13 



and relative large per capita consumption of sugar, it is 

 unlikely that Mexico will reach that status in the foreseeable 



future. 



3. Q. Mr. Kantor, do you anticipate Mexican substitution of 

 High Fructose Corn Syrup (HFCS) for sugar in its large soft drink 

 industry as a result of the encouragement to achieve surplus 

 producer status provided in the NAFTA? 



A. We do not anticipate significant Mexican substitution of HFCS 

 for sugar in the Mexican soft drink industry in the foreseeable 

 future. At present, neither the economic nor dietary incentives 

 for switching from sugar to other sweeteners are present in the 

 Mexican market. Also, NAFTA is unlikely to provide sufficient 

 economic incentives to bring about large-scale substitution of 

 HFCS for sugar. 



The U.S. and Mexican sugar price at the producer level is roughly 

 the same. Therefore, there is no large price advantage for 

 Mexican producers to gain by shipping sugar to the United States, 

 especially considering transportation charges and infrastructure 

 constraints. Additionally, HFCS is not manufactured, nor widely 

 used, in Mexico. Currently, 5 companies in Mexico operate 7 corn 

 wet mills producing traditional products such as corn starch, 

 glucose syrup, dextrose, and corn oil. These facilities are not 

 equipped to produce HFCS. Major investment would be required to 

 update these mills or construct new facilities. 



Soft drink manufacturers, the primary user of sugar in Mexico, 

 would have to make major investments to switch their production 

 facilities from using sugar to HFCS. In addition to their 

 investment, any conversion to HFCS in Mexico would involve major 

 policy changes in Mexican corn imports (limited in the first 15 

 years of the transition period to a level that would restrain 

 Mexican production of HFCS) and significant investment in Mexican 

 HFCS facilities or new infrastructure to import large quantities 

 of HFCS from the United States. 



4. Q. Won't Mexico have a 1-2 million-ton sugar surplus to ship 

 to the US just by converting their domestic beverage industry 

 from sugar to corn sweetener, as the NAFTA would provide enormous 

 incentive to do so? 



A. We expect that shifts in the industry will continue to be 

 driven by economic factors. For the reasons stated above, it is 

 unlikely that there will be a major shift from sugar to HFCS in 

 Mexico in the foreseeable future. 



5. Q. Would these conversions have an impact on the US corn 

 market or US corn production? 



A. In the near term, any additional use of HFCS in the Mexican 

 market would probably come from product imported from the United 

 States, since Mexico currently has no facilities for producing 



