates the competitiveness, comparative advantages, policy effects, and the direction of technical change in milk production in the state of Jalisco -the main domestic producer- under four production systems: specialized, semispecialized, family, and double purpose. To that end the Policy Analysis Matrix method of Monke and Pearson (1989). Only the specialized and semispecialized systems were competitive. With exception of the double purpose system, these systems present comparative advantages, which indicates their economic efficiency. The total policy effect on the specialized and the double purpose systems is of governmental protection and subsidy, whereas it results in a tax for the other two systems. Direction of technological change moves towars a major specialization which, although generates high production costs, is compensated by a higher product price.